Palestine exchange seeks expansion through Diaspora

The Palestine Securities Exchange aims to increase the number of listed companies by 10 percent next year as the bourse works to attract wealthy Palestinians living abroad.

"We want to do exactly what the Israelis have done with the Jewish Diaspora," Ahmad Aweidah, the exchange's chief executive officer, said in an interview.

"Just like the Israelis garner financial support abroad from Jews eager to help by buying Israeli bonds and investing funds in the country, we want to open up our market with the help of very influential Palestinian expatriates."

The exchange, which currently lists 39 companies from the West Bank and Gaza, is seeking to add four more companies to its trading roster in 2010. It will hold roadshows in Amman and Abu Dhabi in the next two months to heighten interest in the bourse. The Palestine Al Quds Index is up 14% this year after declining 16% in 2008.

The 12-year-old exchange was founded by the Palestinian Authority and Palestine Development and Investment Co. Companies listed on the exchange have a combined market value of $2.5 billion. Volume on the exchange increased after it garnered investments from so-called frontier funds in London, Aweidah said. Foreigners, including Palestinians living abroad, account for about 15% of the exchange's investors and are seeking an opportunity to help the economy in the "motherland," while investing in undervalued companies, Aweidah said.

The Development Corporation for Israel, the New York-based underwriter started by the country's first Prime Minister David Ben-Gurion to engage Diaspora Jewry, has raised $25b. for economic projects in the Jewish state, according to the program's Web Site.

"It is our goal to build a strong relationship with our homeland and to be as supportive as we can," Salvador Said Somavia, executive director of Chile's Said Holding Group, said at the conference.

Palestinian "blue-chip" companies are trading at "cheap" prices relative to peers in the Arab world, Aweidah said. The price-to-earnings ratio of Palestine Telecommunications Ltd., the largest phone company in the Palestinian territories, was 7.7 times, according to Bloomberg data, while Emirates Integrated Telecommunications Co., the United Arab Emirates' second-biggest telephone company, has a ratio of 10.5 times, the data show.

Israel continues to impede economic development in the West Bank and Gaza, Aweidah said. Prime Minister Benjamin Netanyahu has said he is focusing efforts on boosting the West Bank economy and will continue easing movement restrictions. Palestinian investors say a political process must be launched to bring in the foreign investment needed to turn around the economy. Economic growth in the West Bank may accelerate to 7% this year from 5% as Israel eases restrictions, the International Monetary Fund said in a report last month.