The stock exchange is a body corporate of financial and administrative autonomy. The economic blocs depend on it to achieve integration through coordination and cooperation. Besides, this market takes up more importance now given the major developments that have fostered integration between the regional and international financial markets.

The stock exchange, one of the bases of the financial system, organizes funding, investment, and marketing, either through stocks and bonds, the most important securities traded in this market, or through different commercial and financial contracts in the field of sale and purchase. This constitutes a stock certificate that covers a part of the partnership according to the shares’ value. Hence, the investor will be entitled to receive net profits and to attend and vote in the General Assembly. In addition, he will enjoy other rights stipulated in the law.

Until 1989, there were just nine Stock Exchanges in the Arab world, namely in Jordan, Kuwait, Morocco, Lebanon, Tunisia, and Egypt.

Status of Beirut Stock Exchange (BSE)

Lebanon has initiated many important reforms. For instance, it developed and modernized the resources markets, reinforced competitiveness, and developed the financial markets to attract more investments and create a more attractive and fertile economic environment that fosters confidence by protecting operators. This, in turn, improved the economic performance, prompting the Gulf citizens and the Arabs to resort to our local markets for better returns. Besides, we must mention in this context that the real estate and banking sectors are the most developed in Lebanon.

Small-sized before the war, Beirut stock exchange was reopened in 1999. Its administration succeeded in reinforcing its performance. To this end, it took measures aiming at embracing modernization and an electronic trading system that paves the way for remote swift trading and quickly offers all information and data required to provide clients with all the services they need. In addition, the administration reorganized the market’s institutions to enhance protection and confidence, thereby encouraging the small-sized companies, by introducing electronic trading systems, to list their shares. In fact, these systems facilitate contacts through specialized units to ensure the success of specialization. Indeed, the latter improves the stock exchange activity, for it encourages the local companies and the foreign investors to list their companies’ shares or trade the listed ones. Moreover, the BSE took other measures that yielded good results. For instance, it presented the shares of the listed companies and favored the continuous trading system to the fixed method.

On the other hand, the Lebanese real estate Solidere Company was the last company that recently joined Kuwait’s Stock Exchange. Hence, it has floated its shares in a successful market of upward trend.

On the other hand, the available reports reveal that the activities of Beirut stock exchange have remarkably improved between 2000 and 2004. In fact, the capital value of the listed companies’ shares rose from 1,238 million dollars to 1,981 million. Remarkably, no demand on the shares of the commercial and industrial establishments was recorded. As for their trading volume, it remained weak.

Personal proposals to boost Beirut stock exchange

The achieved positive factors obviously fall short of expectations. In fact, we still need many integration tools to meet the desired goal. For instance, we must:

1- Allow clients to place orders from their offices. Pave the way too for Arab joint-stock companies that can diversify the securities the investor can trade and invest in the stock exchange. In fact, these securities are the main engine that pushes the market forward.

2- Ensure the banking and monetary sector’s flexible control, so as to simplify procedures. Then businessmen and investors can engage in different activities within a balanced and adequate risk framework.

3- Encourage the use of new investment tools in the financial market, such as the unit funds, the venture capital funds, or the collective investment funds.

4- Implement measures to provide the stock markets with the liquidity they need to foster economic development. To this end, more stringent laws need to be enacted to regulate and develop the market, which will, in turn, help the latter ensure safe trading. Besides, the companies listed in the stock exchange must be obliged to publish their results in due time and with full transparency.

It is worth noting that the Union for Arab Stock Exchanges has decided to establish the first Arab clearing company in Beirut with a 10-million-dollar capital. This is indeed a quantum leap in the field of merging stock exchanges.

Characteristics and Advantages

1- Encourage the free transfer of Arab capitals between the Arab stock markets. Adjust the situation of operators and exchange information on the stock exchange activity, thereby increasing the citizens’ awareness.

2- Settle the transactions between the Arab stock exchanges on the one hand, and between them and the world stock exchanges on the other.

3- Further activate the financial market to encourage more companies to register their stocks, which will grant them many characteristics and opportunities, mainly the possibility to cooperate with financial and banking institutions, whether local, regional, or international. Besides, if companies took this measure, they could easily access and deal with investors by issuing all kinds of stocks, such as common stocks- preference stocks – the stocks that do not enjoy a voting right. They could also increase their capital, either by floating new shares for public subscription or issuing debt bonds of all kinds.

Obstacles

Based on our experience, we can point out to the following shortcomings:

1- The trading transactions focus on preserving the company’s promising shares, while neglecting the weak ones.

2- The insufficient diversity and allocation of floated shares certainly increase the degree of risks and high losses the investors may incur, for their financial portfolios are not diversified.

3- The market capital is still small. Besides, few are the companies listed in the stock exchange. As for trading, it is weak, since investors lack sufficient information.

Accordingly, in the era of regional blocs, efforts must be intensified in order to build a strong, stable economy. In addition, the growth of capitals needs to be reinforced. Hence, high rates of economic development will be achieved, thereby serving the local economy. We hope that the Arab Securities Stock Exchanges will merge in the future in a unified strong Arab stock exchange.

>Mr. Hassan Baydas is a businessman and an economic expert. This article first appeared at Dar Al Hayat: http://english.daralhayat.com