Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy

International arrivals up 11.0% y/y in September 2016

International arrivals to Georgia increased 11.0% y/y to 0.63mn persons in September 2016, according to the Ministry of Internal Affairs. Number of tourists (overnight visitors) continues to increase at double-digit rates (+34.2% y/y). A drop in arrivals from Turkey (-21.4% y/y, 17.2% of total) had the largest negative effect on total arrivals in September. Meanwhile, visitor numbers continue to increase from Russia (+31.3% y/y), Azerbaijan (+7.6% y/y), Armenia (+4.2% y/y), and Ukraine (+28.1% y/y). In 9M16, the number of total arrivals is up 8.6% y/y to 4.88mn persons, while the number of overnight visitors has increased 19.8% y/y.

Inflation rate at 0.1% y/y and 0.3% m/m in September 2016 

The annual CPI inflation rate retreated to 0.1% y/y in September 2016 from 0.9% in the previous month, while core inflation was at 1.5% y/y, according to GeoStat. Overall price changes were driven by price increases in alcoholic beverages and tobacco (+11.2% y/y, +0.69ppts), and restaurants and hotels (+4.8% y/y, +0.20ppts). Meanwhile, prices in the transport category decreased (-7.8% y/y, -0.92ppts), as prices were down for purchase of vehicles and for operation of personal transport equipment. 

On a monthly basis, inflation rate was at 0.3% in September 2016. Price increases in food and non-alcoholic beverages (+0.9% m/m, +0.30ppts) and housing, water, electricity, gas and other fuels (+0.8% m/m, +0.07ppts) and a price decrease in the transport category (-1.0% m/m, -0.12ppts) were the major drivers of monthly inflation dynamics.

NBG sold US$ 60mn

Last week, NBG intervened on the FX market 2 times and sold US$ 60mn, aimed at curbing fluctuation of the national currency. Overall, NBG bought total of US$ 278mn and sold US$ 200mn at 22 interventions YTD. GEL weakened 0.7% w/w and strengthened 2.9% YTD against the US$.

International reserves down 1.0% m/m in September 2016 

Gross international reserves decreased 1.0% m/m (-US$ 30.2mn) and increased 16.0% y/y (+US$ 393.9mn) to US$ 2.86bn as of end-September 2016, according to NBG. The decrease in reserves was attributed to NBG’s FX interventions and operations with commercial banks.

Property registration up 39.8% y/y in August 2016 

Property registration (commercial and residential real estate) increased 39.8% y/y (+10.1% m/m), reaching 56,496 units in August 2016, according to the National Agency of Public Registry. Registration increased for primary (+109.6% y/y, 27.7% of total), as well as secondary (+24.0% y/y, 72.3% of total) properties

Company registration up 40.7% y/y in August 2016 

In August 2016, company registration increased 40.7% y/y (+5.5% m/m) to 4,001 units, according to the National Agency of Public Registry. Out of newly registered companies, 95.5% were business legal entities, while 4.5% comprised non-entrepreneurial (non-commercial) legal entities. 

M2 bond issuance

Development company, M2 completed its fourth successful issuance of US$ 25mn bonds on October 7, 2016. 

Fixed income

Corporate Eurobonds: Bank of Georgia Eurobonds (BGEOLN) closed at 5.4% yield, trading at 103.6 (-0.2% w/w).  GOGC’s Eurobonds (GEOROG 05/17) were trading at 101.7 (-0.2% w/w), yielding 4.0% and (GEOROG 04/21) were trading at 105.4 (-0.1% w/w), yielding 5.4%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 112.6 (-0.3% w/w), yielding 5.2%. 

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

Development company, M2 completed its fourth successful issuance of US$ 25mn bonds on October 7, 2016. The bonds offer 7.5% coupon p.a. payable semi-annually with the maturity of three years. This is the largest, US$-denominated, local bonds issuance among the Georgian companies. Galt & Taggart served as the sole placement agent.

Equities

BGEO Group (BGEO LN) shares closed at GBP 30.43/share (+4.79% w/w and +1.30% m/m). More than 270k shares traded in the range of GBP 29.27 – 31.91/share. Average daily traded volume was 55k in the last 4 weeks, less than in the previous month. FTSE 250 Index, of which BGEO is a constituent, gained 0.67% w/w and lost 0.38% m/m. The volume of BGEO shares traded was at 0.68% of its capitalization. 

 TBC Bank Group (TBCG LN) closed the week at GBP 12.65 (-0.39% w/w and +17.40% m/m). More than 1,965k shares changed hands in the range of GBP 12.30 – 12.85/share. 

Georgia Healthcare Group (GHG LN) shares closed at GBP 3.18/share (+7.35% w/w and +6.09% m/m). More than 130k shares were traded in the range of GBP 3.00 – 3.18/share. Average daily traded volume was 21k in the last 4 weeks. The volume of GHG shares traded was at 0.10% of its capitalization.

Money Market

Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL 1,150mn (US$ 492.7mn).

Certificates of deposit: NBG sold 91-day, GEL 20mn (US$ 8.6mn) certificates of deposit, with an average yield of 6.45% (unchanged from previous issue).

Ministry of Finance Treasury Notes: 2-year GEL 33mn (US$ 14.1mn) T-Notes of Ministry of Finance were sold at the auction held at NBG on October 5, 2016. The weighted average yield was fixed at 6.765%. The nearest treasury securities auction is scheduled for October 12, 2016, where GEL 10mn nominal value 1-year T-Bills will be sold.