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The RSISX USD Index’s constituents’ performances were a mixed bag, with five stocks up and five down. Positive performances were led by Baghdad Soft Drinks (IBSD), which was up 8.1%, followed by the National Bank of Iraq (BNOI) up 6.5%, Iraqi Islamic Bank (BIIB) up 3.9%, and AsiaCell Telecom (TASC) up 0.5%. Decliners were led by Commercial Islamic Bank of Iraq (BCOI), which was down 9.1%, followed by Bank of Baghdad (BBOB) down 6.1%, Al-Mansour Pharmaceuticals Industries (IMAP) down 4.7%, Al-Mansour Bank (BMNS) down 4.3%, and the index’s latest constituent Baghdad Hotel (HBAG), that replaced Iraqi for Seed Production (AISP) at the beginning of the month, was down 0.4% in its first month as a member of the index.
Upcoming parliamentary elections, potential political stalemate and the theatrics of violence
The upcoming parliamentary elections on 11th November 2025, the sixth such elections since the U.S. invasion in 2003, will likely lead to a continuation of the current low market trading volumes into the next few weeks. The prior elections, irrespective of their results and the dramas that followed each, resulted in peaceful transfers of power from one government administration to another; however, the processes of government formations following each election were full of conflict and extended over many months. Current media coverage of the upcoming elections is focused on the intense competition between the ethno-sectarian parties and on the potential for political violence leading up to and following the elections. Most will be recalling and looking for parallels with the last elections in October 2021, and their surprising results that led to a 10-month political impasse over government formation that was marked by political violence. It ended then with a series of theatrics, starting with the multi-week melodrama of an occupation of parliament by the supporters of the Sadrist Movement, the apparent winners of the elections, and counterdemonstrations by the supporters of the Shia Coordination Framework (SCF), the apparent losers of the elections. That climaxed in a night of intense armed conflict in Baghdad’s Green Zone between the two; however, it was immediately followed by a truce of sorts between the two. After which, the Sadrist Movement’s withdrawal from the political process, allowed the SCF to form a government, which within 9 months introduced the expansionary three-year budget of 2023-25 and embarked on significant infrastructure developments.
In discounting and looking beyond the post-election drama, it was asserted here at the time, that irrespective of the political conflict and the theatrics of violence, all parties in the conflict, despite their fierce rivalry, have been members of the all-inclusive governments formed following successive elections post the U.S. invasion in 2003. Importantly, as major players in the post-2003 ethno-sectarian political order, all parties built substantial patronage networks, and consequently could risk the loss of the wealth and sources of economic rent created by these networks if their conflict evolved into a violent confrontation. Supporting the assertions were the actions of the equity and the currency markets that discounted and looked beyond the political impasse and violent clashes.
The current political, societal and economic scene is very different from that of 2021 as the country is enjoying the fruits of three years of solid stability and strong economic growth. Nevertheless, these elections are fiercely contested by the country’s ethno-sectarian parties, and there is always the potential for political violence, especially the wild card of the Sadrist Movement’s potential re-entry into the political process and with that a repeat of the events following the 2021 elections. However, irrespective of how the current elections play out, even if they echo the events post the 2021 elections, the assertions made here then are still applicable, cemented further by the economic developments over the last three years.
The over-arching theme, as discussed in the outlook for 2025 is that both of the two key dynamics discussed here often –the cumulative positive effects of the relative stability and structural banking developments– are in the early stages of their transformation of the Iraqi economy, a process that would unfold over the next few years, bringing with it high economic growth that would feed into higher corporate profits, and ultimately higher stock market returns. We believe that the fund’s holdings stand to capture these returns in the next few years in the same way that they did in 2023, 2024, and year-to-date 2025.
Post-elections, while these dynamics should continue to unfold as much as they did in 2023, 2024 and in early 2025, driving non-oil GDP and corporate profits, yet such growth will be from a much higher base, and the growth rate will slow down sharply from the heady rates of 2023 and 2024. Moreover, the tailwinds of prior strong oil prices are becoming, and will continue to be, headwinds over the next 9-12 months, given current expectations for weaker future oil prices as measured by Brent crude prices (chart below: green line for prior Brent prices, yellow line for future Brent prices). This implies, all things being equal, that the upcoming government will not have the wherewithal to pursue expansionary budgets, unlike the prior one, without the need for debt issuance to augment oil revenues. Over the next few years, the increased need by the government for debt will play a big role in developing the country’s bond market, which, in time, will bring with it “bond market discipline” that has the potential to positively influence the structural imbalances between current and investment spending that were perpetuated in every budget over the last two decades.
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