Is Now a Smart Time to Invest in Iraq?
|July 29, 2011||Filled under Featured Article|
Q: Are there ways to invest in Iraq, either directly or indirectly?
A: If you’ve been having trouble sleeping, and turn on TV late at night or scour the Internet, you’re likely to bump up against pitches to investors to take a chance on Iraq.
Most of these investment proposals center around investing in Iraq’s currency, the dinar. Given how war-torn the country has been after years of military conflict, some investors are figuring it’s a likely place to bet on a recovery.
Addressing the speculative interest in the Iraqi dinar, trading currencies of mainstream currencies — like the U.S. dollar and the euro — are risky enough. But trying to dabble in the currency of a destabilized nation with leadership flux and questions about its government is beyond speculating. These types of investments are closer to the realm of buying a lottery ticket.
But beyond the currency, are there other ways to invest in Iraq? Usually, investors have a whole host of mutual funds and exchange-traded funds that allow them to invest in various countries, even those in emerging nations like China, Brazil and Russia. But a search for Iraq in Morningstar’s mutual fund and ETF database turns up nothing. For tangential exposure, there are a number of ways to invest in the Middle East including the SPDR S&P Emerging Middle East & Africa ETF (GAF), the T. Rowe Price Africa & Middle East fund (TRAMX) and WindomTree Middle East Dividend (GULF).
Another indirect method of betting on Iraq would be to invest in a company that’s involved in reconstructing the country’s infrastructure. One of the biggest players in Iraq’s reconstruction has been Halliburton (HAL), which according to its most recent 10-K annual filing, has several contracts to build and develop energy infrastructure in Iraq. KBR (KBR), a former unit of Halliburton, has also been very active in Iraq. Keep in mind, though, that these are large companies that have construction and engineering projects underway in many parts of the world.
Iraq continues to be a nation in flux. Only investors who can tolerate tremendous risk should consider investing in such a risky proposition. And while there are ways to get some exposure to the area, until the country rebuilds and becomes more stable, the options for investors are pretty limited.
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