Looming Uncertainty on Reforms and Eurobonds Boost Real Estate Trades while Banks’ Stocks Slip

The BLOM Stock Index (BSI) slipped by a weekly 1.06% to stand at 622.95 points on March 06th 2020 while the Market capitalization on the Beirut Stock Exchange (BSE) also fell by 1% to $6.09B this week. Moreover, activity on the BSE slowed down, as shown by the Average traded volume and value retreating from last week’s 105,701 shares worth $780,982 to this week’s 62,941 shares worth $516,117.

In fact, 2 internal key developments this week may be pronouncedly attributed to a subdued activity on BSE, especially on the trades of banks’ stocks: a) the looming uncertainty and potential repercussions of the Lebanese government’s decision expected to be delivered March 07th regarding a default and/or restructuring on Eurobonds and the Lebanese public debt, and b) the sudden decision issued by the country’s financial prosecutor to freeze the assets of 20 Lebanese banks which was however suspended on the same night of Mar. 05th.

Comparing Lebanon’s equity market performance to the region’s revealed that the MSCI Emerging Markets Index, S&P AFE 40 and the S&P Pan Arab Composite Large Mid Cap Index dropped by 0.83%, 3.4% and 2.8%, respectively, over the week ending March 06th. It is worth noting that the declines witnessed in the regional indices are mainly linked to the corona virus outbreak which peaked in the region last week; yet the losses were milder this week as some measures helped contain the contagion.

In terms of top market performers, the bourses of Bahrain, Morocco and Tunisia recorded the weekly drops of 0.72%, 0.99% and 1.07%, respectively. Meanwhile, the stock exchanges of Egypt and Qatar registered upticks of 1.36% and 0.68%, respectively, over the same period.

In detail, the real estate sector on the BSE grasped 99.02% of the total value of trades, while the banking sector grasped the remaining incremental 0.98%.

As such, Solidere “A” and “B” shares rose by 3.14% and 1.53% over the week, to stand at $8.86 and $8.64, respectively.

The most significant price declines recorded among Banks’ traded shares over the week were:

  • Audi Bank’s listed shares, by 12.63% to $1.66
  • Byblos Bank’s listed shares, by 12% to $0.88

Meanwhile, BLOM GDR shares posted a weekly uptick of 28.33% to $3.85 this week.  However, on the London Stock Exchange, BLOM Bank’s GDR fell by 10.53% to $1.7. It is worth mentioning though that BLOM Bank sent out on Mar.05th an official statement regarding its cash capital contribution, by which it announced that the bank is now receiving its stakeholders’ subscriptions to up its capital.

In turn, the Blom Preferred shares Index (BPSI) remained unchanged, at 66.67 points.

As the Lebanese financial and economic crisis deteriorates absent a decision on tough but needed reforms to go hand-in-hand with the expected Eurobonds decision this weekend, big depositors will keep seeking refuge in the real estate sector while overall trading slips. However, the future improvement in the BSE’s performance will be greatly tied to the Eurobond decision this weekend, the materialization of its implications, and the dedication of the Lebanese government to begin structural reforms to at least stabilize the current economic status.

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