In spite of the fanfare when it opened, the Beirut Stock Exchange continues to disappoint.
Last year was certainly a disappointing one for Lebanese investors, with the benchmark BSI index falling by 18 per cent. Whereas most global emerging markets suffered in the second half of 1998, the Lebanese bourse experienced its sell-off in the first part of the year. Economic concerns and high interest rates were two of the key factors that kept investors on the sidelines.
"These worries were underlined by the decision of rating agency Fitch IBCA to lower Lebanon's sovereign debt rating in June," says one fund manager.
The latter months of 1998 were marked by a lacklustre performance. In spite of this, some market watchers drew comfort from the smooth transition of prime ministerial power from Rafiq Hariri to Salim Al-Hoss and the election of Emile Lahoud as president. These events did not trigger the sell-off that some pessimists had feared.
The worst performers in 1998 were the two classes of share issued by Societe Libanais des Cements Blancs, which declined by 74 per cent and 50 per cent respectively. Eternit, which is one of the smallest companies quoted on the BSE with a market capitalisation of $5 million, also fared poorly, with its shares shedding almost 56 per cent.
Performances were also poor on the smaller over the counter market. Both Byblos and Fransabank saw their shares decline by in excess of 40 per cent, whilst Casino du Liban, ABC and Ciments de Sibline also experienced steep falls over the course of the year.
One stock that bucked the trend on the main market was Bank of Beirut, which delivered a 16 per cent gain to share holders. In part, this was on the back of a significant improvement in the bank's trading position. Its unaudited 1998 accounts disclosed net profits of $14.1 million, an impressive 44 per cent increase on the firm's 1997 performance.
In November, Bank of Beirut was also boosted by the acquisition of Transorient Bank, which it purchased for $70 million. According to Rudy Sayegh of local brokerage Fidus, the acquisition of Transorient is likely to have a negative impact on profits in the short term. "Bank of Beirut gained assets in the merger but it got loaded with Transorient, which has very low profitability," he says. Sayegh believes that in the medium term, the bank will benefit from having an enlarged asset base and the expansion to its branch network.
The Beirut bourse, in spite of its poor showing in...