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French Version

Stock exchange yet to hit a real high (Daily Star)

Broker: ‘bourse is still unappealing to many investors’
Most Lebanese entrepreneurs living abroad continue to favor buying stocks from New York and London

Trading on the Beirut Stock Exchange (BSE) has improved over the first six months of this year but not to the degree expected by brokers and investors.

The volatile regional situation, a sharp economic recession, the government’s inability to solve the budget deficit problem and the lack of a clear strategy to promote the equity market are among the reasons that discourage investors from buying local stocks say brokers. “The bourse is still unappealing to many investors. We need a positive shock to turn the wheel around,” one broker said. She added that even if privatization takes place next year, this step will have a minimal impact on the BSE.

But despite these reasons, trading picked up considerably since the government secured a $4.4 billion soft loan pledge from the donor states that met in Paris in November of last year. “Paris II” caused the drop in interest rates on deposits and treasury bills, prompting some investors to buy more local stocks.

According to the financial markets handbook issued by the Central Bank, the volume of trading in the first six months of this year jumped to 16,602,000 shares from 10,003,000 shares in the same period last year. The trading value was $82,240,000 compared to $44,430,000 in the first half of 2002.

The market weighted index increased to 23.44 points on June 30 2003, from 15.07 points on June 30, 2002, an increase of 55.54 percent. As a result, market capitalization increased to $3.018 billion at the end of June this year.

However, the market capitalization of all listed companies is very low compared to bank deposits that exceed $45 billion.

At present, there are 13 banks and companies listed on the BSE after Bou Khalil supermarket was removed from the list due to losses incurred by the company and after it failed to submit its results on time.

The Central Bank’s charts showed that the giant real estate development company Solidere continued to dominate trading on the BSE.

BSE trading volume for the first half of the year indicated that Solidere represented 78.55 percent of total trading volume followed by banks at 9.70 percent, industry at 5.81 percent, trade at 5.77 percent and fixed income funds at 0.17 percent.

Nabil Chaaya, head of the capital market at Banque Audi, said that trading improved following the drop in inter- est rates. “But despite this surge in demand, our market is relatively quiet,” Chaaya said. He added that demand on equity should start picking up soon amid news that interest rates may further drop in the future. Chaaya stressed that the yield on Solidere and listed banks is quite high “which should appeal to investors.”

He added that the Central Bank may resume auctioning the T-bills on a monthly basis which may result in more cuts in interest rates. Interest rates on dollar deposits fell by three to four percent while the rates on Lebanese pound deposits fell by six to 7 percent since the Paris II conference.

But despite the efforts to lure investors, most of the Lebanese entrepreneurs living abroad still favor buying stocks from New York and London stock exchanges. Chaaya said Lebanese expatriates have assets of over $50 billion abroad compared to $45 million deposited in Lebanon. “Lebanese are a short-term investors, but this is changing gradually as more people are showing interest in local shares,” Chaaya said. Other brokers and investors echoed similar views.

Jean Riachi, the chairman of Financial Funds Advisers, said he believes that local stocks are currently undervalued.

He added that the dividend yield on local stocks is very attractive. Riachi said a good example of this was the yield on Banque du Liban et d’Outre Mer (BLOM) shares, which is 8 percent. He added that the dividend yields on Solidere shares may become higher as the company records more profits.

Solidere, the biggest real estate firm in the Middle East, made a net profit of more than $41 million in 2002.

Riachi said that he proposed a more aggressive marketing campaign to lure potential investors. “The stock exchange, banks, financial institutions and the issuers should all promote the local stocks,” he said.

Beirut 18-08-2003
Osama Habib
The Daily Star

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