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French Version


Banque Audi predicts rebound - reports says privatization, fiscal reform will have positive effect (Daily Star)

Study touts $4.4 billion in pledges from ‘Paris II’ donor conference as climax of developments in 2002
Banque Audi this week said that privatization and fiscal reforms will give a boost to the Lebanese capital market and stock exchange.


In its country and market update for 2003, the bank presented a comprehensive study of the main economic developments in 2002, with the climax of the year being the “Paris II” donor conference. “The successful Paris II meeting, which pledged $4.4 billion foreign assistance, has improved Lebanese markets’ outlook substantially,” the report said. A large part of the soft loan will be used to reduce debt servicing, while the rest is earmarked for development projects in the country.

However, the report observed that the stock market still requires more time to react to the positive developments, as investors prefer to commit to fixed income markets at such an early stage in the country’s potential economic revival. “Should positive economic signs continue to appear, it is believed that the stock market would start showing concrete signs of improvement,” the report said.

The report added that the markets might also benefit from the recent fiscal adjustment measures, with the state adopting an ambitious 2003 budget, and launching the awaited privatization and debt management measures. These measures are an attempt to ensure the pegging of debt ratios as a prerequisite to address public finance impediments.

The government of Prime Minister Rafik Hariri hopes to generate $5 billion from privatization and securitization to reduce the $31 billion public debt.

The government has projected a budget deficit of less than 100 percent of gross domestic product within five years if all the measures are implemented on time. “The privatization of the fixed telecommunication network has been set as a top priority for the current year, while Middle East Airlines and the power sector are expected to follow suit,” the report said.

Some investors hope that the privatized companies will be eventually listed on the stock exchange, which will increase the liquidity in the market.

The Beirut Stock Exchange was slow in reacting to the series of favorable signals, particularly following the successful Paris II conference, but it did witness some price correction in November and December of last year after slipping to lower levels in the course of the year.

Investors kept a cautious outlook for Lebanese stocks, as they were waiting to see how the observed signals would eventually benefit currently listed companies, with investors opting to raise exposure to fixed income markets, which promise a less risky return. “When compared to the year before, 2002 proved to be much more dynamic in terms of trading activity and more stable in terms of prices,” Audi said.

No drastic price changes were witnessed in 2002, as the price index rose by just 3 percent to settle at 45.9 percent at the end of 2002, against a 26 percent drop in 2001.

At the end of 2002, prices still recorded a discount of 54 percent below issue prices, and 73.8 percent below peak levels. In terms of activity, the annual trading volume reached $94.4 million (excluding bloc trading) against $47.9 million in 2001, an increase of 97 percent.

The real estate giant Solidere was again the most active share, accounting for almost 80 percent of annual trading volume. Many investors believe that the current prices of Solidere are undervalued because the company is worth much more. The report added that bonds and Treasury bill markets witnessed tremendous improvements last year due to the Paris II agreement and the government’s fiscal measures.

Beirut 07-07-2003
Osama Habib
The Daily Star



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