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The capital markets represent a key factor in the development of modern economies, and perhaps its importance lies not only as a place for trading securities, but exceeded it, to play other important roles among the macroeconomic position and the active participation in the process of economic development. Like all economic sectors in the country, Palestine Stock Exchange experienced many challenges in the recent years, but despite the complex economic reality, PEX did not ignore its role in enhancing the resilience and development of the national economy; however it was a power factor to promote the growth of this economy.
In the context of its economic role; Mohammed Mustafa, the Chairman of the Palestine Investment Fund assured the important role played by the PEX in the evolution and development of the national economy, based on a set of data that were reflected on the Palestinian economic reality; such as helping to provide capital and liquidity, adding that the PEX works to direct savings toward investment opportunities, to enhance the development process, to promote transparency and to provide good investment opportunities. “And with its outstanding performance and maintenance of a secure environment for shares trading in addition to it’s pursue for standards of justice and transparency; the PEX had contributed in creating an attractive environment for investment and strengthening the Palestinian financial sector."
The PEX role is also highlighted through what is provided for small investors of an opportunity to benefit from investing their savings to achieve appropriate investment returns, and also to contribute in the economic renaissance of the country through their shareholdings in the various companies, therefore allowing for the expansion of these companies, and thus opening up new economic and investment prospects, which in turn would contribute to the provision of employment opportunities and reduce reliance on imported products.
Measure of the economic performance
According to analysts’ measures, the stock market is considered one of the most important indicators to measure economic performance. Over the past years, and so far, Palestine Stock Exchange proved its ability to work in different circumstances According to Dr. Mustafa; the PEX has enjoyed immunity against the volatility of political and economic conditions in the region, which helped it to be a source of protection for the foreign portfolios that decide to invest in Palestine. He said, "the demand of Arab, global and local investment funds to invest in the PEX reflects an evident confidence in its performance, it has grown steadily and topped the performance of Arab stock exchanges since the beginning of the year, as well as its commitment to international practices and international standards of capital markets, therefore raising investors confidence in its performance".
So, the PEX became a pot not only to collect national savings and investment, but also to attract foreign investment. According to Dr. Mohammad Mustafa, the bulk of these positive factors prompted foreign investors to consider investment opportunities in Palestine, saying: we have noted this demand by the various funds to invest in the PEX, the latest was “Rasmala Palestine Equity Fund” which began recently to invest in the shares of listed companies. The entry of such investment funds gives a big boost for the stock market and listed companies, and enhances opportunities for the promotion of Palestine as a safe investment environment and a strategic investment choice, in addition to contribute in attracting Arab and foreign investments.
In the same context, Dr. Mustafa pointed out to the Palestinian Investment Fund’s initiatives, saying: "there is no doubt that when there is a high confidence in the PEX as in the case now, the demand for investment is bigger and higher, we in Palestine Investment Fund are the biggest investors in PEX. During the year 2010, we established a treasury company to manage the Fund"s investments in the capital markets in general, and in Palestine Stock Exchange in particular; to reflect the Fund"s faith and high confidence in the ability of the Palestinian listed companies to work and achieve profits and growth, where the value of investment fund portfolio in PEX reached about $245 million until the middle of this year, the size of this portfolio is equivalent to about 15% of the value of the companies that the PIF is investing in, and about 8% of the entire market value. This portfolio is distributed on a range of vital sectors, such as industry, banking and financial services, telecommunications and investment.
Convoying the economic growth trends
From Dr. Hasan Abu Libdeh"s side, the Minister of the National Economy, he described the Palestinian Stock Exchange as immune against shocks, and said: this comes for several reasons, including that our the Palestinian economy is isolated, and therefore the external relations of the PEX is weak, and this means that there are no forces of attraction and expulsion that affect stock prices. He added that the specificity of PEX is laying in the facts of its small size and listed companies; therefore there is no significant liquidity that makes it vulnerable to changes dominated by speculations. And because of its small size and relatively small number of investors, it is immune to any regional or global shocks. As Abu Libdeh reported, "the current stock prices are very attractive if it is read by any financial analyst, and the return on investment is high, therefore, we believe that the PEX will be qualified to cope with these growth trends in the case of a real economic growth”.
Abu Libdeh refers to the year 2005, and according to his vision, the problem lies in the relationship of PEX with the small investors particularly after the crisis of the year 2005, as well as the lacking of several tools that could drive it forward. This is related to the economic process, where there is no key investors nor pension funds, no market maker, or large projects with an international dimension in PEX, in which there is a need to build a strategy to encourage domestic investment especially for small investors who must know that their savings in PEX will give them a yield better than their savings elsewhere.
Finally, Abu Libdeh concluded by asserting that "Palestine Stock Exchange” is a fundamental component of the National Economy, but requires an increase in the confidence of the community in order to be activated, and to continue the encouraging and awareness promotional campaign which is very important and must be intensified, because the results will not be immediate, but long term, especially as it relates to a change in the structure of investment awareness among the Palestinian community. And according to his view, the issue requires "confident and serious stand up against what happened in 2005, to overcome this obstacle that still impede the restoration of confidence between the citizens and the PEX that had been collapsed because of it”.