The economic slowdown, a slump in property prices, lucrative interest rates on deposits and a shortage of liquidity in the stock exchange have all contributed to the decline of Solidere shares to record lows in the past two weeks, brokers said Friday.
“Real-estate giant Solidere has apparently been negatively affected by the wide range of negative economic indicators and the delay in presenting the 2019 draft budget,” one broker told The Daily Star.
Solidere shares hit their lowest ever when Solidere B was traded at $4.61 last week. Shares of the company in the usually dormant Beirut Stock Exchange dominate the volume of the trading in the bourse.
Even the volume and value of both Solidere A and B shares have been extremely low so far in May compared to other months this year.
The total value of A shares traded this week stood at just $127,643, while B shares closed at $50,243.
“On the equity market, the BSE continued to trace a downward trajectory. The price index fell by 3 percent week-on-week to reach 75.57, its lowest level in 14 years, while the total turnover remained quite shy,” Bank Audi’s Lebanon Weekly Monitor said in its last report.
Jean Michel Aoun, trader at Arab Finance Corporation, said among the possible reasons for the decline of Solidere shares were the poor economic conditions and a rise in interest rates on customer deposits.
“Naturally, when banks offer interest around 6 to 7 percent on dollar deposits, then some of the investors prefer to put their money in banks and collect the interest.
“They think it’s safe and guaranteed investment,” Aoun said.
But the broker expressed belief that the prices of Solidere shares were undervalued. “In normal times, Solidere A and B shares should value around $12 to $13 a least. But the due to the situation in Lebanon, the prices have dropped considerably,” he said.
Another broker insisted that political sentiment was one of the main factor affecting Solidere shares and other stocks listed on the BSE.
“If the political atmosphere improves drastically and Arab Gulf tourists start pouring into Lebanon in big numbers, the Solidere shares will surely improve,” the broker said.
Solidere recorded a loss of nearly $99 million in the first half of the 2018, hit hard by political paralysis in the country and real-estate stagnation. It is yet to release its full results for 2018.