Fundamentals of Investing

The Amman Stock Exchange (ASE) continued to experience the rush brought on by a boom in investors' appetite. Volumes remained high with more than 30 million shares, worth approximately JD60 million, changing hands, which created a balance in the market's breadth as opposed to last week's major dominance by advancers.

Meanwhile, the market's fundamentals are at the forefront of discussions as the exchange's participants try to grasp the reasons behind the surge in share value. Given the ASE's current P/E of 20x, which is at a 30% premium to the market's historical average since its inception in 1978, there is a clear indication that the market, in general, can be considered to be overvalued. However, the exchange did trade at peek P/Es of 24x and 25x in 1994 and 1984, respectively, showing that there might still be room for growth.

The services sector was the main attraction of the week, claiming almost 50% of the volume. Specialized Investment Compounds (SPIC) and Beit El-Mal Saving and Investment for Housing (BAMB) both enjoyed a 27% hike as they closed at their respective positions of JD3.76 and JD4.43.

Portfolio holding companies such as Jordan Investment Trust (JOIT) and National Portfolio Securities (NPSC) were active this week although for completely different reasons. JOIT witnessed several bloc deals, totalling 0.5 million shares, on Tuesday. However, the stock could not hold on to its spot, slipping 2% to JD1.33. NPSC, on the other hand, rose 13% to JD2.14 as the company announced that it has decided to drop its lawsuit against Merrill Lynch in exchange for an amicable settlement of JD0.489 million.

The Arab Bank (ARBK) continued with its climb, which was coupled with healthy trading, allowing the stock to close near its weekly high of JD269. The Export and Finance Bank (EXFB) was also on the positive growth path, advancing 16% to JD2.94 as more than 1 million of its shares changed hands.