Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy

FDI up 10.6% y/y in 1H16

FDI in Georgia hit US$ 445mn (-3.8% y/y) in 2Q16, according to GeoStat’s preliminary figures. Similar to previous quarters, the transport and communications sector was the largest FDI recipient at US$ 175mn (-15.8% y/y, 39.3% of total) in 2Q, followed by financial sector at US$ 60mn (+15.3% y/y, 13.5% of total), energy sector at US$ 46mn (+41.2% y/y, 10.3% of total), and construction sector at US$ 19mn (+69.4% y/y, 4.3% of total). Azerbaijan topped the list of investors with US$ 146mn, followed by United Kingdom at US$ 64mn, Czech Republic at US$ 36mn, and Turkey at US$ 28mn. Overall, in 1H16 FDI stood at US$ 834mn, up 10.6% y/y.

International reserves up 1.1% m/m in August 2016

Gross international reserves increased 1.1% m/m (+US$ 32.1mn) and 17.3% y/y (+US$ 425.2mn) to US$ 2.89bn as of end-August 2016, according to NBG. Increase in reserves was attributed to NBG’s FX interventions and operations with commercial banks.

NBG cuts its policy rate to 6.50%

At its meeting on August 7, 2016, NBG’s monetary policy committee cut its policy rate by 25 basis points to 6.50%, citing that the monetary policy decision is based on macroeconomic forecast, according to which the phasing out of tight monetary policy must continue in order for inflation to reach its target rate of 5.0%. The next committee meeting is scheduled for October 26, 2016.

Fixed income

Corporate Eurobonds: Bank of Georgia Eurobonds (BGEOLN) closed at 5.4% yield, trading at 103.3 (+0.4% w/w). GOGC’s Eurobonds (GEOROG 05/17) were trading at 101.9 (unchanged w/w), yielding 4.0% and (GEOROG 04/21) were trading at 105.7 (+0.4% w/w), yielding 5.3%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 113.1 (+0.7% w/w), yielding 5.1%. 

Georgian Sovereign Eurobonds (GEORG) closed at 112.5 (+0.3% w/w) at 3.9% yield to maturity. 

Equities

BGEO Group (BGEO LN) shares closed at GBP 30.44/share (+3.82% w/w and +3.61% m/m). More than 304k shares traded in the range of GBP 29.35 – 31.19/share. Average daily traded volume was 62k in the last 4 weeks, more than in the previous month. FTSE 250 Index, of which BGEO is a constituent, gained 1.17% w/w and lost 0.60% m/m. The volume of BGEO shares traded was at 0.77% of its capitalization. 

 TBC Bank Group (TBCG LN) closed the week at GBP 11.00 (-3.30% w/w). More than 112k shares changed hands in the range of GBP 9.80 – 11.10/share. 

Georgia Healthcare Group (GHG LN) shares closed at GBP 2.92/share (-0.93% w/w and -3.23% m/m). More than 169k shares were traded in the range of GBP 2.90 – 3.05/share. Average daily traded volume was 30k in the last 4 weeks. The volume of GHG shares traded was at 0.13% of its capitalization. 

Money Market

Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL 800mn (US$ 346.9mn).

Certificates of deposit: NBG sold 91-day, GEL 20mn (US$ 8.7mn) certificates of deposit, with an average yield of 6.45% (down 10bps from previous issue).

Ministry of Finance Treasury Notes: 2-year GEL 10mn (US$ 4.3mn) T-Notes of Ministry of Finance were sold at the auction held at NBG on September 7, 2016. The weighted average yield was fixed at 6.871%. The nearest treasury securities auction is scheduled for September 21, 2016, where GEL 10mn nominal value 5-year T-Notes will be sold.