PEX 2020: What’s next for Palestine’s capital market?

Anna Reitman
8 min readJan 27, 2021


This article was originally published November 11, 2019 on Byline Times

Established in 1995 and headquartered in Nablus, the Palestine Exchange (PEX) has made it through some of the most challenging times capital markets have seen, overcoming geopolitical and economic forces that are global, regional and local in nature.

Ahmad Aweidah, CEO of the exchange, explained that the 2009 global financial crisis hit the exchange’s revenues and, while operations were sustainable for some time, by 2013 the decision was made for a major digitization overhaul. Headcount was reduced by almost half, and there are targets in place for PEX to become an entirely paperless company by 2020.

This is being accomplished by building an in-house business process management platform from scratch, which handles the entire business of the exchange internally, resulting in a reduction of operating costs by 40%, he said.

Moreover, being nimbler and leaner has also led to the reopening of a Ramallah office, putting the capital market closer to major stakeholders and listed firms.

Ahmad Aweidah, CEO of the Palestine Exchange (PEX) established in 1995 to promote investment in Palestine at his office in Ramallah, a Palestinian city in the central West Bank of Palestine.

Photo: Eddie Gerald

In terms of the region, PEX “is not the worst pupil”, said Aweidah, adding that the Middle East/North Africa and Gulf regions have seen Arab exchanges buffeted by a low oil price and geopolitics, with Saudi Arabia in the spotlight. For PEX, “2019 has not been a good year”, with trading revenues down by almost 40%, and Q3 profits down by almost a third at $459,000.

These results are indicative of the cash crunch Palestine is just emerging out of, even as the financial figures of its 48 listed firms start to give a clearer picture of the fallout.

“The VAT issue (that) came up with Israel, that had a huge impact on liquidity in the general economy, so it’s normal for that to be reflected in the activity on the exchange,” said Aweidah. “The biggest challenge now is that there is little incentive for companies to list in a shallow market, you need velocity, liquidity.”

Changing that situation would require “something big” to happen, economically or politically, and Aweidah is not betting on it, with 2020 being budgeted for more of the same: “We are not forecasting rosy pictures because there are still big challenges ahead. Even though the VAT issue has been resolved and the liquidity crunch has been alleviated, still, challenges remain. As long as there is no window on the future nobody really knows what’s going to happen, so there’s no clarity, neither politically nor economically for the foreseeable future…uncertainly is the name of the game.”

Palestine’s capital market, he added, is becoming a harder sell to international investors despite a global investing trend towards emerging and frontier markets: “We are competing with so many other markets — Sri Lanka, Pakistan, Colombia — and there are so many opportunities right now, that the story needs to be compelling enough to have a fighting chance. This is not exactly the ideal situation for Palestinian companies to be pursuing investors externally for the time being.”

At the same time, there haven’t been any major outflows, and the level of foreign ownership in the exchange has stayed stable at 38%. And listed firms have held up well, he added, with accumulated profits at $188 million in 2018, in line with 2017, and with no major drop (-1%) in the first half of 2019 comparatively year on year.

What does a listed firm say?

Located in Ramallah, Palestine, the Arab Palestinian Investment Company (APIC) listed on PEX in 2014. Despite Palestine’s cash crunch, its Q3 results show total revenues at $609.1 million; a growth of 9.7% compared to the same period of 2018. Net profits after tax amounted to $15.8 million/year to date in Q3, up 34.6% year on year, while net profits attributed to APIC shareholders amounted to $12.8 million, up 32.7% year on year.

“It is a challenging environment, but we’ve maintained solid performance even in tough times,” said Fida Musleh-Azar, Investor Relations and Corporate Communication Manager at APIC. “The general economic situation in Palestine is really not that great, but if you look to companies listed on the stock exchange, they’re performing very well.”

Fida Musleh-Azar, Investor Relations and Corporate Communication Manager of the Arab Palestinian Investment Company (APIC) at her office in Ramallah, a Palestinian city in the central West Bank of Palestine. APIC was founded in 1994 by a number of Arab businessmen for the purpose of channeling funds and investments to Palestine and creating new jobs in the country.

Photo: Eddie Gerald

She added that while Palestine is often in the news, not much is highlighted about business in Palestine, a situation that needs a lot of work to change that perception by, for example, reaching out to the media with success stories.

As an investment holding company, APIC’s investments are diverse, spanning across the manufacturing, trade, distribution and service sectors, with a presence in Palestine, Jordan, Saudi Arabia and the United Arab Emirates through nine subsidiaries, of which 90% of operations are in Palestine.

Each subsidiary, she said, is a star in its domain — Unipal General Trading Co. in the fast-moving consumer goods sector, Siniora Food Industries Co. in food manufacturing, Medical Supplies and Services (MSS) in the medical supplies sector, National Aluminium and Profiles Co. (NAPCO) in aluminium manufacturing, and Palestine Automobile Co. in car distribution and after-sale services, for examples.

APIC seeks to reinforce its expansion and development policy by targeting new markets and sectors, as well as upgrading its subsidiaries’ products and services with new exclusive global distribution rights, new production lines, and capital acquisitions. In 2018, APIC acquired the remaining 50% of its subsidiary MSS making it wholly owned by APIC. APIC also increased its shareholding ownership percentage from 61.2% to 65.8% in its subsidiary Siniora Food Industries, a listed company on the Amman Stock Exchange.

There are a number of benefits to list on PEX, noted Musleh-Azar. On one hand, it aims at maximizing shareholders’ value: APIC’s market capitalization has risen gradually from $64 million in 2014 to reach $216.3 million to date, a growth of 240% over its 2014 closing when it listed.

On the other hand, she added, it offers a higher profile and visibility in the market, in addition to greater credibility in the eyes of existing and potential stakeholders. Challenges, said Musleh-Azar, are associated with low liquidity, although the exchange positioned itself as a robust one among its emerging markets peers with an average dividend yield of about 6% and an average Price-to-Earnings ratio of 14% over the past five years.

Construction project near PEX and APIC offices in Ramallah, Palestine. Photo: Eddie Gerald

Trendspotting: ESG and blockchain

PEX meets all the regulatory and technical criteria for international recognition as a frontier market and is included in the FTSE Russell indexes, as well as in the MSCI with stand-alone status. It’s also a member of the World Federation of Exchanges, which keeps Aweidah in touch with the most cutting-edge trends. At WFE’s most recent annual conference, he noted, the hot topics were blockchain and ESG (environmental, social, governance) investing.

Blockchain, simply put, is a decentralized form of recording transactions maintained across a peer-to-peer network using cryptography. Aweidah does not see it as relevant for the exchange right now, and leans towards the opinion that it’s “a solution looking for a problem”. Somewhat related to the blockchain is the emergence of cryptocurrencies, like bitcoin and ether, which he says are viewed by the Palestinian public mostly “with suspicion” and “as some kind of Ponzi scheme”.

ESG investing is somewhat more relevant, however. This is considered an evolution of corporate social responsibility practices, which also requires that firms embed environmental, social, and governance factors into the investment process. The International Monetary Fund (IMF) reckons there are some 1,500 equity funds with an “explicit sustainability mandate”, which control nearly $600 billion in assets, up from $200 billion in 2010. And while ESG represents less than 2% of the total investment fund universe, it’s growing rapidly.

One example of how this is impacting operations is that PEX is conducting a “gender audit” in collaboration with UN Women, with a view towards becoming “gender agnostic”, Aweidah explained. At the moment, the exchange has equal representation of women and men.

“We’ve just started, and other companies have started, talking about our carbon footprint, how sustainable we are, etc. But from there to having ESG-compliant products trading on PEX, we still have a long way to go,” he said.

APIC’s Musleh-Azar also noted that ESG is “a very big topic here but needs a lot of miles to come across”. In 2018, the firm invested some $1.4 million in line with corporate social responsibility practices, representing 8.7% of APIC’s net profits.

On ESG compliance, she noted that: “We are committing to higher standards of governance and transparency in the companies we invest in and ourselves as well”.

Upgrading PEX

Another way that PEX is keeping up with the times is in the area of machine learning, specifically in the area of market surveillance using NASDAQ’s SMARTS system, amid an upgrade to NASDAQ’s latest trading engine, which has “tremendous capabilities” compared to the platform the exchange is currently working with, purchased in 1997, Aweidah noted.

He describes the new advanced system like “Lego” with modular implementation: “You pick and choose whatever module you want and then you can just add into it: derivatives you get the derivatives module, you want to do fixed income, you add on the fixed income…it’s the future. We need to start deploying the technology of tomorrow, and obviously we cannot introduce new products as long as we are using an obsolete trading engine.” The expected completion date for integrating the engine into existing systems is June 2020.

Despite these anticipated upgrades, Aweidah describes the situation PEX is in as “a chicken and egg” problem: “We qualify in terms of the technical and qualitative stuff, we have qualified for a long time, we do satisfy all the technical and organizational and regulatory criteria that (institutional investors) require…but it’s a size thing, and it’s a liquidity thing. They won’t come in unless you achieve a particular size but if they do come in, that would immediately help you getting that way.”

While Aweidah said there’s much to learn from other global capital markets in building PEX, there is also something that frontier markets can take from the Palestinian jurisdiction: “You can run a financial market successfully and profitably even under the most difficult circumstances,” he said.



Anna Reitman