S&P Dow Jones Indices has launched a consultation exercise on removing Lebanese shares from its indexes as a result of the country’s economic collapse.
S&P DJI said that it already took some measures “to address ongoing market accessibility issues in Lebanon caused by the imposition of capital controls”. It added that although it has been monitoring the situation, little progress has been made to address to problems caused by these controls.
“Due to 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 in a statement announcing the consultation exercise 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.”
The removal of Lebanon-domiciled shares would affect the country’s largest banks including Bank Audi, Blom Bank and Byblos Bank, as well as two classes of shares listed by property developer Solidere. Solidere is the largest publicly listed company on the Beirut Stock Exchange.
The Blom Stock Index that tracks the performance of the Beirut Stock Exchange has jumped in value by 40 per cent so far this year as those that can afford to, invest to hedge against the pound’s plunge in value.
Lebanon is witnessing its worst economic crisis since the end of its last civil war in 1990. The country’s economy contracted 25 per cent last year, according to the International Monetary Fund.
Since the beginning of last year, the Lebanese pound has lost more than 90 percent of its value against the dollar. That led to extensive inflation, which soared to an annual 158 percent in March.
S&P DJI said its consultation exercise will last until May 14 and that the removal of shares could take place at a forthcoming rebalancing of its indexes before markets reopening on June 21.