As Lebanon gears up to meet its redevelopment challenges a new stock exchange in Beirut marks the country's re-entry as a player to international financial markets.
The re-opening of the Beirut Stock Exchange this summer marks a major step forward in Lebanon's recovery process. But the BSE will be quite different from the stock exchange which shut its doors in 1983, at the height of the civil war: The new market will be carefully regulated, insisting on international accounting and reporting standards by listed companies. Even the trading floor will be different - the old one was virtually destroyed during the war; the new BSE will incorporate the latest computer technology to maintain efficiency and transparency.
In one sense, the new BSE will initially be far smaller than its predecessor: It opens its doors with fewer than 15 listed companies, against 45 listed and seven over-the-counter issues traded on the old exchange. But market capitalisation will be a respectable $2.5bn (mostly representing shares of Solidere, the company reconstructing downtown Beirut); market capitalisation is expected to double by the end of the year.
The sharp rise in capitalisation will be primarily the result of re-listing companies from the old stock exchange. They are being given three to five months to meet listing requirements.
By year's end, as many as three new companies could also be listed, bringing the totals to about 50 traded companies, with a market capitalisation approaching $5bn.
The Lebanese government has gone to great lengths to announce regulations which would prevent share manipulations and financial reporting irregularities. "For us to make Beirut a regional and international financial center, we have had to modernize laws," says Nasser Saidi, first vice governor of the Central Bank of Lebanon. He points out that the government had to undertake four reforms if it wanted to attract international investment on the BSE:
First, it adopted a comprehensive Capital Markets Law. Second, it developed a modern and efficient clearing operation. Third, the government "needed to impose and enforce" international accounting standards on listed companies. And last but not least, it had to create modern regulatory and supervisory structures, to ensure the integrity of the system.
Although the BSE is a "self-regulated organisation" under Lebanon's Stock Exchange Act, BSE President Gabriel...