BEIRUT: Hopes that a new government could be formed this week pushed the Beirut Stock Exchange higher as Solidere A and B shares gained more than 25 percent and 22 percent respectively since the beginning of January.
This is considered to be the biggest monthly gain in more than a year.
“The increase in the price of Solidere shares reflects the optimism of investors ahead of the formation of a new government,” Nancy Elias, the senior financial consultant at FFA Private Bank told The Daily Star, adding that investors had been waiting for this event for a few months.
“Any positive or negative political events are likely to affect the price of Solidere shares and we were expecting such a move,” she added.
The sense of optimism prevailing in the market was triggered by the news that March 8 and March 14 forces expressed readiness to abandon some preconditions regarding the shape of the new Cabinet.
Former Prime Minister Saad Hariri’s announcement that he was willing to join a Cabinet that included Hezbollah also eased tensions in the country.
This apparent progress toward forming a government not only led to a rise Tuesday in Solidere A and B shares of 3.11 percent and 0.14 percent respectively, but also reflected positively on the rest of the shares traded on the Beirut Stock Exchange.
The BLOM Stock Index rose by 0.90 percent.
Trading value reached $6.76 million with 745,009 shares traded through 198 transactions compared to only 190,861 the day before.
The market capitalization of the listed companies increased by 0.94 percent to reach $11.093 billion, against $10.989 billion for the previous session.
Echoing Elias, BSE Vice-President Ghaleb Mahmasani said the encouraging statements issued by political rivals about their willingness to form a government soon were the main reason behind the positive activity on BSE.
“Any political event, whether major or minor, would have an impact on the BSE because the market is too small and it gets affected easily by any developments,” he said.
Ever since upbeat news about the the formation of a Cabinet emerged a week ago, Solidere shares have been seeing an encouraging trend.
“This positive movement started last week,” said Jad Abi Haidar, senior financial analyst in the Economic Research Unit at Credit Libanais, adding that positive signals from different political parties regarding the government’s formation weighed favorably on the stock market during the past week.
However, analysts interviewed by The Daily Star warned of a possible reversal in the upward market activity if the government’s formation is delayed.
“People are expecting the government to be formed by the end of this week. But if we don’t see any tangible progress in this context within two weeks, this positive increase in BSE activity won’t last for a long period of time,” Haidar said.
Mahmasani said the good performance seen on Beirut’s bourse could last longer provided that Cabinet is formed quickly and the ministerial statement wins a vote of confidence in Parliament.
“All of this positive activity is temporary, especially that the market is too small and we do not have foreign investors for the time being,” he added.
Other banks also saw their shares rise Tuesday.
Bank Audi surged by 0.15 percent, with the volume of shares traded reaching 505,800 with a $3.191 million value, compared to only 120 a day earlier.
“We expect dividends payments to take place in the next two to three months,” Elias said, adding that the banks’ yields in Lebanon were very attractive, ranging between 5 percent and 6 percent. “So it is normal to see an increase in the trade of banks stocks.”
Another financial analyst who spoke on condition of anonymity said Bank Audi was the largest bank in Lebanon today and its profitability had induced investors to work closely with it. “Bank Audi is usually the first bank to announce dividend payments in the month of April and then other banks would follow,” he said. “This could be one of the factors behind the hike in the number of shares traded today.”