BEIRUT: Gone are the days when hundreds of thousands of shares would change hands daily on the Beirut Stock Exchange, and the new volume lows continue to send shockwaves across the trading community, warning of a massive sell-off in the works.
“There has been no volume and no interest in the market for a while now. Some trades come in from time to time, but they are nothing noteworthy,” said Yves Rahme, head of equities unit at Byblos Bank in an interview with The Daily Star.
The number of traded shares fell 16 percent to 274,559 during the week ending Oct. 21, the slowest trading week yet in 2011, bringing back memories of the post-July 2006 war trading days.
The BLOM Stock Index also closed the week down 0.49 percent to 1,214.51 points, less than 2 percent away from the bottom of the July 2006 war period, as the market capitalization slid half a percent to $10.46 billion.
Asked why pessimistic investors are not rushing to liquidate their holdings, Rahme said that “investors are not selling because prices are depressed and the spreads are too big.”
He cited BLOM Bank’s bid and ask prices which were quoted at $7.39 and $8.09 respectively Friday, a 9.5 percent spread which itself results from the missing liquidity.
Spearheading the journey into the past is Solidere, which despite showing some resilience in recent trading, remains at levels widely considered to be unjustified. “For several weeks now, Solidere has been trading at the levels of the 2006 war period.
If the stock picks up to $16-17, you will see more sellers,” predicted Rahme who believes investors still refuse to book their losses, choosing instead to wait for a local rebound before dumping their shares.
Solidere’s A and B classes gave in to declines of 0.4 percent and 1.34 percent respectively and are trading in the upper levels of $14 a piece.
Unsurprisingly, a proposed 3-percent tax on real-estate sales transactions did not appear to impact the developer of Downtown Beirut and neither did the decision to raise interest income taxes to 8 percent from 5 percent affect banking stocks.
According to Rahme, “political events used to move the market, but that is not the case anymore. The increased tax on interest income also had no impact on stock prices because they do not trade on fundamentals but on liquidity needs of investors.”
Indeed, third-quarter earnings at Bank Audi barely instigated any trading after the bank reported its worst quarterly growth in net profits in years. Profits at the bank grew only 0.15 percent to $92.1 million during the three summer months as provisions nearly doubled year-on-year to $15 million.
The bank’s balance sheet also shrunk for the first time since early 2007 on flat growth in loans and advances, while deposits fell 1.55 percent year-over-year to $24.9 billion at the end of the quarter.
Despite low volumes, Bank Audi GDR was the worst performer during the week, down 3.07 percent, followed by BLOM Bank which dropped 1.92 percent.
With more bank earnings expected to be uninspiring, a rebound may be further away than some sellers wish. Buying activity remains mostly for the purpose of cost averaging even as a minority of buyers with a longer horizon take advantage of depressed valuations.
“This will be the same story for the weeks ahead as the mood is not for investing but for being conservative,” said Rahme.