Beirut Stock Exchange
This Middle East stock exchange has been trying for the past two years to encourage companies to list their shares by showing them in the long run the benefits of diversifying. When the banks are satisfying the needs of the investors they don’t feel an urgent need to come into the stock exchange
Interview with Dr. Ghaleb Mahmassani, Vice President of Beirut Stock Exchange
The Lebanese economy grew 8.5% in 2008 and a revised 9% in 2009 despite the global economic downturn. The World Bank estimated GDP growth in 2010 to be around 7%. What are the key drivers behind this growth and what is the outlook for 2010?
I think there are several factors that contributed to this growth. We have to mention the political and security stability factor that helps and encourages investors to come into Lebanon and also the strictness of the banking sector helped preserve the finance and banking sector during the worldwide financial crisis. This strictness of the banking sector helped increase confidence in Lebanon and its economy. Moreover, Lebanese expatriates contributed to the flow of money into Lebanon because of their confidence in the economy. Investments were made in tourism and real estate and this is also attractive to the private needs of investors due to the location of Lebanon relative to the sea and the mountains.
How confident are you in about this development continuing and is it sustainable over the long term?
In the long run no body can really predict. In Lebanon, however, we feel this strength will continue through 2010 because the current factors will not change. Further, the oil prices are increasing and we will benefit from the repercussions of the increase in oil due to the increase of wealth of the people working in Arab countries.
What would you say to international investors regarding stability?
Stability is a major factor. Now we have this stability but of course if there is a war it will affect the economy. No body is willing to go to war at the moment and people are trying to solve the current problems via diplomacy. We are all trying to spare Lebanon the burden of being a place of confrontation and all of the political parties in Lebanon, despite their differences, are keen on sparing Lebanon from this situation and would like to preserve economic stability because we are all benefitting from it.
Market capitalization of Beirut Stock Exchange increased by 34% and the market liquidity ratio was 8.1% down from 18.8% in 2008. What is your frank assessment on the Lebanese capital market and what is the outlook for the future?
The Lebanese capital market is mainly concentrated on debt and eurobonds issued by the government. Share trading is limited in Lebanon and people do not enter usually for reasons of speculation. Our main weakness is that the number of shares listed is very limited due to various factors. Most Lebanese companies are family owned and families are reluctant to relinquish control and don’t want foreigners to come and buy shares in their company. Also, when they need funds they don’t feel the need to come to financial markets because banks do this. Each capitalist has friends and knows has a network for financing. Except tax incentive on dividends distribution, there is no new real incentive as of right now for people to list their companies and drive people to the stock exchange. As for the future we are trying with the concerned parties in the financial sector to increase both supply and demand sites on the Beirut Stock Exchange.
What needs to be done to provide incentive for people to enter the markets?
The main element is that we have to increase confidence in the capital market and we need to have a central authority that regulates and controls this market through new instruments and supervision.
What are the prospects for the Beirut Stock Exchange being a center for regional companies to list?
We can handle this and our laws are prepared for this. First we need to have this kind of authority and coordination with other Arab countries’ authorities to come to an agreement. I am confident that Lebanon can create conditions that would attract companies to come directly to Lebanon to invest. If political stability continues and a financial center is created by the government as well as the privatization of certain sectors happens then these factors will really help this situation.
What can the stock exchange do itself to increase its access to shares?
The stock exchange has been trying for the past two years to encourage companies to list their shares by showing them in the long run the benefits of diversifying. When the banks are satisfying the needs of the investors they don’t feel an urgent need to come into the stock exchange
Do you see a lot of visitors from international investors who want to come to the Lebanese Stock Exchange?
Foreign investors will come when there is the possibility of making a quick profit and that is not currently the case because the market is small and as a result not very liquid.
What is the most challenging part of your job?
The mentality of companies in Lebanon makes my job very difficult because they do not look to capital markets and are reluctant to come into the stock exchange. They are not aware of the benefits and the return to be made by investing in capital markets. To develop a stock exchange we need a change in mentality and the business culture here. But we are working on several issues with concerned parties in the financial sector in order to develop the performance of the Beirut Stock Exchange regarding new listings and trading.
What is your final message about Lebanon?