The total trading volume at Beirut’s stock market in 2011 reached 77.5 million shares, regressing by around 53 percent from 2010. Figures released by the Beirut Stock Exchange indicated that the total turnover during 2011 stood at $515 million, down by 72 percent from the previous year.

The BLOM Stock Index (BSI) fell by 20.25 percent from its December 2010 level. The market liquidity ratio at the end of the year was five percent compared to 14.7 percent in 2010.

Market capitalization at the end of this year stood at $10.3 billion, down by around 19 percent from the end of 2010. The BSE figures showed that the market capitalization of total shares listed on the bourse dropped to 24.8 percent of GDP from 32.3 percent of GDP at end-2010.

“Domestic and regional political instability have curtailed transactions throughout 2011,” according to vice president of the Beirut Stock Exchange Ghaleb Mahmasani.

Mahmasani said that the turmoil in several countries in the region and the local political stalemate have discouraged investors in general. He said that Arab investors, whose activity had recoiled since the 2008 financial crisis in the Gulf countries, were still reluctant to trade in Beirut’s stocks.

Figures released by the Arab Monetary Fund (AMF) showed that Lebanon’s stock market was the third worst Arab performer for the year 2011, behind revolt-stricken Egypt and Syria. The AMF figures indicated that the market capitalization rate fell in all 15 of the Arab markets covered with the exception of Qatar.

According to Mahmasani, the BSE was more vulnerable than other Arab markets due to its relatively tiny capitalization and its weak prospects. He said that the limited number of companies listed on the stock exchange does not allow much growth in the market.

Bank stocks occupy the majority of the BSE’s market capitalization with 72.8 percent, followed by real estate stocks with 23.1 percent. Banking stocks accounted for 81.8 percent of the total trading volume and 53.9 percent of the value of shares traded. The real estate stocks represented 16.9 percent of the volume and 43.9 percent of the value of stocks traded.

According to Mahmasani, the developed banking sector poses a challenge to the development of the stock market. He said that family-owned enterprises in need of capital find it easier to resort to banks for funding rather than have their companies’ shares publicly traded.

Mahmasani said that the new regulations governing capital markets would encourage companies to list their shares on the BSE. This, he said, would hearten investor sentiments and restore confidence in the market.

The Capital Markets Law, ratified by Parliament last August, stated the establishment of an independent watchdog, chaired by the Central Bank governor, to supervise the BSE. The law also entails privatizing the BSE at a later date.