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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007 PALESTINE SECURITIES EXCHANGE Dr. Hasan Abu-Libdeh Chairman The year 2006 witnessed serious transformations in the life of the PSE on both the organizational and practical levels. The year 2006 was not a normal year for the Palestine Securities Exchange nor was it so for investors. Since late 2004, the PSE has entered an ascending correction movement compensating Al-Quds Index loss for four years of hurdles that prevented achieving the expected growth that reflects an objective assessment of the performance of the Palestinian economy and public shareholding companies. The aggregate consequences of the continuous Israeli aggression during the first years of the Uprising had a direct role in stopping the growth of the index. During the year 2005, the Palestinian cause witnessed political progress that led to unprecedented upward movement of the index. The result was that the index registered the highest growth level in the world that reached 306%. However, the developments following the legislative elections that took place at the first month of 2006, and the security tensions in Palestine before and after the said elections, made the index lose an important portion of its gains of 2005. Despite this decline, I can assure that PSE is stable and stands on solid ground. Meantime, the PSE enjoys a benefit that qualifies it to become the favorite market for investment as soon as circumstances improve. It is sufficient to mention that the performance of Al-Quds Index was not the worst in 2006 that was characterized with a deep correction movement that overwhelmed most of the stock exchanges in the region despite its developing economies and high oil prices. The year 2006 witnessed serious transformations in the life of the PSE on both the organizational and practical levels. Since May 2006, the PSE launched the procession of increasing the bases of ownership, transparency and good corporate governance. The General Assembly of the PSE decided to go public and become a public shareholding company. More than 51% of its current shares will be sold for the public and other investors including Palestinian brokerage firms. The PSE commenced in preparing a strategic plan, restructuring, staff development, increasing interaction with public shareholding companies and member companies (brokerage firms), sustained coordination with the Capital Market Authority, and allocation of resources to increase public awareness of investors. In this respect, the Investment Awareness Project was launched during the second half of 2006. A radical change was carried out in the computerized environment in order to maintain the efficacy of the PSE operations and to protect investors. The PSE regulations were also developed to keep up with the Securities Law and the Capital Market Law. HISTORY AND DEVELOPMENT In 1995, and in aproactive outlook for investment prospects in Palestine, as well as the urgent need for creating asound investment enviroment, Palestine Development and Investment Company (PADICO), and in cooderation and cooperation with the Palestinian National Authority, took the first steps towards establishing asecurities exchange in Palestine. This initivate aimed to attract Palestinian savings inside Palestine and in the Diaspora and encourage foreign investments that would provide long-term financing for economic projects in Palestine that ensures the advancement of the national economy under all circumstances. It also aimed to regulate and faciliate trading in securities in asecure investment enviroment. Hence, PADICO signed an agreement with the Ministry of Finance for operating the Securities Exchange in the last quarter of 1996, and the first trading session was held on 18 February 1997. The beginings of PSE were modest but developing, in terms of the number of listed companies and brokerage firms, as well the size of transactions. Starting with few companies in 1997, the number of listed companies on PSE increased to thirty-three by end of 2006, while the number of brokerage firms increased to sevenm with offices and branches in most of the Palestinian Cities. Most listed companies trade in Jordanian Dinar, while others trade in US Dollars. Only equities are currently traded on PSE, but there is potential and readiness to trade other securities in the future. With the continuous expansion and progress, Palestine Securities Exchange (PSE) has opened a branch office in Ramallah in order to serve investors and ccordinate with stakeholders. With an Outlook for enhancing the principels of partnership and transparency, PSE is in the process of becoming a public shareholding company, and hence would be listed. FUTURE OUTLOOK In the year 2007, the PSE will witness more procedures for good corporate governance including offering its stocks for subscription and listing its shares at the Exchange. In addition, it will provide investors with the opportunity of direct trading via the internet (E-Trading). Training courses will be held to raise the efficiency of its workers and Traders. It will finance several initiatives that aim at supplying technical and basic analysis of listed companies. It will attempt to develop the performance of brokerage firms, enhance the procedures of disclosure, and sign bilateral agreements with regional and international stock exchanges. With God's will, not less than ten new companies will be listed so that the number of companies listed at the exchange will reach 45 public shareholding companies by the end of the year 2007. We will also launch a group of Electronic surveillance programs for daily trading to protect investors. The year 2007 shall witness, by God's will, more efforts in the field of investment awareness, horizontal expansion by opening a branch of the PSE in Gaza Strip, and expansion in the Social Liability Program so as to reflect more commitment in the human and social program. In cooperation and coordination with the Capital Market Authority, we hope to achieve the legal and organizational requirements to launch the market making service so as to protect the investors from the severe fluctuations in stock prices at any trading session. PAGE 116
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007 PALESTINE SECURITIES EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ millions # Shares millions Total Volume Average Daily Volume Total Volume Average Daily Volume Stocks Jul-06 25.12 1.14 8.48 0.39 Aug-06 75.75 3.44 21.59 0.98 Sep-06 84.98 4.25 20.86 1.04 Oct-06 26.57 1.56 8.48 0.50 Nov-06 83.66 4.18 26.04 1.30 Dec-06 81.45 4.53 23.47 1.30 TOTAL 377.53 3.18 108.92 0.92 Bonds Jul-06 n/a n/a n/a n/a Aug-06 n/a n/a n/a n/a Sep-06 n/a n/a n/a n/a Oct-06 n/a n/a n/a n/a Nov-06 n/a n/a n/a n/a Dec-06 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Other Jul-06 n/a n/a n/a n/a Aug-06 n/a n/a n/a n/a Sep-06 n/a n/a n/a n/a Oct-06 n/a n/a n/a n/a Nov-06 n/a n/a n/a n/a Dec-06 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ millions Index MONTHLY STOCK VOLUME VS INDEX (US$ millions) Stocks Index MONTHLY MARKET CAPITALIZATION (US$ millions) Jul-06 2,221.72 524.96 Aug-06 2,636.14 632.53 Sep-06 2,548.52 603.67 Oct-06 2,567.46 593.96 Nov-06 2,702.21 625.92 Dec-06 2,728.81 605.00 CONTACT INFORMATION 90 80 70 60 50 40 30 20 10 0 700 3,000 600 2,500 500 2,000 400 1,500 300 200 1,000 100 500 0 0 July Aug Sept Oct Nov Dec July Aug Sept Oct Nov Dec Contact Name Dr. Hasan Abu-Libdeh E-mail habulibdeh@p-s-e.com Website www.p-s-e.com PAGE 117
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