Solidere shares
soar and readjust

Prospects of new Cabinet

boost investor appetite

Solidere’s share prices which surged in the first three days of the week driven by rising prospects of a formation of the Cabinet, witnessed a downturn on Thursday on profit-taking.

The positive developments had also affected Eurobond prices, which are equally driven by improvements in emerging markets.

Solidere’s ‘A’ shares jumped 6.48 percent to close at $7.39 on the Beirut Stock Exchange (BSE) on Wednesday. The ‘A’ shares of the country’s largest real estate company surged 22 percent when compared with their closing price last week. The market then witnessed profit-taking activities on Thursday with the ‘A’ shares dropping 6.76 percent to close at $6.89.”This was mainly driven by profit-taking as news about some obstacles to the formation of the new Cabinet emerged after market close,” said Jean-Michel Aoun Manager of Capital Markets at Arab Finance Corporation. Some investors had bought low and they were waiting for the share price to rise in order to sell and make a profit, he said. The share is still 14 percent higher than its closing price last week.

Regarding the earlier rebound in Solidere’s shares, Faysal Barbir, Director-Capital Markets at FFA Private Bank said that the rally was mainly triggered by growing prospects for the formation of the new Cabinet. “Trading volume was shy but it was a great improvement from the previous sell-off, especially that the share price soared 35 percent compared with its lowest value last month,” he said.

Jean Hanna, Deputy General Manager at Fidus, said: “Solidere’s shares are a barometer of the political landscape in the country as most of its assets consist of real-estate properties in Beirut commercial district — the heart of the capital.”

“Besides the positive political signals that boosted investor appetite, the stock rally was partly driven by the fact that new shareholders had previously acquired shares in Solidere,” he said. According to Hanna, these shares were most likely held by small investors who used to offer them for sale on the stock market. “The acquisition reduced the supply of Solidere shares on the market and heightened confidence in the company,” he said. “Solidere’s shares are exceedingly undervalued if one takes into consideration the value of its assets,” Hanna said.

The prices of Lebanese Eurobonds are also rising. “The Eurobonds are trading higher with improved demand across the curve,” Barbir said. The cost of insuring exposure to the country’s sovereign debt has dropped with credit default swaps (CDS) for Lebanon falling by 200 basis points (bps) to 650 bps from a high of 850 bps last month.

Hanna said that the Eurobonds are affected by medium and long-term economic factors, not by the Cabinet per se. “The formation of the new Cabinet increases the prospects for a successful implementation of the commitments made at the CEDRE donor conference,” he said.

“The Eurobond prices were also affected by an improvement in global risk sentiment in emerging markets,” according to Barbir.

Solidere’s ‘B’ shares which are usually traded at a much lower volume than the ‘A’ category closed 5.84 percent higher on Wednesday then dropped 4.44 percent on Thursday. The BSE is still witnessing the usual lull in trading activity with just nearly 52,700 Solidere ‘A’ and ‘B’ shares changing hands on Wednesday and around 60,500 shares on Thursday. A few bank stocks traded flat and at low volume the last two days.