The only silver lining? Beirut blast unlikely to result in stock sell-off
A twin suicide bombing that hit the Iranian Embassy in the capital this week dragged the Beirut Stock Exchange lower but won’t trigger a major sell-off since long-term investors have already taken into account the deteriorating security situation, analysts told The Daily Star Thursday. Shares A and B of Lebanon’s real estate giant Solidere ended this week 4.34 percent and 4.51 percent lower respectively amid thin trading volumes as 61,961 shares of Solidere A and 17,859 shares of Solidere B exchanged hands. The BSE will be closed Friday on the occasion of Independence Day.
“The fundamentals of Solidere haven’t changed and long-term investors who hold the stock have been accustomed to the ongoing security incidents, so I see no reason why they should sell now if they didn’t before,” financial analyst Walid Sassia told The Daily Star.
Sassia said speculative traders and short-term investors had already exited the market long before Tuesday’s bombing, explaining the thin trading volume on the BSE.
“Likewise, long-term investors also don’t consider this a bargain price to increase their position or sell what they bought at $15 or more,” Sassia said.
Solidere, which was set up to rebuild the Beirut Central District, has been hurt by lower demand for real estate due to the spillover from the Syrian crisis, and its shares have lost almost 13 percent since the beginning of 2013.
Jean Michel Aoun, a senior investment adviser at the Arab Financial Corporation, played down the possibility of a major sell-off that could drive Solidere share prices significantly lower unless the security situation dramatically deteriorates and leads to chaos across Lebanon.
“Solidere shares have strong support near the $10.6-$11 range, and I don’t see the share price breaking below that support level unless drastic security events take place,” Aoun added.
A financial analyst who spoke on condition of anonymity told The Daily Star that though long-term investors in Solidere were increasingly uneasy about the performance of shares, they would not be willing to sell at a heavy loss.
“The stock is almost illiquid. There are no sellers because investors who bought the shares at $15 are asking what worse could happen?” the trader said.
Even those who want to sell will arrange for a block trade or privately negotiated transaction away from the open market, the trader added. “There will always be a big investor in Solidere who will step up to buy the shares to limit any significant drop in prices.”
In the banking sector, which the trader said was a relatively safer investment than the real estate sector due to its proven resiliency throughout major shock events over the past few years, saw the price of Bank Audi and BLOM bank shares drop respectively 0.74 percent to $6.70 and 0.36 percent to $8.25, while the prices of Byblos Bank shares gained 1.97 percent.