The Palestinian stock exchange has proved resilient in the face of regional political upheaval, but is still heavily undervalued because of the territory’s reputation for violence and strife, the bourse’s CEO said on Monday.

Since the start of the year, the Palestine Securities Exchange (PSE) has fallen just 1.5 percent, against drops of up to 40 percent in some neighbouring markets, such as Egypt, chief executive operator Ahmad Aweidah said in an interview.

“Shares are cheap. Companies are profitable. They are paying dividends. Intifada or no intifada, Arab Spring or no Arab Spring, military takeovers, curfews, roadblocks, we have been through it all and survived,” he told the Reuters Middle East Investment Summit.

Aweidah said uprisings that have swept the Arab world this year would prove positive for the Palestinians, who expected more sympathetic governments to take power in various states.

However, uncertainty over the unresolved conflict with Israel continues to weigh on sentiment, with the Palestinian’s recent unilateral bid for statehood recognition at the United Nations the latest cause for concern.

Both Israel and its main ally, the United States, are opposed to the move, and the U.S. Congress has frozen aid funding to the Palestinians for pushing ahead with the plan.

“We have gone through much worse than what we are seeing now,” Aweidah said. “The problem is that ‘brand Palestine’ is not there. This place is only talked about when people are being blown up. … The Palestinian equity story is not told.”

LOOKING TO LIST ITSELF

The PSE is based in Nablus, some 40 kilometre (25 miles) north of Ramallah, the Palestinian administrative capital in the Israeli-occupied West Bank.

Some 45 companies are listed on the exchange, with a 46th due to join next month. Its total market capitalisation is just under $3 billion, and average daily trading volumes have come in at just under $2 million so far this year, Aweidah said, adding that 47 percent of all shares were foreign-owned.

Two companies, holding company Palestine Development and Investment Inc. and Paltel , account for 40 percent of that turnover.

Pointing to the low valuations, Aweidah said Paltel was trading on a P/E ratio of 7.9, paying a dividend of almost 8 percent annually for the last three years, while the average P/E ratio for telecoms firms in the Middle East was 12.

“It is beyond ridiculous,” he said.

Aweidah is using such valuations to try to convince investors to buy into the exchange itself, and is hoping to list the PSE within the next three months.

“We believe that listing the exchange will further enhance our credibility,” he said, adding: “Our biggest selling point is our upturn potential, which is huge.”

The PSE is looking to sell up to 25 percent of its capital through private placements, hoping to secure backing from two or three big institutional investors, who could bring in know-how and business. Aweidah was due to travel to Dubai on Tuesday for talks with potential buyers, but did not give names.

Amongst other potential boons for the exchange are steps by the local authorities to authorise and regulate a private pensions sector, which could generate funds of perhaps $100 million a month, some of which would be invested in stocks.

But Aweidah also acknowledged that there were hurdles to development, citing, among others, a lack of diversity in the local banking sector and tight regulatory restrictions that discouraged banks from taking positions in the stock exchange.

Despite these problems, along with the constant worry of a deterioration of relations with Israel, Aweidah said he believed Palestinian shares remained a sound investment.

“If you had invested $1,000 in the Palestinian exchange in 1997 (when it opened), today you would have $5,000, despite everything that has happened. That’s not bad,” he said.