VZCZCXRO1115
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0747 1431531
ZNR UUUUU ZZH
R 221531Z MAY 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 1992
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS BEIRUT 000747 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA 
STATE PASS USTR 
TREASURY FOR MNUGENT AND SBLEIWEISS 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR ABRAMS/SINGH/YERGER/DEMOPULOS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT:  LEBANON:  STOCKS SOAR ON NEWS OF POLITICAL SOLUTION 
 
 
SUMMARY 
------- 
 
¶1. (SBU) Prices of Lebanese stocks soared on the Beirut Stock 
Exchange (BSE) on May 21 and 22 after Lebanese political leaders 
reached an agreement in Doha.  Real estate consortium Solidere and 
some bank shares reached the exchange-mandated percentage limits on 
how much share prices may increase.  The market saw some profit 
taking on May 22.  Total value of transactions rose significantly, 
and the BSE recorded a new record in number of transactions  on May 
¶22.  BSE president said international foreign funds, mostly western, 
are also investing in Lebanese instruments, and he expects "the 
momentum to remain positive, with some profit taking"  End summary. 
 
¶2. (SBU) The end of the political conflict and of the 18-month 
sit-in in downtown Beirut saw prices of Lebanese stocks soar on the 
Beirut Stock Exchange (BSE) on May 21 and 22.  Total value of 
trading increased from $16.4 million on May 21 to $59.2 million on 
May 22. A total of $50 million in Solidere shares alone accounted 
for 84.4 percent of total value traded.  Solidere's principal real 
estate development of shops and offices in Beirut has suffered 
because of its proximity to the sit-in.  The BSE also hit a new 
record in number of transactions, BSE President Fady Khalaf told us, 
noting that 1,400 transactions were recorded on May 22, of which 
1,060 were in Solidere shares.  The previous record was in January, 
2006, with approximately 1,000 transactions recorded, he said. 
Market capitalization rose from $13.89 million on May 21 to $14.8 
million on May 22. 
 
¶3. (SBU) Solidere is a private consortium which bought up and 
developed downtown Beirut after the civil war.  The area was hard 
hit by the Hizballah sit-in, beginning in December, 2006.  The 
removal of the tent city nearby will open up the many businesses and 
restaurants of Solidere to the public again.  Shares rose from 
$27.16 on 5/20 to $31.05 on 5/21, reaching the daily increase cap of 
15 percent.  The market was short on supply to meet demand for 
Solidere shares, Khalaf told us, noting that the market closed on 
May 21 with unmet demand for 1.4 million Solidere shares.  As a 
result, prices for Solidere shares rose by an additional 15 percent 
to $35.70 on May 22, triggering some profit taking.  Demand for 
Solidere shares remains high, with supply being immediately absorbed 
by the market, Khalaf noted. 
 
¶4. (SBU) Khalaf refuted rumors that Solidere shares were trading on 
the black market at $43 on May 21.  He explained that Solidere 
shares are nominative, and thus transactions must go through the BSE 
and the clearing house to be recorded.  People could be mixing this 
up with Solidere GDRs (Global Depository Receipts), which traded 
between $37 and $4.62 in London, he remarked, and noted that about300,000 Solidere GDRs were traded on May 21.  Solidere GDRs traded 
between $35 and $36 on May 22, in line with prices on the BSE, he 
said. 
 
¶5. (SBU) Stocks and GDRs for Lebanese commercial banks also rose 
substantially on May 21, with some shares reaching their daily 
increase cap of 10 percent.  BLOM Bank and Audi Bank GDRs closed at 
$106 and $101.6 respectively, and Byblos Bank share price nearly 
reached the daily increase cap.  Prices of shares in the cement 
company Holcim climbed to $21.84 (almost the upper limit) on May 21 
and $23.53 on May 22.  Khalaf expects the momentum on Lebanese 
shares to remain positive, with some profit taking.  BSE president 
said international foreign funds, mostly western, are also investing 
in Lebanese instruments, and he expects "the momentum to remain 
positive, with some profit taking at certain levels."  Local and 
international demand for all Lebanese sovereign papers also picked 
up, with prices increasing by 1-1.5 percent, banking sources told 
us. 
 
SISON