Pent-up demand has resulted in a surge in Iraqi stocks due to political gains and lifting of UN sanctions, says investment management company Global Capital Investments.

Investors continue to show strong interest in the Iraq Stock Exchange (ISX) even as political protests sweep across the Middle East. Iraq has been warily eyed as the next Kuwait or Russia because of its vast oil reserves, estimated to be as large as Saudi Arabia’s.

The value of the ISX’s 88 listed companies has risen 24.27 percent in 2011, in contrast to the region’s 15.21 percent losses year-to-date, as measured by the S&P Pan Arab Composite Index. The ISX began trading in 2004 with 15 stocks and its current market capitalization totals less than $4 billion.

Global Capital says foreigners - mainly from the United States, Europe, the Gulf and Egypt - have invested record amounts in 2011, with over $20 million (or 23.4 billion Iraqi Dinars) of foreign capital flowing in so far in 2011.

According to Ken Kuhn, president of Global Capital Investments, pent-up demand for publicly-traded companies was unleashed in December last year when the United Nations voted to lift international sanctions against Iraq, followed by Iraq’s parliament voting to seat a new government.

Higher oil prices are also now benefiting Iraq as investors bank on the country again becoming a major oil producer, says Kuhn.

“Stock markets are often leading indicators,” says Kuhn. “Iraq has enormous challenges, but the stock market’s gains clearly reflect investors’ optimism that they can be met,” he adds.