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CHAMPION OF THE DAY
Solidere shares up near $50
after decline in LL and lollar
Rise in value on being last haven
rather than company performance
Solidere’s ‘A’ and ‘B’ shares jumped by 23 percent in just two days with ‘A’ closing at $49.6 on Friday and ‘B’ shares at $48.5.
The trading volume of ‘A’ shares soared by 68 percent over the two days to 29,401 shares.
Compared with their closing prices at the end of December 2021, the ‘A’ share surged 52 percent and ‘B’ share 45 percent.
Source: Beirut Stock Exchange
The rise in the share price reflects the decline of the lira which started to drop again after the elections, said Faysal Barbir Director of Capital Markets at FFA Private Bank. “We expected the share price to rise because we have anticipated that the Central Bank would reduce its interventions on the foreign exchange market after the elections. It was heavily intervening before the elections in order to artificially stabilize the lira,” he said.
According to Barbir, since the economic crisis started to worsen in the last quarter of 2019, the price of Solidere’s share stopped to reflect the fundamentals of the company’s performance or the real estate market. “The share is rather functioning as a store of value for depositors who want to safeguard the value of their lollars stuck in bank accounts. Even if the investment in Solidere shares is in lollars, it keeps its value because the share price is rising while depositors who manage to withdraw some of their lollars, do so at a huge discount,” he said. All listed shares are denominated in dollars and are paid for by check.
In addition to that, lollars stuck in banks are generating insignificant interest income. The weighted average rate on lollar deposits in commercial banks fell to 0.16 percent in March 2022 from four percent in January 2020.
According to Barbir, the share price will rise further as long as the exchange rate continues to decline and the government does not implement the comprehensive reforms required by the International Monetary Fund (IMF).
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May 20, 2022
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