Tunisian Prime Minister Beji Caid Essebsi, left, and Libya's interim leader Mustafa Abdel Jalil met Wednesday, Oct. 12, 2011, in the eastern city of Benghazi, Libya. ABDULLAH DOMA/AFP/Getty Images)ABDULLAH DOMA/AFP / Getty Images
Libya's fledgling stock market is attracting investor attention as the country's new rulers aim to re-launch it after a wartime shutdown of more than six months.
Analysts excited by high-risk frontier bourses with growth potential are eyeing with interest an exchange that was a late creation of Colonel Moammar Gadhafi's regime and had just 12 listed companies by the time this year's successful uprising against him began.
While no one foresees an immediate surge in business, bullish observers hope a more favourable political climate, a speeding up of privatization plans and a push to issue shares to Libyan citizens could boost the size of the $3-billion (U.S.) market significantly over time.
"I believe it will grow. Libya is going to be very interesting," says Mark Mobius, executive chairman at Templeton's emerging markets group.
The market has returned to investors' radar as Libyan officials have talked about opening it as soon as this month, although others said it would not be until the new year.
Nagib Abdel Salam Obeida, head of the Benghazi exchange, told Reuters last month that he expected the market to restart in October and that he hoped to see an increase in foreign participation.
If peace in Libya is fully established and maintained, the bourse's capitalization could increase by as much as 10 times to about 30 per cent of gross domestic product in a few years' time, according to Emad Mostaque, Middle East and North Africa strategist at Religare Capital Markets. It could grow even more "if they aggressively push it", Mr. Mostaque said.
One reason for the market's potential is that it is starting from such a low base, given the size of the Libyan economy. Held back by a 42-year Gadhafi regime that swung between suspicion and outright hostility to private business, the stock market opened only in 2007 with its very limited number of traded companies – one of which is the bourse itself.
Banks and insurance companies dominate the existing listings, leaving room to take in companies from other sectors, notably the oil industry that dominates the economy. The political environment under the new ruling National Transitional Council is also seen as likely to be more pro-business than the Gadhafi regime, allowing the non-oil economy to expand in new directions.
A third reason for investor optimism is the will of the wider world to help Libya develop its economy and make its post-Gadhafi institutions work. The London Stock Exchange even signed a co-operation deal with its Libyan counterpart in 2007, although the LSE has said this did not develop.
Analysts admit there are plenty of potential troubles that may yet stymie the Libyan market, from guerrilla war to bureaucratic paralysis or the emergence of a dominant political group not wedded to the western capitalist model. There may also be a need to restructure the market – not least its unusual practice of simultaneous trading in Tripoli, the capital, and the eastern city of Benghazi, where the anti-Gadhafi rebellion began.
"I suspect the Libyan opportunity is five to 10 years out – assuming all goes well on the restoration of functional government," says Daniel Broby, chief investment officer at Silk Invest in London.
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