Lebanese equity markets
BLOM Stock Index (BSI)
Weighted effective yield of Eurobonds
Equities update
Although political tensions in Lebanon eased following the formation of a new cabinet, investor sentiment remained wary in light of escalating political upheaval throughout the Middle East and North Africa region. This was mainly reflected in low trade volumes on the Beirut Stock Exchange for the four-week period from June 20 to July 15, 2011. The daily average volume for the month reached 120,568 shares compared to 306,829 shares recorded over the preceding four weeks. Furthermore, the corresponding traded values fell by half to $1.56 million. The BLOM Stock Index (BSI), Lebanon’s equity gauge, fell considerably during the aforementioned period, ending at 1,320 points on July 15, 3.05 percent lower than its previous close on June 17, and amounting to a 10.5 percent loss since the start of the year.
Compared to regional and emerging markets, the BSI underperformed both the S&P Pan Arab Composite Large MidCap and the MSCI Emerging indices.
Throughout this period, Solidere’s stocks dominated trades on the BSE, accounting for 65 percent of the total traded value. Nevertheless, the distorted political environment weighed negatively on the performance of the real estate stocks in classes A and B, which fell by more than 7 percent to settle below the $17 mark for the first time in 26 months. It is worth highlighting that BLOMINVEST Bank updated its coverage on Solidere with a ”Hold” recommendation and a fair value classification of $19.40 per share.
The performance of banking stocks also witnessed a downward trend, except for BLC bank’s stock, which rallied 12.6 percent to $1.87. The BLOM Bank Global Depository Receipt (GDR) stock declined 2.8 percent to $8.68 while its listed stock slipped 0.47 percent to $8.46. BLOM Bank preferred shares classes 2004 and 2005 were de-listed from the BSE in preparation for the issuing of $200 million worth of new five-year 2011 preferred shares. Bank Audi stocks followed suit, as its GDR and listed stocks dropped by a respective 4.42 percent and 0.43 percent. Byblos Bank common stock retreated, by 0.57 percent. The preferred stocks for Bank of Beirut classes D and E witnessed a mixed performance. The former lost 2.96 percent while the latter rose 1.78 percent to reach $25.75.
Additionally, manufacturing sector equities closed on a negative note, as Holcim’s stock fell 9 percent to a four-month low of $16 due to the distribution of dividends.
Bond bulletin
With respect to debt instruments, the Lebanese Eurobond market sustained its advance between June 17 and July 15 with demand concentrated on medium and long-term bonds. This pushed the BLOM Bond Index upward 0.58 percent to 110.48 points. Consequently, the weighted yield on holding Eurobonds fell by 20 basis points (bps) to 5 percent and the spread against the US benchmark yield widened by 15 bps to 374 bps. Lebanon’s credit default swap for five years was trading between 340 bps and 367 bps on July 15, compared to 328 bps to 353 bps on June 17. In regional economies, CDS quotes for Dubai stood at 338 bps to 358 bps, with Saudi Arabia between 93 bps to 98 bps.
