Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy -- Inflation was 3.1% y/y and 0.5% m/m in August 2018

Annual CPI inflation was 3.1% in August 2018 up from 2.8% in July 2018, according to GeoStat. Core inflation was up to 1.5% from 1.4% in previous month. Annual price changes were driven by price increases in transport (+7.8% y/y, +1.04ppts), food and non-alcoholic beverages (+3.2% y/y, +0.96ppts) and healthcare (+5.2% y/y, +0.44ppts) categories. On a monthly basis, there was 0.5% inflation in August 2018. Price increase in food and non-alcoholic beverages (+1.5% m/m, -0.44ppts) was the major driver of monthly inflation dynamics.

Tourist arrivals up 13.9% y/y in August 2018

Total international visits to Georgia increased 10.7% y/y to 1.04mn visitors in August 2018, according to the Ministry of Internal Affairs. A 13.9% y/y growth in tourist arrivals (0.74mn trips, 70.8% of total) drove the international visit growth. Out of top countries by visitors, in August 2018, international visitors continued to increase from Russia (+15.8% y/y), Azerbaijan (+13.3% y/y) and Turkey (+24.4% y/y), while visitors were down from Armenia (-5.7% y/y) and Iran (-24.4% y/y).

International reserves down 0.1% y/y in August 2018

Gross international reserves were down 0.1% y/y and down 0.5% m/m to US$ 2.9bn in August 2018, according to NBG. The NBG purchased US$ 17.5mn on its auction in August, 2018. However, the change in reserves was attributed to government FX operations and/or asset revaluation.

NBG keeps monetary policy rate unchanged at 7.0%

At its meeting on 5 September 2018, NBG’s monetary policy committee decided to keep its key rate unchanged at 7.0%. Inflation was 3.1% in August, slightly above the 3.0% target. Mainly, the decision takes into account the increased macroeconomic risks due to high volatility on financial markets in the region. However, even if the risks are realized, a significant deviation of inflation from its target is not expected. The next committee meeting is scheduled for 24 October 2018.

Fixed income

Corporate Eurobonds: Bank of Georgia Group Eurobonds (GEBGG) closed at 6.4% yield, trading at 98.3 (-0.7% w/w). Bank of Georgia GEL-denominated Eurobonds (GEBGG) were trading at 100.5 (unchanged w/w), yielding 10.7%. Georgia Capital Eurobonds (GEOCAP) were trading at 92.1 (-1.0% w/w), yielding 7.9%.

GOGC Eurobonds (GEOROG) were trading at 103.1 (+1.3% w/w), yielding 5.5%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 106.0 (+0.9% w/w), yielding 6.0%.

Georgian Sovereign Eurobonds (GEORG) closed at 105.3 (-0.3% w/w) at 4.7% yield to maturity. Georgia Eurobonds, YTM (%)

Equities

Bank of Georgia Group (BGEO LN) shares closed at GBP 17.03/share (+3.01% w/w and -5.40% m/m). More than 200k shares traded in the range of GBP 16.72 – 17.45/share. Average daily traded volume was 52k in the last 4 weeks. FTSE 250 Index, of which BGEO is a constituent, lost 2.61% w/w and lost 2.55% m/m. The volume of BGEO shares traded was at 0.41% of its capitalization.

Georgia Capital (CGEO LN) shares closed at GBP 10.28/share (+0.12% w/w and +2.70% m/m). More than 231k shares traded in the range of GBP 9.71 – 10.20/share. Average daily traded volume was 67k in the last 4 weeks. The volume of CGEO shares traded was at 0.60% of its capitalization.

TBC Bank Group (TBCG LN) closed the week at GBP 15.84 (-1.00% w/w and -7.91% m/m). More than 119k shares changed hands in the range of GBP 15.72 – 16.44/share. Average daily traded volume was 23k in the last 4 weeks. The volume of TBCG shares traded was at 0.22% of its capitalization.

Georgia Healthcare Group (GHG LN) shares closed at GBP 2.31/share (+0.43% w/w and -13.48% m/m). More than 36k shares were traded in the range of GBP 2.14 – 2.35/share. Average daily traded volume was 36k in the last 4 weeks. The volume of GHG shares traded was at 0.08% of its capitalization. BGEO Group PLC (BGEO LN)

Money Market

Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL 1,140mn (US$ 435.7mn).

Certificates of deposit: NBG sold 91-day, GEL 20mn (US$ 7.6mn) certificates of deposit, with an average yield of 7.14% (up 0.01ppts from previous issue).

Ministry of Finance Treasury Bills:

1-year GEL 40.0mn (US$ 15.5mn) T-Bills of Ministry of Finance were sold at the auction held at NBG on September 5, 2018. The weighted average yield was fixed at 7.115%. The nearest treasury security auction is scheduled for September 12, 2018, where GEL 40.0mn nominal value 2-year T-Notes and GEL 20.0mn nominal value 182-days T-Bills will be sold.