Hope for Cabinet lifts Solidere shares

The rise in share value adds over $100 million in capitalization to the Beirut Stock Exchange.

BEIRUT: Upbeat news about the potential formation of a new government pushed the Beirut Stock Exchange higher Tuesday on Solidere A and B shares gains of 7.87 percent and 6.18 percent, respectively. “The positive activity witnessed with regard to Solidere shares reflects the optimism of investors amid hopes of the formation of a new government soon,” said Yves Rahme, head of the equities unit at Byblos Bank.

Intensified attempts to break the nine-month Cabinet stalemate have made some progress, with President Michel Sleiman Friday voicing optimism on the formation of an all-embracing government based on the 8-8-8 formula.

This new progress had a beneficial impact on Solidere shares, “which are usually the most affected by any positive or negative political events,” Rahme said.

The volume of shares traded on Tuesday for Solidere A and B reached 86,111 and 24,060, respectively. The total number of shares traded that day was 307,667 with a trading value of $4.47 million.

The stock capitalization of the listed companies increased by 1.30 percent to reach $10.848 billion, against $10.707 billion for the previous session.

Despite the increase in trades on the BSE following the optimistic news, the volume remained relatively low compared to historic levels.

“What is obvious from the volume of shares traded today is that most of the investments were made by Lebanese and not Arabs or international buyers,” Rahme said, adding that international investors would not normally buy less than 50,000 shares. “We are only witnessing demand on a number of shares ranging between 1,000 and 5,000 for the time being.”

Rahme attributed the increase to traders seeking to lock a short-term profit of $1 or $2 per share by buying a certain number of shares and selling them upon the formation of the government.

“They [will] sell them right after the formation of the government, before the occurrence of any bad event in the country,” he said.

“Local investors got used to the events occurring in the country and they understand the game by now,” said another financial analyst, who spoke on condition of anonymity.

He said that foreign investors were nonexistent on the BSE today.

“If there is no clear image of the situation in the whole region, then foreign investors won’t be encouraged to invest in the BSE,” he said.

But he added that even if the government were formed, investors would still behave cautiously when trading on the BSE because there are still key events such as presidential and parliamentary elections awaiting Lebanon.

“The situation is a bit unstable for the time being, and we cannot expect a continuous improvement on the trading of Solidere shares,” he said. “We do not expect Solidere shares to go up every day.”

While Solidere witnessed a remarkable increase, banks shares remained mostly unchanged. BLOM Bank shares and Bank of Beirut preferred shares saw a slight decrease of 0.11 percent and 1.54 percent, respectively.

“If Solidere shares go up further and the government is formed, then we may see an increase in demand on banks stocks because there will be payment of dividends on banks shares in three months,” Rahme said, adding that Solidere did not pay dividends this year and was not expected to do so before September.

A version of this article appeared in the print edition of The Daily Star on January 15, 2014, on page 5.




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