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Lebanese markets escape Bernanke’s pain

File - June 19, 2013 file photo, Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington. (AP Photo/Susan Walsh, File)

BEIRUT: The Lebanese stock exchange and markets remain immune to the effects of the U.S. decision to end its quantitative easing program in 2014, bankers and economist said Tuesday. “We are not that active in the capital market. We were expecting Ben Bernanke to postpone his decision on quantitative [to] six months from now and for this reason the shares in the United States and Europe fell sharply in the past three days,” Joe Sarrouh, adviser to the chairman of Fransabank, told The Daily Star.

“Our markets are not really exposed to the markets abroad.”

Quantitative easing is the term used by U.S. Federal Reserve Bank officials for the inflationary creation of money to finance U.S. government debt and purchase mortgage-backed securities from banks on the open market.

“We expect Bernanke to say something about the new measures to appease the concern in the international markets in July of this year,” Sarrouh added.

“Once Bernanke explains why he wants to end the quantitative easing, the markets will become more stable.”

But some economists see one advantage in Bernanke’s move to end quantitiveeasing.

“The U.S. dollar has risen about 2 percent recently against other currencies. This means that Lebanon, which is a dollarized country, can cut the cost of imports from Europe,” economist Ghazi Wazni told the paper.

He added that 40 percent of Lebanon’s imports come from the European Union, which uses the euro as the main currency.

Sarrouh and other bankers said domestic conditions were still the main factor with a direct effect on the stock exchange and Treasury bills.

The bankers pointed out that most of the Lebanese government bonds were held by the Central Bank and commercial banks in Lebanon while the share held by foreign investors was less than 10 percent.

George Soghbini, the general manager of SGBL, said the only way Lebanon would be affected by the end of the Federal Reserve’s easing program was if the interest rates on U.S. dollars surged.

“If this happens then naturally the interest rates in Lebanon will surge. But this case will not happen in the immediate future,” Soghbini explained.

Wazni said Bernanke was waiting to see the unemployment and inflation figures later this year before making any new move.

He added that if unemployment in the U.S. was still close to seven percent then Bernanke would choose a different path.

The U.S. Fed officials predicted 3 percent GDP growth in the U.S. economy next year, low inflation, and a reduction of the unemployment level to 6 percent by the end of 2015.

The prediction may have been too rosy, considering the extraordinarily low savings rates of consumers, high national debt, and recent economic history. In the past 20 years, the U.S. economy has only seen CPI-adjusted growth exceeding 3 percent of GDP in years before an economic crash.

The Dow Jones and other international markets started to pick up steam again Tuesday after a slide last week, and are expected to continue their upward climb this week.

Economists stressed that Lebanese investments in the international markets were very small because most of the businessmen and companies still preferred to invest in Lebanese bonds and stocks.

 
A version of this article appeared in the print edition of The Daily Star on June 26, 2013, on page 5.

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