BEIRUT: Lebanese stocks drew little enthusiasm and even less attention during the week from domestic and foreign investors focused on European and U.S. market developments and blinded by the shiny gold prices hovering around $1850/oz.
As a result, the Beirut Stock Index closed the day Friday at 1,299.69 points, down 0.46 percent for the week, and the market capitalization fell 0.51 percent to $11.22 billion amid a wave of large losses across major global equity markets on rising fears of a new global recession.
“I do not see any reason for Beirut stocks to rise. It is only normal for them to be down given the domestic political situation, the deteriorating situation in Syria, and also with the global market turmoil,” said Louis Hobeika, economist and professor at Notre Dame University.
The market’s laggard for the week was Beirut Stock Exchange’s biggest stock, Solidere, as class A and B shares fell 1.8 percent and 1.5 percent respectively, closing at $16.42 and $16.48. According to Hobeika, “it is unusual to see Solidere trading this much below its estimated fair value of above $40 per share, but in practice there is no demand for the stock right now.”
On the other hand, thin trading in banking stocks allowed for only limited price variation, so the sector fared better than the developer of Downtown Beirut, with Bank Audi, BLOM Bank, and Bank of Beirut all holding on to their prices while Byblos Bank shares slipped 1.2 percent.
A further deterioration in the security environment in Syria during the week added new concerns from the potential impact on Lebanese banks operating there, including Byblos, as well as the wider economy.
However, the domestic situation still earned some space on domestic investor’s agenda, especially given increased tensions following additional announcements from the Special Tribunal for Lebanon and the ongoing debate over the electricity plan.
Even the monthly fiscal performance report, which included an expected transfer of $704 million in telecoms revenues to the Finance Ministry, generated heated debate between the government and opposition.
As a result, many Lebanese and regional investors trended towards gold and sovereign debt as new safe havens, indicating little or no risk appetite given current political discourse and financial market developments. According to Emanuele Del Monte, portfolio manager at Fideuram Asset Management, “domestic liquidity [in Lebanon] is abundant and locals are invested a lot in the sovereign debt. That’s why in times like these, Lebanon bonds turn out to be perversely very stable compared to other illiquid bonds.”
Although newly issued and secondary bonds continue to weather the global storm, the International Monetary Fund projected Lebanon’s economic growth at 2.5 percent for 2011, a third of the average growth posted in previous years.
With a falling dollar and declining tourism numbers, the domestic economy appears to be returning to the years of tame growth rates and widening fiscal and trade deficits.
As a result, according to Hobeika, “the government needs to take some positive steps, including good decisions in terms of the electricity plan, security environment, and administrative appointments, in order to revive the economy and stock market in the second half of the year.”
For now, even a meager positive economic growth rate and a stable credit rating place Lebanon in an enviable position relative to several neighboring and developed countries. Yves Rahme, head of equity research at Byblos Bank, told The Daily Star that “Lebanon is still doing better than others such as France, the United Kingdom following the riots, the U.S., and several of our neighboring countries, so I think we are generally seen as a safe destination right now.”