Buy back prospects boost the market

Amman Stock Exchange (ASE)

Weekly Commentary (03-07 June)

Leaky Business

The government is moving towards allowing public companies to buy back a limited portion of their outstanding shares - known as Treasury Stock. According to reports in a local paper the move comes after months of extensive coordination between the Central Bank and other financial institutions. Although some analysts welcomed the step in the change of policy, they also expressed concern that the real problem within the capital market is a lack of transparency - something fundamental to drive investor confidence home.

Speaking of disclosure, the Jordan Securities Commission (JSC) has requested the ASE to halt from trading the shares of four companies that have failed to file their results for the year 2000. Again, while some analysts welcomed the move, others complained that all this is too little too late.

In the market, the ASE saw its overall trading activity shoot up despite a mid-week holiday marking a religious celebration. Value traded stood at around JD8.3 million with more than 4 million shares changing hands. The AMI closed slightly higher at 93.52 after a winning week, with advancers outnumbering decliners almost two to one.

The pharmaceuticals sector got its shot in the arm with Dar Al Dawa for Development and Investment (DADI) and Arab Pharmaceuticals (APHA) gaining 6% and 3%, respectively. The Arab Bank (ARBK) followed up from last week's commotion reaching as high as JD174 - so did Union Tobacco & Cigarettes (UTOB), which has shot up lately to a curious high of JD6.85. This may have come in preparation for a local institution's planned acquisition of a UTOB bloc, which never saw the light of day.

News of leaks at the Arab Potash (APOT)'s Dike Number 18 has been surfacing as of late. This comes as the company stopped pumping water into the dike for five days last week and lowered the water level by two to three meters. Local and foreign firms were rushed in to assess the damage and find a quick fix that would finish off the problem once and for all. If the problem is not resolved by the end of 2001, according to APOT's chairman, production for the year would fall by 50,000 tons (total production during 2000 was 1.94 million tons). Other observers, however, feel that APOT may come under pressure to meet next year's demands and will have to dip into inventories, should the worse happen. Despite these concerns APOT still managed to close up 1%.

Comparative numbers for trading activity on the bourse show that we're in the deep. Activity for the first five months of the year show that volumes are down by almost 2% while, although value traded may seem to be on the rise, if we take out the JD16.7 million Arab Bank deal brokered last week, value traded declined by some 11%. Again, this highlights the necessity of restructuring regulations to increase transparency and restore investor confidence.

On the QIZ front, the Al-Hassan Industrial Estate's exports are continuing their year on year rise. The value of exports for May stood at more than US$20 million compared to US$12.4 for the same time last year. As usual, textiles led the way with goods worth more US$12 million followed by engineering products and leather ware, at US$4.4 million and US$1.7 million, respectively.