Lebanon 2013 | FINANCE | INTERVIEW

TBY talks to Ghaleb Mahmassani, Vice-President of the Beirut Stock Exchange, on opportunities in the market, the battle for liquidity, and privatization.

Ghaleb Mahmassani
Ghaleb Mahmassani obtained a Bachelor’s degree in Political Science from the American University in Beirut in 1962, and licenses in French and Lebanese law in the same year. He received a PhD in Law from Lyon University in 1966. He has been an Attorney at Law since 1962, and has been active both academically and professionally at the international level. Mahmassani also served as a Member of the International Court of Arbitration of the International Chamber of Commerce (ICC) in Paris from 2000-2005.

What steps are being taken to promote the financial markets in Lebanon?

In an effort to foster the development of the financial markets in Lebanon, the Lebanese parliament endorsed and promulgated the Financial Market Law No. 161, in which I had the honor to participate. We have been discussing organized financial markets since 1996. Many drafts were made, but in the end the new law was finalized with the help of the Central Bank and the Ministry of Finance, and was voted in by parliament in August 2011. The new law, which is now under implementation, dictates the appointment of a new capital market authority formed of six members (three of them are experts that are full time) in addition to a chairman (the governor of the Banque du Liban). This capital market authority will be responsible for developing, creating, and establishing all the regulations for the financial market in Lebanon. Members of the authority are preparing the regulations related to transparency, governance, and disclosure with help from the World Bank and experts from the central bank. We are placing great hopes that the authority will be like those of London, Paris, or New York. Also, the new law provides for the establishment of a special financial market tribunal to settle and look into all disputes concerning the financial markets to avoid going to the lengthy procedures of normal tribunals. It has disciplinary as well as regulatory powers. Another important point in the new law is that within one year the Beirut Stock Exchange (BSE) will have been transformed into a joint-stock company from its current status as an official establishment. In the first step, all the shares will be held by the government, because currently the government owns it, but within six months it has to be privatized and sold; however, the law does not say to whom. Therefore, it is left to the financial authority to decide how much of a stake the government will retain.

What are the main challenges facing Lebanon's capital markets?

We are among the remaining countries that have a stock exchange that is considered a government institution. Most of the exchanges now are purely private companies. As well, there is a lack of trust and confidence from institutional investors due to the absence of a capital market authority. In terms of companies, many private businesses are family-owned and they hate disclosing their activities.

How would you assess the stock market's activity in 2013?

Market activity at the BSE witnessed a drop in trading movement during the first four months of the year. Cumulative trading during this period totaled 13.6 million shares valued at $88.5 million, compared to 17.3 million shares for a value of $126.2 million for the corresponding period of 2012. This represents a decrease of 21% and 30% respectively on the volume and value of shares traded. On the other hand, the stock capitalization of the listed shares increased by 5.4% to reach $11.1 billion at the end of April 2013 against $10.5 billion at the end of April 2012.

Where are the current investment opportunities in Lebanon?

The best opportunities in Lebanon are in the real estate sector and the large banks. I believe that most shares listed on the BSE are traded at around or even below their net book value because of the political and security turmoil in the Arab countries surrounding Lebanon, and not due to sell-offs led by poor investor sentiment. That is why I believe that the current prices of most listed instruments provide a good investment opportunity for local or foreign investors willing to diversify their portfolios.