Amman stock exchange
Investing in Jordan
Jordan with limited natural resources is mainly dependent on its neighbours for its energy and other food requirements. Having passed through a turbulent period since the formation of the country in 1950, serious economic reforms were undertaken only in the late 1990s. Until recently, the main factors driving the economy was exports of textiles and garments manufactured in the Qualifying Industrial Zones (QIZ), which were exported mainly to the U.S under the tariff and quota free option envisaged under the U.S-Jordan Free Trade Agreement. Now attempts are being made to move away from the traditional reliance on exports of minerals, reliance on overseas remittances from expatriate Jordanians and foreign aid. Renewed emphasis is being placed on information technology (IT), the tourism sector and developing new industries. The recently started Aqaba Special Economic Zone (ASEZ) with tax incentives and low regulation is a step in the right direction to promote private sector-led economic growth. Jordan standing at a unique geographical location in the crossing point of Europe, Asia and Africa has now emerged as a pioneer and role model in private sector management and economic liberalization in the Middle East. The introduction of the stock exchange is another step in the right direction at integrating the Jordanian economy into the global market.
The Amman Stock Exchange
The Amman Stock Exchange, named after Amman, the capital of Jordan was started in the year 1999 as a non-profit private institution with full administrative and financial autonomy. It is governed by a seven-member board of directors. A chief executive officer oversees the day-to-day operations and reports to the board. More than 52 brokerage firms have membership to conduct business in the Amman Stock Exchange. Stocks of more than 150 companies with core specialisations in banking, insurance, service and industrial sectors are listed.
Since its inception the autonomy given by the government and the emphasis on fairness, transparency, efficiency and liquidity made the Amman Stock Exchange very popular. Since there is a strong and secure environment for all the listed securities, the rights of each individual investor has been guaranteed and protected. With each passing year, more people consider investing in the stock market than ever before. Implementation of internationally recognized directives and policies regarding market subdivisions and listing criteria has ensured greater transparency and efficiency.
The Amman Stock Exchange (ASE) works closely with the Jordan Securities Commission in maintaining close contacts with other stock exchanges, associations and international organizations and also to maintain a close watch on the performance of the stock exchange on a day-to-day basis. The ASE is an active member of the Union of Arab Stock Exchanges and the Federation for Euro-Asian Stock Exchanges (FEAS). It is also an affiliate member of the World Federation of Exchanges (WFE) and also the International Organization for Securities Commissions (IOSCO). The ASE not only helps new enterprises to raise capital by listing on the Exchange, but also monitors and regulates market trading to ensure a fair market and investor protection and also to ensure compliance with the law
Recent trends in the stock market
The International report on Doing Business 2007 has ranked Jordan 5th among the countries in the Middle East and North African region for doing business. The improvement in the business climate because of the reform policies adopted by the government resulted in the improved ranking. The revenue from tourism registered a 27.4 percent increase this year when compared to the income in the same period in the year 2006. Out of the 150 companies listed in the stock market, nearly 107 of them have showed consistent growth and profits. Recently the stock market index climbed to as high as 8100 points, because of the decision of the Central Bank of Jordan to raise key interest rates by 25 basis points, which is a record of sorts.
Investing in the Amman Stock Exchange (ASE)
Both Jordanians and foreigners are free to invest in the ASE. Understanding the basic investment formalities and trends in the ASE is not a big problem. The profit earned by the company and its annual growth rate determines whether the company should be listed in the first market or the second market. A new investor must study the rules and regulations governing the operations at the Amman Stock Exchange. Even though stock brokers offer good services, short term courses and seminars are conducted by various agencies to create awareness on investing in the stock market. For newcomers, buying stocks listed in the first market is the best option, even if they are priced on the higher side, because assured returns will certainly build up investor confidence helping them to invest more.
For shares to be listed in the first market,
It must have been listed for one full year in the second market.
The net shareholder equity must be more than 100 percent of the paid-in capital.
The company must have net pre-tax profits for atleast two of the last three years.
The company must have more than 100 shareholders.
The shares of the company must trade for more than 20 percent of the overall trading days in a fiscal year.
Shares listed in the second market and are those which are transferred from the first market and this takes place because of the following reasons
Decrease in net shareholders equity to less than 75 percent of the paid in capital
Losses in the company financial statements in the last successive 3 years
Number of shareholders becoming less than 75
The number of trading days in which the share is traded going below the established limit during the fiscal year
The percentage of company shares traded going below the established limit in a fiscal year
The securities traded in the ASE are classified into transferable shares of companies, corporate bonds, securities issued by government public institutions and municipalities, security depository receipts, shares and investment units of mutual funds, equity bond options, spot and carry forward contracts and put and call options.
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