Bourse pulled off record performance in 2006 despite national crises

Feb. 08, 2007- Emboldened by record trading in 2006 despite a troubled year for the country, the Beirut Stock Exchange (BSE) unveiled ambitious plans Wednesday that would allow any investor with a computer to buy or sell any share listed in Lebanon with the touch of a button.

This is this the third phase of planning by BSE chairman Fadi Khalaf, who eagerly points to the movement of shares on his computer screen at his office at the Azarieh Building in the Beirut Central District, which is ironically besieged by hundreds of anti-government protesters.

"Electronic trading is the third and most important step in our plan after we introduced remote trading on December 18 2006," he told The Daily Star.

Authorized brokers have been handling the demands of their clients from their offices since remote trading materialized late last year.

Prior to the introduction of remote trading, brokers used to come to the BSE offices early in the morning to follow the movement of shares and then call their clients over the phone to find out if they wanted to buy or sell.

"Remote trading is very convenient to the brokers and their managers because in this manner decisions can be taken quickly and without any hassle," Khalaf said.

Within two months, the bourse plans to launch a new Web site that will increase transparency and provide live market data.

"The real-time Web site will help investors watch the movement of shares but will not be able to make any order until e-trading is introduced in the near future," Khalaf said.

At present, the BSE has a crude Web site that shows the outcome of trading once brokers complete their orders.

He added that investors would be able to buy and sell shares once e-trading is introduced through their brokers.

The online trading is just a small part of an overall project to overhaul the bourse and make it more competitive.

Finance Minister Jihad Azour, who has jurisdiction over the BSE, included an important item on improving the bourse and capital markets in the Paris III reform paper that was submitted to donor states last month.

Khalaf realizes that the road to a fully active bourse on par with some of its peers in the region will be a long one.

But the BSE's performance in 2006 was remarkable by any standard, given the fact Lebanon endured a two-month war and a sharp political standoff that has paralyzed the country.

"Investors realize that the prices of shares on the BSE are still undervalued despite the situation," he said. "That's why the prices did not change dramatically after the war."

Market capitalization stood at $8.304 billion at the end of December 2006, increasing from $4.917 billion at the end of December 2005. The value of shares traded reached $2.032 billion compared to $923 million during 2005, posting an increase of 120 percent. The volume of shares traded increased from 89.75 million shares to 134.85 million shares marking a 50-percent rise. Moreover, the number of transactions executed was 42,928, an increase of 164.5 percent. It is worth mentioning that all the BSE's performance indicators for this year have been the highest since the bourse reopened in 1996.

Several banks and companies planned to float shares on the BSE before the war broke out but these plans were put on the back burner until the situation in the country grows clearer.

"There are still companies showing interest in listing on the bourse but they're looking for the right moment," Khalaf said.

He declined to give the names of the companies that showed interest in listing shares.

Khalaf believes that the prices of stocks on the BSE are still undervalued and the investors are aware of this fact.

"Solidere shares, for example, are undervalued because the properties controlled by the company in the BCD are worth billions of dollars," he said.

He said the same principle applies to the five listed banks because they are recording handsome profits and are very liquid.

"The bourse will be in even better shape once the regulatory committee is established this year to introduce new laws and meet the needs of the bourse. In addition, another committee will be formed to ensure no insider trading is taking place."