BEIRUT: Beirut-listed stocks took advantage of the three-day holiday and crept up for the first time in six weeks during the two-day trading week. The BLOM Stock Index rose 0.19 percent and closed Friday at 1,287.52 points as market capitalization inched up 0.07 percent to $11.13 billion.
However, the brief breath of fresh air did not seem to be supported by an underlying trend. “We are not really seeing a rebound because volumes are still very low, so bid-ask spreads are quite large and not indicative of a true positive market performance,” said Haytham Mroue, deputy head of equities at Byblos Bank in an interview with The Daily Star.
Stocks trading on the local exchange have been hit hard by the regional instability that started in early 2011, but the deteriorating security in Syria and flaming domestic political disputes have also driven investors away.
It is therefore notable to see Solidere’s Class A and B shares, the market’s laggards in year-to-date performance, rise 1.32 percent and 0.61 percent respectively during the week to close at $15.71. Byblos Bank also posted a strong 2.12 percent gain although volumes were humble even by Beirut Stock Exchange standards.
But observers dismissed the few signs of a rebound. “Some investors are getting a bit excited, but we are not seeing a return of foreign investors. I also don’t think there is a reason for investors to enter the market,” said Mroue. “We may be seeing a deceleration in the decline of stocks, but there is no momentum for a rebound.”
On the bright side, missing domestic and regional confidence did not stop banks from reporting strong first half results. Privately-held Fransabank, one of Lebanon’s 10 largest banks, reported a 15.9 percent increase in net profits in the first six months to $80.3 million, with total assets hitting $13.6 billion as of the end of June.
Profits also poured in for IBL, another non-publicly listed company, which reported a 32.1 percent leap in net profits to $19.2 million in the first half of 2011 on the back of a 78 percent jump in non-interest income.
Still, positive news from the two banks was not enough to restore confidence in the banking sector or the economy, as investors remained focused on regional political developments.
“BSE stocks do not trade according to fundamentals, so they are not affected by reports or earnings releases. The market is politically driven and we are currently being affected by events in Syria because our economy and stability are related,” said Mroue.
Continued unrest in Syria has indeed contributed to a slowdown in economic activity in Lebanon and the effect is expected to take a toll on full year real GDP growth, according to global banks. In particular, Citigroup projected the country’s economic growth at 2.8 percent in 2011, less than half the rate in 2010, and in line with recently disclosed Standard Chartered forecasts of 3 percent during the year.
As a result, investors disappointed by the missing political catalysts for Lebanese stocks have tilted their asset allocation more generously toward gold, pending positive resolutions to the region’s security dilemmas.
“Investors are still risk-averse, and that’s why gold has significant upside in my personal opinion. On the other hand, the BSE is effectively a market in hibernation,” said Mroue.