Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy

Real GDP grew 4.4% y/y in 3Q17

Georgia’s real GDP growth was 4.4% in 3Q17, based on GeoStat. The hotels and restaurants was the fastest growing sector in 3Q17 expanding by 12.6% y/y, followed by mining (+10.6% y/y), construction (+9.3% y/y) and trade (+9.3% y/y). Meanwhile real growth was down 2.8% y/y in agriculture. The trade (18.7%) accounted for the largest share of GDP, followed by industry (17.0%) and by transport and communication (10.7%) sectors.

Exports up 8.2% y/y in November 2017

In November 2017, exports increased 8.2% y/y to US$ 236.7mn, imports were up 16.9% y/y to US$ 757.8mn and the trade deficit widened 21.4% y/y to US$ 521.0mn, according to GeoStat. Overall in 11M17, the trade deficit was up 1.2% y/y at US$ 4.7bn as exports were up 27.0% y/y to US$ 2.4bn, while imports increased 8.8% y/y to US$ 7.1bn.

In November 2017, ferro-alloys (+36.8% y/y), copper (+32.0% y/y), cars (+68.2% y/y), wine (+32.9% y/y) and spirits (+28.2% y/y) were the top 5 exported commodities; A 20.6% of exports were directed to the EU (-19.3% y/y), 50.3% were directed to the CIS (+36.1% y/y) and 29.1% to other countries (-2.9% y/y).
Petroleum (+14.4% y/y), aircrafts (US$ 43.5mn, one-off), gases (+8.7% y/y), copper (+99.3% y/y) and cars (-11.7% y/y) represented the top 5 imported commodities in November 2017.

Producer price index up 4.3% m/m and up 14.9% y/y in November 2017

PPI for industrial goods was up 4.3% m/m in November 2017, according to GeoStat. A 4.8% price increase for manufacturing contributed the most to the overall index change as prices were up for food, beverages and tobacco (+6.6% m/m) and basic and fabricated metals (+4.8% m/m).

Annual PPI was up 14.9% in November 2017. Rising prices in manufacturing (+15.1% y/y) contributed the most to the overall index change. Prices were also up for supply of electricity, gas and water (+11.5% y/y) and for mining and quarrying (+20.1% y/y).

Fixed income

Corporate Eurobonds: BGEO Group Eurobonds (BGEOLN) closed at 5.0% yield, trading at 104.6 (unchanged w/w). Bank of Georgia GEL-denominated Eurobonds (GEBGG) were trading at 100.5 (unchanged w/w), yielding 10.8%. GOGC Eurobonds (GEOROG) were trading at 107.6 (-0.1% w/w), yielding 4.3%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 112.4 (unchanged w/w), yielding 4.7%.

Georgian Sovereign Eurobonds (GEORG) closed at 112.3 (-0.1% w/w) at 2.9% yield to maturity.. Georgia Eurobonds, YTM (%)

Equities

BGEO Group (BGEO LN) shares closed at GBP 35.17/share (+0.80% w/w and +6.58% m/m). More than 198k shares traded in the range of GBP 34.56 – 35.45/share. Average daily traded volume was 52k in the last 4 weeks. FTSE 250 Index, of which BGEO is a constituent, gained 2.16% w/w and lost 2.33% m/m. The volume of BGEO shares traded was at 0.50% of its capitalization.

TBC Bank Group (TBCG LN) closed the week at GBP 16.90 (+2.92% w/w and +2.99% m/m). More than 83k shares changed hands in the range of GBP 16.14 – 17.00 share. Averaged daily traded volume was 24k in the last 4 weeks.

Georgia Healthcare Group (GHG LN) shares closed at GBP 3.59/share (+2.57% w/w and +3.76% m/m). More than 79k shares were traded in the range of GBP 3.40 – 3.60/share. Average daily traded volume was 13k in the last 4 weeks. The volume of GHG shares traded was at 0.06% of its capitalization.

Money Market

Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL 1,280mn (US$ 506.3mn).

Ministry of Finance Treasury Bills:

The nearest treasury security auction is scheduled for December 27, 2017, where GEL 12.0mn nominal value 5-year T-Notes will be sold.