Baghdad stock exchange booms and land prices rise as investors look to future

The Dow Jones tumbled 170 points yesterday, and the Federal Reserve looked set to cut interest rates to below when Eisenhower was President in an attempt to buttress a shaky American economy. But in Baghdad it was a very different picture as shares continued to soar.

Facing an impending war and an industrial infrastructure fractured by years of sanctions, the financial heart of the Iraqi capital should have long stopped. But the Stock Index had risen by 58 per cent, to 2,117, in the past six months, while the Dow Jones in New York fell by 10 per cent, and the FTSE in London by 16 per cent.

And it is not just stocks and shares that are rocketing. Baghdad, Basra and Mosul have become some of the prime spots in the region for real estate. The price of land in Baghdad has risen by 20 per cent in the past four months, to the equivalent of £170 a square metre, and those of more upmarket properties by 30 per cent. One of the large and garish villas in the Mansour or Arasat districts would cost around £140,000, although the trend is towards buying land rather than property.

It is not despite, but because of the crisis that the boom is taking place. Investors believe that after this things will change. None will say publicly that "regime change"will lead to the American-inspired economic blockade being lifted and Iraq again being able to enjoy its oil wealth, and the inflow of foreign investment. Instead they intone that things are bound to get better after the United Nations inspections and "the problem" has finished. International aid agencies and businesses will come back in and they will need places to stay, play and work.

The trading floor of the stock exchange, started 10 years ago, has no computers, and the grey walls are peeling. But traders in electric blue jackets scurry around to take advantage of the bull market. The director, Abbas Fadhil, says: "Business people in Iraq have always traditionally been investors and that is what this is all about."

Some of the money being spent has come from expatriates who had started to invest back home in the past few years. Others have done well out of the black economy and the kleptocracy created by the sanctions and Iraq's stultifying bureaucracy.

But the feelgood factor is far from universal. Khalid Ali Qutub, who is about to shut down his small household ware shop, has not even heard of the stock exchange. "That is a world I know nothing about," he said. "All I know is that I am about to lose everything thanks to this war."