Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy

Real GDP up 1.5% y/y in September 2016 

Georgia’s economy expanded 1.5% y/y in September 2016, after growing 2.9% y/y in the previous month, according to GeoStat’s rapid estimates. As a result, output growth averaged 2.6% y/y in 9M16. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.

Tourist arrivals up 20.9% y/y in October 2016 

Total international arrivals to Georgia increased 4.5% y/y to 0.5mn visitors in October 2016, according to the Ministry of Internal Affairs. Arrival growth was solely driven by surge in tourist arrivals increasing 20.9% y/y to 0.2mn persons in October 2016 after growing 34.2% y/y in previous month. As a result, share of tourists in total international arrivals was up 5.5ppts to 40.9% of total. Out of top countries by arrivals, in October 2016 visitors continued to increase from Azerbaijan (+10.1% y/y), Russia (+13.0% y/y), Ukraine (+15.8% y/y), and Iran (+344.3%), while arrivals were down from Armenia (-2.1% y/y) and Turkey (-16.6% y/y). Arrivals from EU were up 20.8% y/y. In 10M16, the number of total international arrivals was up 8.1% y/y to 5.4mn persons, while the number of tourists increased 19.7% y/y to 2.4mn persons.

Inflation rate at -0.2% y/y and 0.5% m/m in October 2016 

The annual inflation fell below zero at -0.2% in October 2016 after 0.1% inflation in previous month, according to GeoStat. Core inflation also retreated to 0.9% in October from 1.5% in previous month. Overall price changes were driven by price decreases in transport (-6.7% y/y, -0.79ppts) and furnishings, household equipment and maintenance (-3.9% y/y, -0.25ppts) categories. Meanwhile, prices were up for alcoholic beverages and tobacco (+10.9% y/y +0.67ppts). 

On a monthly basis, inflation rate was 0.5% in October 2016. Price increases in food and non-alcoholic beverages (+0.7% m/m, +0.22ppts), health (+2.0% m/m, +0.20ppts), and clothing and footwear (+3.0% m/m, +0.08ppts) were the major drivers of monthly inflation dynamics.

Tax revenues up 8.5% y/y in October 2016 

Consolidated budget tax revenues were up 8.5% y/y to GEL 669.1mn in October 2016. In 10M16, consolidated budget tax revenues stood at GEL 7.1bn (+9.5% y/y) and accounted for 82.3% of annual tax revenue plan.

Fixed income

Corporate Eurobonds: Bank of Georgia Eurobond (BGEOLN) closed at 5.5% yield, trading at 102.6 (-0.5% w/w).  GOGC Eurobonds - GEOROG 05/17 traded at 101.6 (-0.1% w/w), yielding 3.7% and GEOROG 04/21 traded at 105.3 (-0.1% w/w), yielding 5.4%. Georgian Railway Eurobond (GRAIL) traded at a premium at 111.8 (-0.4% w/w), yielding 5.3%. 

Georgian Sovereign Eurobond (GEORG) closed at 111.8 (-0.2% w/w) at 3.9% yield to maturity.

Equities

BGEO Group (BGEO LN) shares closed at GBP 29.03/share (-2.65% w/w and -4.38% m/m). More than 304k shares traded in the range of GBP 28.79 – 29.94/share. Average daily traded volume was 43k in the last 4 weeks, more than in the previous month. FTSE 250 Index, of which BGEO is a constituent, lost 2.09% w/w and lost 5.81% 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 13.03 (+1.29% w/w and +3.37% m/m). More than 61k shares changed hands in the range of GBP 12.71 – 13.25/share. Averaged daily traded volume was 27k in the last 4 weeks.  

Georgia Healthcare Group (GHG LN) shares closed at GBP 3.50/share (-2.78% w/w and +11.11% m/m). More than 43k shares were traded in the range of GBP 3.45 – 3.55/share. Average daily traded volume was 24k in the last 4 weeks. The volume of GHG shares traded was at 0.03% of its capitalization.

Money Market

Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL 1,250mn (US$ 516.6mn).

Certificates of deposit: NBG sold 91-day, GEL 20mn (US$ 8.3mn) certificates of deposit, with an average yield of 6.62% (up by 17bps from previous issue).

Ministry of Finance Treasury Notes: 2-year GEL 45mn (US$ 18.7mn) T-Notes of Ministry of Finance were sold at the auction held at NBG on November 2, 2016. The weighted average yield was fixed at 7.216%. The nearest treasury securities auction is scheduled for November 9, 2016, where GEL 50mn nominal value 1-year T-Bills will be sold.