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Cablegate: Lebanon: Stocks Soar On News of Political Solution

VZCZCXRO1115
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0747 1431531
ZNR UUUUU ZZH
R 221531Z MAY 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 1992
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS BEIRUT 000747

SENSITIVE
SIPDIS

STATE FOR NEA/ELA
STATE PASS USTR
TREASURY FOR MNUGENT AND SBLEIWEISS
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR ABRAMS/SINGH/YERGER/DEMOPULOS

E.O. 12958: N/A
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: STOCKS SOAR ON NEWS OF POLITICAL SOLUTION


SUMMARY
-------

1. (SBU) Prices of Lebanese stocks soared on the Beirut Stock
Exchange (BSE) on May 21 and 22 after Lebanese political leaders
reached an agreement in Doha. Real estate consortium Solidere and
some bank shares reached the exchange-mandated percentage limits on
how much share prices may increase. The market saw some profit
taking on May 22. Total value of transactions rose significantly,
and the BSE recorded a new record in number of transactions on May
22. BSE president said international foreign funds, mostly western,
are also investing in Lebanese instruments, and he expects "the
momentum to remain positive, with some profit taking" End summary.

2. (SBU) The end of the political conflict and of the 18-month
sit-in in downtown Beirut saw prices of Lebanese stocks soar on the
Beirut Stock Exchange (BSE) on May 21 and 22. Total value of
trading increased from $16.4 million on May 21 to $59.2 million on
May 22. A total of $50 million in Solidere shares alone accounted
for 84.4 percent of total value traded. Solidere's principal real
estate development of shops and offices in Beirut has suffered
because of its proximity to the sit-in. The BSE also hit a new
record in number of transactions, BSE President Fady Khalaf told us,
noting that 1,400 transactions were recorded on May 22, of which
1,060 were in Solidere shares. The previous record was in January,
2006, with approximately 1,000 transactions recorded, he said.
Market capitalization rose from $13.89 million on May 21 to $14.8
million on May 22.

3. (SBU) Solidere is a private consortium which bought up and
developed downtown Beirut after the civil war. The area was hard
hit by the Hizballah sit-in, beginning in December, 2006. The
removal of the tent city nearby will open up the many businesses and
restaurants of Solidere to the public again. Shares rose from
$27.16 on 5/20 to $31.05 on 5/21, reaching the daily increase cap of
15 percent. The market was short on supply to meet demand for
Solidere shares, Khalaf told us, noting that the market closed on
May 21 with unmet demand for 1.4 million Solidere shares. As a
result, prices for Solidere shares rose by an additional 15 percent
to $35.70 on May 22, triggering some profit taking. Demand for
Solidere shares remains high, with supply being immediately absorbed
by the market, Khalaf noted.

4. (SBU) Khalaf refuted rumors that Solidere shares were trading on
the black market at $43 on May 21. He explained that Solidere
shares are nominative, and thus transactions must go through the BSE
and the clearing house to be recorded. People could be mixing this
up with Solidere GDRs (Global Depository Receipts), which traded
between $37 and $4.62 in London, he remarked, and noted that about300,000 Solidere GDRs were traded on May 21. Solidere GDRs traded
between $35 and $36 on May 22, in line with prices on the BSE, he
said.

5. (SBU) Stocks and GDRs for Lebanese commercial banks also rose
substantially on May 21, with some shares reaching their daily
increase cap of 10 percent. BLOM Bank and Audi Bank GDRs closed at
$106 and $101.6 respectively, and Byblos Bank share price nearly
reached the daily increase cap. Prices of shares in the cement
company Holcim climbed to $21.84 (almost the upper limit) on May 21
and $23.53 on May 22. Khalaf expects the momentum on Lebanese
shares to remain positive, with some profit taking. BSE president
said international foreign funds, mostly western, are also investing
in Lebanese instruments, and he expects "the momentum to remain
positive, with some profit taking at certain levels." Local and
international demand for all Lebanese sovereign papers also picked
up, with prices increasing by 1-1.5 percent, banking sources told
us.

SISON

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