WFE Interviews the Amman Stock Exchange
Q1 - Could you give us a bit of background about your exchange? Creation date, main product(s) traded, few data on market sizing (market cap, volumes…), Date of establishment, legal status (i.e. joint stock co., or nonprofit…)
The Amman Stock Exchange (ASE) assumed its tasks on March 11th, 1999 - after the restructuring of the Amman Financial Market - as a private nonprofit institution with administrative and financial autonomy and is authorized to practice as a regular market for trading in securities in Jordan, subject to the control of the Jordan Securities Commission (JSC). The ASE is managed by a seven-member Board of Directors; four of whom are elected by the General Assembly and three are appointed by the Board of Commissioners of the JSC.
The ASE operates markets for stocks, bonds, and right issues. The equities market is segmented into 3 markets based on criteria related to liquidity, profitability and owner's equity, while the bonds market includes government bonds in addition to corporate bonds.
As of May 31st 2013, the number of listed companies at the ASE stood at 243 companies with a market capitalization of USD26.9 billion. The trading value at the ASE since the beginning of this year until the end of May has doubled compared with the same period of last year reaching USD2.6 billion and the number of shares traded reached 1.4 billion shares executed through around half a million transactions.
Q2 – How active are foreign investors in your exchange ? How accessible is your market? IT connectivity, access/restrictions for foreign investors, The breakdown of the investors, breakdown of companies listed by sector (financial, industrial and other services….)
The high level of foreign investors’ ownership in the market capitalization reflects their confidence in the ASE. The percentage of foreign investments in the ASE stood at 51.2% of the market capitalization at the end of April 2013. This percentage is considered one of the highest in the region, and it has been stable in the recent years, even with the financial turmoil that is going on around the world. 33.8% of the market capitalization is owned by Arab investors and 17.4% by non-Arab investors. At the sectorial level, the non-Jordanian ownership of the market capitalization of listed companies reached 54% for the Financial Sector, 34.3% for the Services Sector, and 56% for the Industrial Sector.
In fact there are many reasons that encourage foreign investors to invest in the ASE, such as the ease of access to the market, the free movement of capital, and the tax exemption of capital gains and dividends. Besides, foreign investors always prefer to invest in a well regulated market.
Q3 – What new project/product are you currently working on?
The ASE embarked on a number of key projects mainly; upgrading the technical infrastructure and launching new financial instruments, such projects shall ensure maintaining the lead that the ASE has amongst regional stock exchanges. The ASE has been developing its technical infrastructure progressively over the past years in order to meet and satisfy the investors’ needs, and to be able to handle its role more efficiently and in accordance with the international best practices. The Internet Trading service was one of the major developments that the ASE implemented recently, and currently the ASE works on enabling more brokers to provide this service to their clients. Another major development was applying the new market segmentation through which the companies listed at the ASE were redistributed on three market segments based on criteria related to profitability, shareholders' equity, free float shares and the number of shareholders. Moreover, companies listed in these different market segments were differentiated in the price fluctuations limits and in the trading hours.
Q4 – What are the challenges you see in your market today and in the future?
As you know, stock exchanges are vulnerable to the political and economic challenges of their respective countries in addition to the surrounding countries. Luckily, the political situation in Jordan is stable, although that is not the case in many countries in the region. However, the Jordanian economy is facing challenges that are mainly due to the high budget deficit and public debt. These challenges were worsened by the political situations in the surrounding region and the government is working on bringing these indicators back to acceptable levels.
Q5- How do you assess your exchange`s position at a time of increased globalization?
The ASE has enhanced its position on the international map by becoming member in many Arab, regional and world gatherings such as the WFE, the Federation of Euro-Asian Stock Exchanges (FEAS), the Arab Federation of Exchanges (AFE), the International Organization of Securities Commissions (IOSCO) and the Financial Information Services Division (FISD). Part of the globalization concept is about the free movement of capital and the ease of access to financial markets around the world which is something the ASE has an advantage of, as there are no restrictions on foreign investments which resulted in the high foreign investment levels.