Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy

Real GDP up 2.9% y/y in August 2016 

Georgia’s real GDP growth was 2.9% y/y in August 2016, according to GeoStat’s rapid estimates. As a result, output growth averaged 2.7% y/y in 8M16. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.

NPLs at 4.0% y/y in August 2016

In August 2016, the banking sector loan portfolio increased 7.9% y/y, excluding the exchange rate effect (+7.0% y/y and -1.1% m/m in unadjusted terms), to GEL 16.4bn (US$ 7.1bn). Deposits increased 10.7% y/y, excluding the exchange rate effect (+8.7% y/y and -1.6% m/m in unadjusted terms), to GEL 14.6bn (US$ 6.3bn). NPLs stood at 4.0% in August 2016, up 0.7ppts y/y and up 0.1ppts m/m.

NBG sold US$ 40mn

Last week, NBG intervened on the FX market and sold US$ 40mn, aimed at curbing fluctuation of the national currency. Overall, NBG bought total of US$ 278mn and sold US$ 140mn at 20 interventions YTD. GEL weakened 0.1% w/w and strengthened 3.6% YTD against the US$.

Global competitiveness index 

According to World Economic Forum, Georgia was named the most improved Eurasian economy (up by 7 places from 66th to 59th, out of 138 countries), in Global competitiveness index 2016-2017. 

Current account deficit stood at 13.4% of GDP in 2Q16 

Current account deficit narrowed to 13.4% of GDP in 2Q16 from 10.8% of GDP in 2Q16, increasing 32.6% y/y in nominal terms to US$ 486.9mn, according to NBG. Merchandize trade deficit, traditionally the major contributor to deficit creation, increased 119.5% y/y as exports (-16.8% y/y) were down and imports (+58.6% y/y) were up. Positive balance in services and current transfers compensated 86.2% of trade deficit. Among services, tourism had the largest positive balance, increasing 12.0% y/y to US$ 515.3mn (14.1% of GDP). Net current transfers, the largest positive item of the current account, were up 273.1% y/y to US$ 1.54bn, on the back of 7.5x increase in the government sector transfers due to the international aid received for hepatitis-C elimination program. Net FDI, significant item for financing the current account deficit, amounted to US$ 380.6mn (10.5% of GDP, up 8.6% y/y). The largest investment inflows were directed to transport and communications sector.

Fixed income

Corporate Eurobonds: Bank of Georgia Eurobonds (BGEOLN) closed at 5.3% yield, trading at 103.8 (-0.1% w/w).  GOGC’s Eurobonds (GEOROG 05/17) were trading at 101.9 (unchanged w/w), yielding 3.8% and (GEOROG 04/21) were trading at 105.5 (-0.6% w/w), yielding 5.4%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 112.9 (-0.9% w/w), yielding 5.1%. 

Georgian Sovereign Eurobonds (GEORG) closed at 112.1 (-0.2% w/w) at 3.9% yield to maturity.

Equities

BGEO Group (BGEO LN) shares closed at GBP 29.04/share (-1.53% w/w and +2.25% m/m). More than 275k shares traded in the range of GBP 28.24 – 29.44/share. Average daily traded volume was 56k in the last 4 weeks, more than in the previous month. FTSE 250 Index, of which BGEO is a constituent, lost 0.29% w/w and gained 0.14% m/m. The volume of BGEO shares traded was at 0.70% of its capitalization. 

TBC Bank Group (TBCG LN) closed the week at GBP 12.70 (+10.39% w/w and +15.98% m/m). More than 327k shares changed hands in the range of GBP 12.00 – 12.70/share. 

Georgia Healthcare Group (GHG LN) shares closed at GBP 2.96/share (-6.77% w/w and +9.53% m/m). More than 75k shares were traded in the range of GBP 2.96 – 3.25/share. Average daily traded volume was 23k 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 980mn (US$ 420.9mn).

Certificates of deposit: NBG sold 182-day, GEL 20mn (US$ 8.6mn) certificates of deposit, with an average yield of 6.58% (up 1bps from previous issue).

Ministry of Finance Treasury Notes: 5-year GEL 10mn (US$ 4.3mn) T-Notes of Ministry of Finance were sold at the auction held at NBG on September 21, 2016. The weighted average yield was fixed at 7.555%. The nearest treasury securities auction is scheduled for October 5, 2016, where GEL 33mn nominal value 2-year T-Notes will be sold.