Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

Weekly Market Watch by Galt & Taggart

The FINANCIAL -- Economy

Real GDP growth was 3.7% y/y in November 2017

Georgia’s economy expanded 3.7% y/y in November 2017, according to GeoStat’s rapid estimates. Overall, in 11M17 real GDP growth was 4.8% y/y (growth was 2.4% y/y in 11M16). In November 2017, the growth was recorded in hotels and restaurants, real estate operations, trade and transport sectors, while growth was down in construction and manufacture of food products and basic metals. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.

Current account deficit stood at 2.9% of GDP in 3Q17

Current account deficit narrowed to 2.9% of GDP in 3Q17 from 8.6% of GDP in 3Q16, decreasing 63.6% y/y in nominal terms to US$ 120.4mn, according to NBG. Merchandize trade deficit, traditionally the major contributor to deficit creation, decreased 1.4% y/y to US$ 984.2mn, as exports increased 19.4% y/y, while imports were up 7.7% y/y. Positive balance in services was up 27.7% y/y to US$ 857.9mn. Among services, tourism had the largest positive balance, increasing 31.0% y/y to US$ 929.0mn (11.0% of GDP). Net current transfers, the second largest positive item of the current account, were up 9.2% y/y to US$ 281.0mn. Net FDI, significant item for financing the current account deficit, amounted to US$ 525.6mn (6.2% of GDP, up 75.4% y/y).

Inflation was 6.7% y/y and 0.8% m/m in December 2017

The annual CPI inflation was 6.7% in December 2017 down from 6.9% inflation in previous month, according to GeoStat. Core inflation was 4.7% in December compared to 5.1% in previous month. Annual price changes were driven by price increases in food and non-alcoholic beverages (+7.3% y/y, +2.2ppts), transport (+14.9% y/y, +1.94ppts), and alcoholic beverages and tobacco (+17.5% y/y, +1.12ppts) categories. On a monthly basis, there was 0.8% inflation in December 2017. Price increases in food and non-alcoholic beverages (+1.4% m/m, +0.42ppts) and transport (+1.5% m/m, +0.2ppts) categories were the major drivers of monthly Inflation dynamics.

NPLs at 3.4% in November 2017

In November 2017, the banking sector loan portfolio increased 16.2% y/y after growing 16.6% y/y in previous month, excluding the exchange rate effect. In unadjusted terms, loan portfolio was up 24.1% y/y and 5.0% m/m to GEL 22.1bn (US$ 8.1bn). Deposits were up 17.6% y/y excluding the exchange rate effect. In unadjusted terms, deposits were up 23.4% y/y and up 4.9% m/m to GEL 19.9bn (US$ 7.3bn). Deposit dollarization reached 67.5% (-3.7ppts y/y and +1.1ppts m/m). NPLs stood at 3.4% in November 2017 (-0.5ppts y/y and +0.1ppts m/m).

Fixed income

Corporate Eurobonds: BGEO Group Eurobonds (BGEOLN) closed at 4.9% yield, trading at 105.2 (+0.8% w/w). Bank of Georgia GEL-denominated Eurobonds (GEBGG) were trading at 100.5 (unchanged w/w), yielding 10.7%. GOGC Eurobonds (GEOROG) were trading at 107.9 (+0.3% w/w), yielding 4.2%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 112.7 (+0.3% w/w), yielding 4.6%.

Georgian Sovereign Eurobonds (GEORG) closed at 112.1 (-0.2% w/w) at 3.0% yield to maturity. Georgia Eurobonds, YTM (%)

Equities

BGEO Group (BGEO LN) shares closed at GBP 36.32/share (+2.11% w/w and +9.33% m/m). More than 194k shares traded in the range of GBP 34.72 – 36.50/share. Average daily traded volume was 42k in the last 4 weeks. FTSE 250 Index, of which BGEO is a constituent, gained 0.84% w/w and gained 5.18 m/m. The volume of BGEO shares traded was at 0.49% of its capitalization.

TBC Bank Group (TBCG LN) closed the week at GBP 16.74 (-4.34% w/w and +0.72% m/m). More than 37k shares changed hands in the range of GBP 16.20 – 17.66 share. Averaged daily traded volume was 13k in the last 4 weeks.

Georgia Healthcare Group (GHG LN) shares closed at GBP 3.58/share (+0.85% w/w and +2.03% m/m). More than 39k shares were traded in the range of GBP 3.45 – 3.60/share. Average daily traded volume was 10k 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 1,190mn (US$ 459.4mn).

Certificates of deposit: NBG sold 91-day, GEL 20mn (US$ 7.8mn) certificates of deposit, with an average yield of 7.33% (up 0.24ppts from previous issue).

Ministry of Finance Treasury Bills:

91-days GEL 40.0mn (US$ 15.4mn) T-Bills of Ministry of Finance were sold at the auction held at NBG on January 3, 2018. The weighted average yield was fixed at 7.443%. The nearest treasury security auction is scheduled for January 10, 2018, where GEL 40.0mn nominal value 2-year T-Notes and GEL 20.0mn nominal value 182-days T-Bills will be sold.