BEIRUT: The Beirut Stock Exchange is in need of several improvements, across different areas, according to global portfolio analytics and indices provider MSCI, Inc.
Lebanon still fell in the frontier market category, which is a type of developing country which is more developed than the least developing countries, but too small, risky, or illiquid to be generally considered an emerging market.
Five accessibility criteria were evaluated, which include ease of capital inflows and outflows, openness to foreign ownership, the stability of the institutional framework, efficiency of the operational framework and the availability of investment instruments.
Investors, the report noted, usually take a closer look at the equal treatment of investors, the cost of investment, unrestrictive use of stock market data, the free flow of capital and country-specific risks.
Openness to foreign ownership is free of constraints, the report noted, except for Israeli nationals who are banned from investing in Lebanese stocks.
In terms of equal rights to foreign investors, the report argued that Lebanon could improve its standing by always offering company related information in English.
In terms of investor qualification requirements and equal economic and voting rights to foreign investors, Lebanon has "no major issues." It also has a "no issues" rating in terms of foreign room level, which looks at the proportion of shares available to foreign investors.
Lebanon also secured a "no issues" rating in regards to its capital inflows and outflows, along with 18 other countries, which highlights that no restrictions exist on capital flows to and from the country.
However, Lebanon should look into affording foreign investors the ability to hold Lebanese pound balances or create an offshore currency market, which is not currently the case. This leads to constraints on the onshore currency market with Lebanon getting an "improvements needed" rating in this area.
Given that registration is mandatory and may take up to five days, this leads to an inefficient operational framework, MSCI notes, with the market entry process needing improvement.
Market regulations and detailed stock market information should all be made readily available in English to improve the flow of information.
Along with another 11 frontier markets, Lebanon secured a "no major issues" rating in regards to market regulations. Among another six markets, Lebanon received the same rating in terms of information flow.
Almost all of Lebanon's market infrastructure indicators needs improvement, the report noted, except for trading.
Regarding clearing and settlements procedures, the report noted that Lebanon lacks a functioning nominee status as well as no omnibus structures while overdraft facilities are currently blocked.
In terms of registry and depository, the report maintained that not all listed shared are dematerialized while also noting the absence of a central registry.
Regarding transferability, MSCI noted that in-kind transfers and off-exchange transactions are banned.
Due to Lebanon's volatile political situation and regional conflicts, the agency modified the stability of the institutional framework category rating to "improvements needed."
Other Arab countries falling under the Frontier Market definition are Bahrain, Jordan, Morocco, Oman, and Tunisia.
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