[TEL AVIV] Most stock exchanges have a screen of company tickers, flashing prices and a collection of plaques from local brokerages. What they don't have is a military checkpoint five minutes down the road.
The Palestine Exchange in the West Bank city of Nablus was founded in 1995 and has barely featured on the trading map of world. Now, to the arbiters of global investing, the time has come to change that.
Last month, it won inclusion in the FTSE Russell index of 27 frontier markets, joining parts of eastern Europe and Africa as developing places for investors.
There are few countries in the frontier category that feel more frontier, with Palestine a byword for conflict in the Middle East. While the international recognition is a watershed moment, it's what happens next on the political stage that will be key to the exchange's fortunes, and the conflict with Israel again shows little sign of ending.
"We are doing everything we can, but at the end of the day, it's Palestine," said Ahmad Aweidah, chief executive officer of the stock exchange. "We understand there is political risk, but that hasn't stopped us."
Attracting investors hasn't been easy for a bourse located in a place that isn't officially considered a state by the United Nations and is partly controlled by Hamas, a group shunned by the US and European Union as a terrorist organisation.
The Palestinian Authority, run by the Fatah party founded by Yasser Arafat, has bilateral recognition from more than 130 countries. It participates at the Olympics as a member, but is still limited to observer status at the UN.
On Sept 22, Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas gave their annual UN speeches and showed neither leader was closer to an agreement on how to move forward with peace talks. The last round of US-led negotiations broke down in 2014 amid mutual recriminations.
For some Israeli investors, the fact that the Palestinian market has been ignored because of the political backdrop is an advantage."We see this as a potential opportunity to look into a market which is still not being watched," said Jerry Cutiesteanu, senior investment manager at Tel Aviv-based Israel Brokerage & Investments Ltd. "We don't have any limitations to invest in Palestine and the market is close to us and we know the business environment, which puts us in a good position."
The exchange takes up three floors of a six-story white stone building in Nablus, a city of about 150,000 people about 22 miles as the crow flies from the Palestinian Authority's base in Ramallah. About 40 people work there, though all trading is done electronically so there's little activity. About two-thirds of the shares are owned by Palestinians, with Jordanians and Saudis also investing.
The 48 companies that trade on the market, which uses the acronym PEX, had a combined market value of US$3.3 billion as of August, roughly the same size as the 12th-largest stock in Israel's benchmark TA-25 Index.
The Palestinian index, the Al-Quds, has 15 stocks, including industrial and real estate holding companies, banks, drugmakers, telecoms and a cigarette producer. More than half its value is made up of two of them: Palestine Telecommunications and Bank of Palestine. The index has risen 10 per cent over the past year, according to data compiled by Bloomberg.
While none of the companies has been granted the same FTSE frontier status, acceptance by an index provider is the first step in promoting listed local companies.
FTSE Russell added Palestine to its watch list in 2014 before handing it the new status. The company said it shows the stock exchange meets the criteria of a regulated and transparent market where money can be invested and withdrawn without penalty.
"The market is not very liquid so being added to the FTSE index will hopefully help bring more funds to the exchange," said Tarek Shaka, the general manager at Lotus Financial Investment Co, which oversees US$400 million and calls itself the largest brokerage in the territories. "The exchange is very sensitive to politics. If anything positive happens on the political front we will see foreign money flowing into the Palestinian market."
Palestine finds itself in a group with other parts of the Middle East such as Jordan. Then there's Bangladesh and Vietnam in Asia and Africa's most populous country, Nigeria. There are also 10 states of the European Union, including euro members Slovakia, Slovenia and the Baltic nations.
The Palestine Exchange, though, is near a checkpoint where the Israeli Defense Forces examine each car passing. Its data centres are protected by steel plates behind concrete walls to withstand attacks.
"We are ready to continue trading under any circumstance, including war," said Mr Aweidah, the CEO. "Once you close, it's hard to reopen and we don't want that."