BEIRUT: As the wave of block trading in banks fades, turnover on the Beirut Stock Exchange is again falling behind in a sign of continued uncertainty over developments in Syria and their potential spillovers in Lebanon.

“Trading is still weak as investors wait for news on Syria, and so far we have not had any positive news,” said the head of capital markets at a leading bank who spoke to the The Daily Star on condition of anonymity.

Record 2011 earnings results at publicly listed banks had returned confidence to investors in dividends typically paid in April, but domestic and regional uncertainty is prompting investors to stick with more conservative, liquid investments.

Average traded shares on the BSE fell 26 percent to 153,173 shares during the week ending Feb. 17, although the BLOM Stock Index inched up 0.23 percent 1,183.38 points in the absence of meaningful activity. The market capitalization also closed the week up 0.13 percent to $10.45 billion, its highest level in two months.

As in previous weeks, BLOM Bank dominated market activity with nearly 53 percent of total shares changing hands, driving the GDR and listed shares’ prices up 0.92 percent and 0.27 percent to $7.68 and $7.42 respectively.

“The banking sector is perceived to be a safe haven, protected by the Central Bank,” said the head of capital markets in explaining demand for banking shares. “BLOM also pays higher dividends than the rest,” he added.

In April 2010, the bank distributed $0.45 in dividends to shareholders, equivalent to a 6.1 percent trailing 12 months dividend yield based on Friday’s closing price.

BLOM and the rest of the traded banks are expected to maintain their dividend payment policy despite certain adversity in 2012.

“I think banks would pay cash dividends to avoid flooding the market with sell orders especially when volumes are weak,” said the head of capital markets.

BLOM’s GDR has seen rising interest from investors following a favorable recommendation by Deutsche Bank earlier in January. The receipts are up 3.1 percent so far in 2011 compared to 0.6 percent for the composite market index.

Byblos Bank, Lebanon’s third biggest lender, gained 3.14 percent during the week to close at $1.64, its highest level since mid-December, while Bank Audi’s GDRs increased 0.8 percent to $6.35 during the week.

On the other hand, the country’s biggest real estate company, Solidere, remained out of favor as its Class B shares dropped another 0.5 percent during the week to $13.88, and Class A shares stagnated at $13.9.

A domestic political stalemate, ongoing violence in Syria, and an unresolved European debt crisis are still weighing on investor sentiment although pass through effects to the economy have so far been manageable.

“Lebanon is immune to those events because of the Central Bank’s policies, but the country can benefit from more capital inflows if the domestic environment is calm,” said the head of capital markets.

Banque du Liban’s balance sheet grew 0.65 percent in the first half of February to $72.3 billion. Foreign assets, which include foreign currency reserves, are also up $169 million in 2012 through Feb. 15, while the value of gold reserves reached $15.92 billion.