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Privatization of Beirut bourse imperative to attract more investors

  • Acting BSE Chairman Ghaleb Mahmassani speaks during an interview in Beirut, Thursday, July 3, 2014. (The Daily Star/Mohammad Azakir)

BEIRUT: Beirut Stock Exchange should be privatized in an attempt to attract more investors and increase the platform’s activity, said the vice president of the Beirut bourse.

“BSE privatization will bring in more investors if it is done properly and it will help them in buying and selling their shares in a faster way as it is the case in other countries,” Ghaleb Mahmasani told The Daily Star in an exclusive interview.

Mahmasani explained that when the activity on BSE increases, it will be easier for people to sell their shares, adding that the absence of such an option is considered to be a practical handicap for the stock exchange.

“In foreign exchange platforms, the volume of activity is huge so shares get sold in a moment,” Mahmasani said.

Two weeks ago, Central Bank Governor Riad Salameh urged the Lebanese government to privatize the Beirut Stock Exchange to improve its performance and boost private sector financing.

The privatization of the BSE would be a new initiative in the framework of encouraging the private sector to transform family-owned companies into publicly listed companies so that people can have a stake in these firms, said the governor.

“BSE is purely commercial so there is no reason for it to remain with the government,” he said.

“The government is not even able to assume its proper role, why would it bother with BSE?”

Mahmasani said BSE has agreed with the Finance Ministry on a privatization roadmap but the decision to implement it must be taken by the Cabinet.

“We are currently pushing this government to make the simple decision to transform BSE into a joint stock company and to entrust the financial market authority and Finance Ministry to move ahead with its full privatization,” he said.

Regarding the slow performance of BSE, Mahmasani said the volume of trade on BSE diminished from 2008-13 due to several factors, including the economic crisis.

He added that the activity on BSE is highly affected by the political and security situation in Lebanon as well.

According to statistics provided by BSE, the biggest volume of transactions was recorded in 2006 and particularly in the first half of the year, following the withdrawal of the Syrian army from the country and before the beginning of the July Israeli war against Lebanon.

“Investors need to feel confident in the Lebanese market and when they see a delay in the government’s formation for five or six months and an inability to elect a president, they will surely be frightened,” he said.

However, Mahmasani expressed his optimism about a better performance of BSE in 2014 following the formation of the government.

The volume of shares traded on BSE increased by 42.14 percent in the first six months of 2014 compared with the same period in 2013, and the value went up by 47.17 percent while the market capitalization surged by 9.53 percent.

Mahmasani argued that the low activity on the Beirut Stock Exchange compared with other countries in the region is not only caused by political and security issues but it is also due to the fact that companies in Lebanon are not much encouraged to be listed on the platform.

He explained that companies usually get listed because they need fresh capital, so they sell their shares to increase their capital. But nowadays, it is easier for Lebanese companies that want to expand to go directly to banks and get the money they need by providing personal guarantees, he argued.

“Most of them prefer to do so rather than having strangers coming to look at their ways of spending or joining the board of directors,” he said.

Mahmasani believes that banks should be less eager to grant requests for money, in order to encourage companies to be listed on BSE.

He added: “Companies will come when they feel that there is a real market working and a general atmosphere of economic activity in the country rather than political and security issues.”

Mahmasani said that the government has an important role to play in this aspect by encouraging entities such as Casino Du Liban and Middle East Airlines to get listed on BSE.

“MEA took a decision two years ago to list 25 percent of their shares but nothing happened,” Mahmasani said.

 
A version of this article appeared in the print edition of The Daily Star on July 04, 2014, on page 5.
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Summary

Beirut Stock Exchange should be privatized in an attempt to attract more investors and increase the platform's activity, said the vice president of the Beirut bourse.

Regarding the slow performance of BSE, Mahmasani said the volume of trade on BSE diminished from 2008-13 due to several factors, including the economic crisis.

He added that the activity on BSE is highly affected by the political and security situation in Lebanon as well.

However, Mahmasani expressed his optimism about a better performance of BSE in 2014 following the formation of the government.

The volume of shares traded on BSE increased by 42.14 percent in the first six months of 2014 compared with the same period in 2013, and the value went up by 47.17 percent while the market capitalization surged by 9.53 percent.


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