Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy

NBG increases its policy rate by 25 basis points to 6.75%

At its meeting on 25 January 2017, NBG’s monetary policy committee increased the policy rate by 25 basis points to 6.75% and announced to gradually increase the key rate to 7% in the course of the next two quarters. As NBG cited, decision was based on increased inflation expectations. Annual inflation was 1.8% in December 2016 but NBG expects further rise in prices due to one-off factors – increase in excise taxes and exchange rate fluctuations. NBG cited that the inflation rate expected to be above target of 4.0% in 2017, despite weak demand. NBG expects the inflation rate to decrease in 2018 and remain below the 3.0% target. The next committee meeting is scheduled for March 7, 2017.

NPLs at 3.4% y/y in December 2016

In December 2016, the banking sector loan portfolio increased 10.7% y/y after growing 9.5% y/y in previous month, excluding the exchange rate effect. In unadjusted terms, loan portfolio was up 18.1% y/y and 6.0% m/m to GEL 18.9bn (US$ 7.1bn). Deposits were up 10.2% y/y excluding the exchange rate effect. In unadjusted terms, deposits were up 18.4% y/y and up 5.2% m/m to GEL 17.0bn (US$ 6.4bn), and deposit dollarization reached 71.4% (+1.9ppts y/y and +0.2.0ppts m/m). NPLs stood at 3.4% in December 2016, up 0.7ppts y/y and down 0.6ppts m/m.

Fixed income

Corporate Eurobonds: Bank of Georgia Eurobond (BGEOLN) closed at 5.7% yield, trading at 101.6 (unchanged w/w).  GOGC Eurobonds - GEOROG 05/17 traded at 100.5 (-0.2% w/w), yielding 5.1% and GEOROG 04/21 traded at 105.6 (unchanged w/w), yielding 5.3%. Georgian Railway Eurobond (GRAIL) traded at a premium at 109.4 (+0.1% w/w), yielding 5.7%. 

Georgian Sovereign Eurobond (GEORG) closed at 111.0 (+0.1% w/w) at 4.0% yield to maturity.

Equities

BGEO Group (BGEO LN) shares closed at GBP 28.88/share (+3.44% w/w and -2.83% m/m). More than 1,113k shares traded in the range of GBP 27.55 – 29.02/share. Average daily traded volume was 144k in the last 4 weeks, more than in the previous month. FTSE 250 Index, of which BGEO is a constituent, gained 0.22% w/w and gained 1.19% m/m. The volume of BGEO shares traded was at 2.82% of its capitalization.

 TBC Bank Group (TBCG LN) closed the week at GBP 14.99 (+0.81% w/w and +3.38% m/m). More than 249k shares changed hands in the range of GBP 14.38 – 15.00/share. Averaged daily traded volume was 33k in the last 4 weeks.

Georgia Healthcare Group (GHG LN) shares closed at GBP 3.57/share (+0.74% w/w and -2.86% m/m). More than 13k shares were traded in the range of GBP 3.40 – 3.50/share.  Average daily traded volume was 17k in the last 4 weeks. The volume of GHG shares traded was at 0.01% of its capitalization.

Money Market

Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL 1,160mn (US$ 430.9mn).

Certificates of deposit: NBG sold 91-day, GEL 20mn (US$ 7.4mn) certificates of deposit, with an average yield of 6.82% (down by 15bps from previous issue).

Ministry of Finance Treasury Bills: 5-year GEL 20.0mn (US$ 7.4mn) T-notes of Ministry of Finance were sold at the auction held at NBG on January 25, 2017. The weighted average yield was fixed at 8.938%. The nearest treasury security auction is scheduled for February 1, 2017, where GEL 40.0mn nominal value 1-year T-bills will be sold.