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Beirut bourse struggles with country’s political crisis

Buildings in the phase of construction are seen in Downtown Beirut, Friday, May 9, 2014. (The Daily Star/Mohammad Azakir)

BEIRUT: The delay in the presidential polls is weighing heavily on the Beirut Stock Exchange, and while the election of a new president might help activity pick up, other factors will continue to impact the performance of the stock market, financial experts told The Daily Star.

“The election of a new president will only have a short-term positive impact on the BSE because even if we get over this huge event, we would still be waiting for new parliamentary elections and the formation of a new government,” said Jean Michel Aoun, financial expert at Arab Finance Corporation.

In addition to internal political issues, Aoun explained that regional stability and an end to crisis in Syria remained the main factors that could boost share prices on the BSE.

“Presidential elections would only lead to a short-term and small spike in prices of Solidere shares to $15-18 from the current price of $13, while regional stability would lead to a remarkable increase in prices to $23-24,” he said. “The whole market will follow accordingly.”

Aoun argued that he did not expect the BSE to witness any significant demand for Solidere shares in the next couple of months because the majority of investors had already bought shares and were waiting for prices to increase in order to sell and make a profit.

Solidere’s A and B shares have traded in a relatively narrow range since the beginning of 2014. In January of this year, Solidere A and Solidere B closed at an average of $13.27 and $13.10, respectively. They have closed at an average of $13.55 and $13.39, respectively in February 2014, compared to $12.5 for both shares in March and $12.9 in April.

Another financial analyst told The Daily Star on condition of anonymity that the remarkable increase in the total volume and value of shares traded on the BSE in the first four months of 2014 compared to the same period in 2013 reflected the positive attitude of investors following the appointment of the new government and the improvement in the security situation.

The total volume of shares traded on the BSE increased by 41 percent from 13,636,269 in the first four months of 2013 to 19,226,715 shares in the first four months of 2014. As for the value of traded shares, they have increased by 55.04 percent, from $88.5 million to $137.2 million for the same period.

“We realize from statistics that the activity and turnover increased in a significant way following the government’s appointment, but they slowed down again after the delay in presidential polls,” the analyst said.

The analyst argued that investors would not adopt a positive attitude again until the stress caused by the presidential and parliamentary elections was over.

The analyst added that Saudi Arabia’s withdrawal of its travel advisory for Lebanon would take time to positively effect the BSE.

“Today, with the Internet, you can trade from any [location] in the world. So even if Saudi Arabia lifted the travel advisory, this does not mean that the activity on the BSE would pick up directly because if Arab investors want to trade, they can do it online anyway, and they don’t have to be present in the country. It all depends on our capability to restore confidence in the Lebanese market.”

His comments were echoed by Nancy Elias, financial analyst at FFA Private Bank, who said that regaining confidence in the country required time, even if Saudi Arabia lifted the advisory.

“This will have a positive impact on the macro level and economic activity in general, which may have a favorable effect on local real estate shares, and reflect positively on the stock exchange,” she said. “But you need other positive factors such as the presidential election and proper political settings to regain investors’ confidence in the country.”

Elias also highlighted the negative repercussions of Syria’s ongoing crisis on Lebanon.

“We have a very low momentum and low interest from local and foreign investments, and this is how things will remain because people are afraid of the internal political turmoil and the regional instability coming from Syria and affecting the local economy,” she said.

 
A version of this article appeared in the print edition of The Daily Star on May 17, 2014, on page 4.

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