21 January 2011

BEIRUT: Bankers said Thursday that conversion of accounts from Lebanese pounds to dollars increased after Qatar and Turkey failed to break Lebanon’s political deadlock, amid unconfirmed reports that the Central Bank has injected more than $500 million to guard the pound’s stability.

“People’s fears have been translated into conversions from the Lebanese pound to the dollar, but these exchanges are still acceptable so far,” the special adviser to the chairman of Fransabank Joe Sarrouh told The Daily Star.

Sarrouh said the monetary policy is under control as long as the security situation is stable. “But if the security situation deteriorates then a wave of panic will spread throughout the country and we will witness more conversions,” he said. But he added that it is in no one’s interest to opt for a violent scenario.

Sarrouh said that the Central Bank was following the situation on a daily basis to prevent any deterioration of the pound.

Central Bank Governor Riad Salameh reassured President Michel Sleiman Thursday about the stability of the Lebanese pound. “The Cental Bank is taking all the necessary measures to preserve the monetary stability and secure high liquidity in the market,” he said during his visit to the president.

Over the past few days the Central Bank has injected more than $500 million to keep the pound stable amid unconfirmed reports that Lebanese expatriates are becoming reluctant to send money to Lebanon. If the news is confirmed it will have a negative impact on the capital inflows to Lebanon.

“There is no slowdown in capital inflows to the country for the time being, but if such a slowdown takes place, coupled with a deceleration in the economy, then the overall growth will be affected,” Sarrouh said.

Sarrouh said Lebanon witnessed much higher conversation activities during Israel’s 2006 war on Lebanon and expressed his hope that the same level would never be reached again.

Ratings agency Standard and Poor’s downgraded its outlook on Lebanon’s B credit rating to stable from positive, saying the standoff “severely weakened” its economic growth prospects.

So far the crisis has had no clear impact on Lebanon’s projected growth of 5 percent in 2011.

For his part, head of research at the Byblos Bank Group Nassib Ghobril said conversions from the Lebanese pound to dollars were much higher Thursday compared to the days before. “I heard that these conversions reached $400 million and other sources told me exchanges amounted to $1 billion, but I am not sure about that and I don’t have exact figures,” he said.

Ghobril believes that if the situation deteriorates then this would have a negative impact on growth and would affect consumers’ sentiment. “Tourism and real estate sectors will be impacted as well as the retail services if the crisis lasts for too long,” he said.

Meanwhile, most stocks trading on the Beirut Stock Exchange witnessed a decrease Thursday reflecting investors’ increased market uncertainty.

Shares of real estate giant Solidere A and B closed at $18.02 with a decrease of 2.17 percent in Solidere A and 1.9 percent in Solidere B. Trading value reached $1.11 million. Some 130,150 shares were traded through 81 transactions.

During the session six instruments were traded. The prices of Byblos Bank GDR rose, while the prices of Solidere A, Solidere B, Byblos Bank and BLOM Bank decreased, and the price of BLOM Bank GDR remained unchanged.

The Stock Capitalization of the listed companies decreased by 0.63 percent to reach $12,566 million, against $12,645 million for the previous session.

“The price of Solidere A went up by 2 percent on Jan. 11 when the Saudi-Syrian initiative was still functioning, but dropped by 8 percent the following day when the initiative failed,” said financial analyst Jean Tawile.

Tawile said people were selling Thursday because they were scared of the failure of the Turkish-Qatari initiative. “People are expecting the situation to worsen, that’s why they prefer to sell their shares for the time being and buy them at lower prices when the situation deteriorates further,” he said.

Tawile explained his viewpoint by saying that even if Solidere A were to fall to $17 and people buy it at this price then they would get a dividend yield of 6 percent on their shares, considering Solidere is paying $1 per share as dividend.

Copyright The Daily Star 2011.