S&P considers removing Lebanese shares from indexes

S&P Dow Jones Indices began a consultation exercise on removing Lebanese shares from several of its indexes because of the country’s worst economic crisis in decades.

Measures have already been taken “to address ongoing market accessibility issues in Lebanon caused by the imposition of capital controls”, it said.

S&P DJI, a division of credit rating agency S&P Global that creates stock market indexes, has been monitoring the situation but said there has been little progress in addressing the problems caused by these controls.

“Given the situation in the country regarding foreign currency shortages and fund repatriation concerns, S&P DJI is proposing to remove index constituents domiciled in Lebanon from the S&P Pan Arab Indices,” the company said on Friday.

“Additionally, S&P DJI is proposing to reclassify Lebanon from a frontier market to a stand-alone market, and consequently remove all constituents from the S&P Frontier BMI and related sub-indices.”

Lebanon is facing its worst economic crisis since the country’s civil war ended in 1990. The economy shrunk by 25 per cent last year, according to the International Monetary Fund.

Although no formal capital controls were announced, banks placed strict limits on the amount of dollars that customers can withdraw amid a greenback shortage.

The Lebanese pound has lost more than 90 per cent of its value against the dollar since last year began, fuelling a sharp increase in inflation.

Inflation stood at an annual rate of 158 per cent in March.

S&P DJI said the consultation exercise will end on May 14, with the removal of shares expected at the coming rebalancing of its indexes before markets reopen on June 21.

The removal of shares domiciled in Lebanon would affect Bank Audi, Blom Bank and Byblos Bank, the country largest lenders. It would also affect two classes of shares listed by property developer Solidere, which is the largest publicly listed company on the Beirut Stock Exchange.

The Blom Stock Index that tracks the performance of the Beirut Stock Exchange is up 40 per cent in value so far this year as those that can afford to move to hedge against the pound’s fall in value.

S&P Dow Jones Indices said the removal of the shares could take place before markets reopen on June 21