Syria: Investment in Syria no longer a good venture

Syria Sanctions: Syria's stock exchange has declined by 43 per cent since the uprisings that began on March 15.

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A year ago, investing in Syria seemed like a good idea.

Syria:

Sanctions Arab League sanctions will affect every area of industry in the beleaguered nation. Read all the stories in The National's special report Learn more

The country had low exposure to the struggling global economy, was opening up to foreign investment and was freeing up its private sector as the president Bashar Assad's Baath party adopted plans for a social market economy.

The Arab Spring, however, fundamentally changed the economic outlook many investors envisaged for the country.

The Damascus Securities Exchange Index has slumped 43 per cent since the uprisings began on March 15 as investors sold the country's currency and Syrian-denominated assets. "In crisis times, revolutions or war, such extraordinary occasions will open the door for the inevitable," said Wadah Al Taha, the chief investment officer at Al Zarooni Group in Dubai. "People are worried and are reacting according to their fears."

Syria's currency has dropped almost 6 per cent against the dollar this year, as Syrians sold the pound to buy dollars in the country's black market. The central bank has spent $3 billion from a $5bn contingency fund to defend it, Adib Mayaleh, the governor, said last month. The country's economy is likely to shrink to 2 per cent this year, said the IMF.

The Damascus Securities Exchange, launched in 2009, had seen two years of a bull market rally triggered by a large discrepancy between the prices of shares before and after they were floated on the exchange.

Shares of companies traded on the unregulated market before listing were being traded significantly higher than their book value. Once listed, stocks took months to catch up to that price, as they were constrained by the limit of a 2 per cent daily rise in value. The exchange in February had planned to tackle this obstacle by allowing floated companies to have no price limit on the first day to help stabilise prices. All that seems in the past now, as the stock exchange and its investors brace for more turbulence.

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