The confidence of foreign investors in the Amman Stock Exchange

Foreign investments in the Amman Stock Exchange(ASE) maintained their levels during the year 2020 and in the past months of the year 2021. This is a result of a great confidence factor in the Jordanian economy despite the storms that Jordan has gone through as a result of the Corona pandemic and the political and security crises in the region.

Shares owned by non-Jordanians accounted for 50.8 per cent of the total market value of the stock exchange at the end of January 2021, where the Arab contribution accounted for 32.3 per cent and the non-Arabs accounted for 18.5 per cent of the total market value. On the sectors side, the share of non-Jordanian investors in companies listed on the stock exchange for the financial sector was 52.7 per cent, the services sector was 19.3 per cent, and the industrial sector reached 64.1 per cent.

These numbers undoubtedly indicate the non-Jordanian investors’ keenness to continue investing in the ASE  and diversify their investment portfolio in light of the high degree of transparency and regulation enjoyed by the ASE, in addition to the relatively low degree of price fluctuation in the stock exchange,  and in addition to the good performance of a number public shareholding companies and their ability to attract capital for investment. The foreign investor, regardless of its type, often looks for safety in the investment environment and return on investment. There is no doubt that they will find them in the ASE, otherwise the percentage of non-Jordanian ownership would not remain almost at its level during the year 2020. Political stability within the Kingdom is an important factor from the viewpoint of foreign investors, especially in light of the continuing tension in the geopolitical situation in some neighbouring countries. 

We know that the repercussions of the spread of COVID-19  and the closure of the economic sectors and the measures that were taken as a precaution to limit the spread of the epidemic formed a pressurising circumstance on the activity of companies in Jordan in various sectors, and this was reflected in the performance of the stock exchange during last year.

As the data indicates, the ASE 100 general stock price index weighted by free floats decreased to reach 1,657.2 points at the end of the year 2020 compared with 1,815.2 points at the end of the year 2019, a decrease of 8.7 per cent. The market value of the shares listed on the ASE at the end of the year 2020 decreased to 12.9 billion dinars, a decrease of 13.5 per cent compared to the market value of the shares listed at the end of last year 2019. Thus, the market value of the shares listed on the ASE  for the year 2020 accounted for 41.5 per cent of the GDP in Jordan.

I believe that what the ASE needs today is to develop and implement the necessary policies to attract institutional investment, especially through investment funds, in preparation for the return of liquidity to the market. We have always talked about providing licensed market makers in the stock exchange, but we did not see this on the ground, as this would reduce price fluctuations and provide greater confidence in the prevailing price levels, and maintain market liquidity. In addition, the primary market for government securities (bonds) should be strengthened by expanding the investor base, diversifying public debt instruments, and encouraging an efficient secondary market for government securities.

The importance of revitalising the ASE stems from the fact that it is the second channel in the financial system that plays the role of a mediator in the economy. This is done by converting national savings into investments that constitute a main source of financing for public shareholding companies listed on the stock exchange, at the same time providing funding for the treasury, the public sector and the national economy as a whole.

Dr Adli Kandah is economic, banking and financial expert who contributed this article to The Jordan Times.