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French Version

Beirut shares fall too, but mostly on local factors

Brokers insist Lebanese issues remain undervalued

Mirroring most shares around the world, Beirut's stock index fell slightly during trading on Tuesday. However, the causes for the fall, the second in two days, may be quite different than those in New York, London, Paris and even the Gulf. Traders and investors all agree that politics is the number one factor behind the fluctuation of Beirut Stock Exchange (BSE).

"The international market sentiment may have some impact on the overall trading on the BSE. But in my opinion the Lebanese stocks are mainly driven by the political situation here," Jean Riachi, the president of the Financial Funds Advisors Private Bank, told The Daily Star.

The BLOM stock index fell from 1,468.99 points on Monday to 1,422.37 points Tuesday.

The value of shares traded reached $4.946 million compared to $3.082 million Monday, an increase of 60.469 percent.

"The drop in the index here is relatively lower than other stocks around world. Most shareholders are not willing to give up their stocks because they know that there is a huge discount on their shares in Lebanon," Riachi said.

Most brokers repeatedly say that the Lebanese stocks, especially the giant real-estate company Solidere, are undervalued.

"We know, for example, that Solidere, a real estate company with a land bank and no debt, is worth at least the double current price," Riachi said.

On Tuesday, the prices for Solidere A and B shares fell to $20.64 and $20.27 respectively.

"Even if you combine the effects of the international prices on the equity market and the local political crisis, we will notice that the [fall] is very limited in Lebanon," Riachi said.

He added that if the prices

of Lebanese shares were trading at their current prices under normal political conditions then Lebanon would have been affected to some extent by the fluctuation in the international stocks.

Citing another example, Riachi said Arab investors offered to buy the shares of Lebanon's largest bank, BLOM, at more than $150 per share last year.

"This is another proof that Lebanese stocks are undervalued," Riachi said.

Shadi Baroud from the Arab Finance Corporation agreed that politics was still the primary cause for the fluctuation of stocks in Lebanon.

"One word raises the prices and another word drops the prices," Baroud said.

He stressed that the market reacted negatively to the news that the Arab League initiative to end the political crisis in Lebanon reached a dead end.

Punters noticed that the shares of Solidere reached $25 three months ago following news that all parties agreed on the election of army chief general Michael Suleiman.

Brokers refuse to predict the future of the BSE.

"No one can forecast if the prices of stocks will drop or fall in Lebanon. But there is a general consensus that a political solution will have a very positive effects on the bourse," Baroud said.

Regarding the US Federal Reserve's decision to cut interest rates by 75 basis points, Baroud said this step had no impact on Lebanese equities.

Many bankers claimed that any cut in interest rates in the US may increase customer deposits in Lebanese banks, adding that the interest rates on dollar deposits here were still attractive.

Riachi and Baroud both agreed that the prices of Solidere shares would not fall sharply in the near future.

"Solidere shares were trading at $16 six to seven months ago and now they have reached more than $20. I don't believe that they will fall further than that," Baroud said.

He added that foreign and Arab investors, who represent close to 20 percent of the shareholders in the BSE, have not abandoned their shares despite the political crisis.

Beirut 23-01-2008
The Daily Star

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