Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy

Real GDP grew 4.7% y/y in 2Q17

Georgia’s 2Q17 GDP growth was revised upward to 4.7% y/y from 4.0% y/y rapid estimate figure by GeoStat. As a result, 1H17 growth came in at 4.9% y/y compared to 3.0% y/y growth in 1H16. Construction was the fastest growing sector in 2Q17 expanding by 16.4% y/y, followed by hotels and restaurants (+12.9% y/y) and mining (+7.4% y/y). Declines were only posted in agriculture (-2.4% y/y) and electricity, gas and water production (-0.9% y/y) sectors.

Exports up 25.6% y/y in August 2017

In August 2017, exports increased 25.6% y/y to US$ 236.1mn, imports were up 1.2% y/y to US$ 699.7mn and the trade deficit narrowed 8.0% y/y to US$ 463.6mn, according to GeoStat. Overall in 8M17, the trade deficit was down 0.9% y/y at US$ 3.3bn as exports were up 28.5% to US$1.7bn, while imports increased 7.5% to US$ 4.9bn.

Increased exports of ferro-alloys (+134.1% y/y), cars (+22.6% y/y), wine (+58.1% y/y) and pharmaceuticals (+65.0% y/y) were the major commodities driving export growth in August 2017. In contrast copper exports were down 7.5% y/y.

Petroleum (+23.4% y/y), copper (+54.7% y/y), cars (-32.8% y/y), pharmaceuticals (+12.8% y/y) and phones (+27.3% y/y) represented the top 5 imported commodities in August 2017.

Producer price index up 0.8% m/m and up 11.5% y/y in August 2017

PPI for industrial goods was up 0.8% m/m in August 2017, according to GeoStat. A 0.6% price increase for manufacturing contributed the most to the overall index change as prices were up for manufacture of basic metals and fabricated metal products (+5.2% m/m) and chemicals and chemical products (+4.0% y/y), while prices were down for food, beverages and tobacco (-1.0% m/m).

Annual PPI was up 11.5% in August 2017. Rising prices in manufacturing (+11.4% y/y) contributed the most to the overall index change. Prices were also up for supply of electricity, gas and water (+10.1% y/y) and for mining and quarrying (+18.0% y/y).

Fixed income

Corporate Eurobonds: BGEO Group Eurobonds (BGEOLN) closed at 5.3% yield, trading at 103.3 (-0.3% w/w). Bank of Georgia GEL-denominated Eurobonds (GEBGG) were trading at 100.0 (unchanged w/w), yielding 11.0%. GOGC Eurobonds (GEOROG) were trading at 107.0 (+0.3% w/w), yielding 4.6%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 112.4 (+0.4% w/w), yielding 4.8%.
Georgian Sovereign Eurobonds (GEORG) closed at 112.7 (+0.1% w/w) at 3.1% yield to maturity. Georgia Eurobonds, YTM (%)

Equities

BGEO Group (BGEO LN) shares closed at GBP 32.90/share (-0.21% w/w and -4.89% m/m). More than 205k shares traded in the range of GBP 32.47 – 33.24/share. Average daily traded volume was 56k in the last 4 weeks. FTSE 250 Index, of which BGEO is a constituent, gained 0.72% w/w and lost 1.18% m/m. The volume of BGEO shares traded was at 0.52% of its capitalization.

TBC Bank Group (TBCG LN) closed the week at GBP 16.39 (+0.43% w/w and +5.20% m/m). More than 311k shares changed hands in the range of GBP 16.00 – 17.01/share. Averaged daily traded volume was 32k in the last 4 weeks.

Georgia Healthcare Group (GHG LN) shares closed at GBP 3.20/share (-4.48% w/w and -5.88% m/m). More than 209k shares were traded in the range of GBP 3.15 – 3.40/share. Average daily traded volume was 22k in the last 4 weeks. The volume of GHG shares traded was at 0.16% of its capitalization.

Money Market

Refinancing loans: National Bank of Georgia (NBG) issued 7-day refinancing loans of GEL 1,050mn (US$ 423.8mn).

Ministry of Finance Treasury Bills:

182-days GEL 20.0mn (US$ 8.1mn) T-Bills of Ministry of Finance were sold at the auction held at NBG on September 13, 2017. The weighted average yield was fixed at 7.119%. The nearest treasury security auction is scheduled for September 27, 2017, where GEL 20.0mn nominal value 5-year T-Notes will be sold.