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EghtesadOnline: The Nablus-based Palestine Exchange began trading as a frontier market for the first time in its two-decade history.

According to Bloomberg, the classification by index provider FTSE Russell came into effect this week. While none of the 49 publicly traded companies have been granted the same status, the move is a precondition to consider them for inclusion.

The status is a milestone for the exchange, whose market capitalization was $3.3 billion as of August and its data centers are protected by steel plates behind concrete walls to withstand attacks. Palestinian companies have struggled to shake off the stigma of being in one of the world’s most unstable territories. International recognition by an index provider is the first step in promoting listed local companies.

“Our market might be small, but it’s definitely operated with the best international practices, and it’s actually one of the most open and liberal exchanges in the Middle East,” Chief Executive Officer Ahmad Aweidah said in an interview with Bloomberg TV on Wednesday. The bourse aims to be recognized by other index providers globally, including MSCI Inc., he said.

The exchange’s growth is limited by an economy that lacks water resources, national sovereignty, open borders and an airport. Still, the average volume of trades on the Al-Quds Index over the past 180 days is 1.1 million shares, more than double Morocco’s main stock gauge. The Palestinian measure’s 3.2 percent gain so far this month is the steepest in the Middle East and North Africa.

"Does the FTSE upgrade guarantee that investors from the U.K., the U.S. or elsewhere around the world will invest in the exchange? I’m not sure, but it will improve our chances to be seen and for our companies to be noticed," said Samir Hulileh, the vice chairman of the Palestine Exchange.

FTSE Palestine Exchange Frontier Market