BEIRUT: Ignorance was hardly bliss for Beirut stock investors in the final week of October. As the world debates Europe’s rescue plan and with the Middle East’s attention diverted to Syrian-Qatari developments, Saudi Arabia’s new political hierarchy and Tunisia’s election results, the Beirut Stock Exchange sank further into oblivion.

Even third quarter earnings reports by Lebanon’s biggest banks drew little interest from investors who reportedly saw the slowdown in profits coming, in light of Syrian and Egyptian events.

“Investors were not surprised by the earnings results, and are away from the market because of the turmoil in the region. Political events in Syria affected banking sector growth but that was already priced in the market, so price movements did not show any momentum and volumes were rather passive,” said Nancy Elias, senior financial consultant at FFA Private Bank in an interview with The Daily Star.

Yet with only 382,849 shares changing hands during the last week in October, the BLOM Stock Index still managed to fall 1.18 percent to 1,200.15 points, although market capitalization rose slightly to $10.48 billion.

BLOM Bank, the country’s second largest bank by assets, announced a year-on-year drop of 8.4 percent in third quarter net profit, pushing the stock down 3 percent during the week to $7.42. Similarly, Bank of Beirut said its profits fell 1.17 percent during the quarter, but its shares did not budge.

The only bank to report third quarter profit growth is Banque Bemo which said its net income rose 6.9 percent year-on-year to $2.1 million, an exception limited by the lack of trading in the bank’s shares. On the other hand, Solidere, which is yet to report summer earnings, saw its Class A and B shares slide 2.15 percent and 0.48 percent respectively with tight trading.

Good or bad, earnings results typically generate some trading, but with Lebanese stocks at two-year lows, investors are refusing to liquidate. “Bank profits were not really expected to be a catalyst, rather a better macro environment. As soon as regional turmoil calms, liquidity will be injected back,” said Elias.

Asked about a possible role for the central bank or government in rescuing a fading stock market, Elias said that “liquidity comes from confidence and the current sources of uncertainty are external, namely Syria, but not related to fundamentals, and those cannot be manipulated by the central bank.”

Instead, she pointed to a long-term solution involving financial reforms through privatization which would lead to the entry of new entities into the stock exchange. “We already have conservative financial policies and a disciplined banking sector, but we need better trading conditions,” said Elias.

Trading conditions in Lebanon’s Eurobonds seemed more appealing to investors with Elias describing activity in the over-the-counter market as more active given demand from depositors. Similarly, bonds traded on the BSE fared better than equities during the week albeit on even smaller volumes as the BLOM Bond Index rose 0.1 percent to 111.1 points, down only 0.8 percent for the year.

After futile earnings reports and in the absence of interest in the BSE from investors, politicians and financial authorities, all of whom are focused on deciphering the Syrian and Special Tribunal for Lebanon variables, Lebanese stocks keep sliding into the abyss without serious buying activity in sight. “We were betting on a return of liquidity, but that has not happened yet,” said Elias.