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 4.7% y/y in December 2017

Georgia’s economy expanded 4.7% y/y in December 2017, according to GeoStat’s rapid estimates. Real GDP growth was 4.7% y/y in 4Q17 (5.7% in October, 3.7% in November and 4.7% in December) and 4.8% y/y for the entire 2017. In December 2017, the growth was recorded in social and personal services, healthcare, hotels and restaurants and manufacturing, while growth was down in electricity, gas and water supply, communication, transport and construction sectors. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.

Inflation was 4.3% y/y and 0.6% m/m in January 2018

The annual CPI inflation retreated to 4.3% in January 2018 from 6.7% inflation in previous month, according to GeoStat. Core inflation was also down to 3.0% in January from 4.7% in previous month. Annual price changes were driven by price increases in food and non-alcoholic beverages (+4.7% y/y, +1.44ppts), transport (+6.6% y/y, +0.91ppts), and alcoholic beverages and tobacco (+11.5% y/y, +0.75ppts) categories. On a monthly basis, there was 0.6% inflation in January 2018. Price increases in food and non-alcoholic beverages (+1.7% m/m, +0.52ppts) and housing, water, electricity, gas and other fuels (+2.7% m/m, +0.21ppts) and price decrease in clothing and footwear (-2.1% m/m, -0.08ppts) categories were the major drivers of monthly Inflation dynamics.

NBG keeps its policy rate unchanged at 7.25%

At its meeting on 31 January 2018, NBG’s monetary policy committee decided to keep its policy rate at 7.25%. NBG noted that despite recent appreciation of the nominal effective exchange rate, the effect of its recent depreciation on inflation persists. Inflation was above the 4.0% target in 2017 and came in at 6.7% in December 2017, mostly driven by one-off factors. NBG, however, anticipates that the annual inflation rate will decrease in the first months of 2018, and remain close the target rate of 3.0% during 2018. The next committee meeting is scheduled for 14 March 2018.

Fixed income

Corporate Eurobonds: BGEO Group Eurobonds (BGEOLN) closed at 5.0% yield, trading at 104.9 (unchanged 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 107.2 (-0.4% w/w), yielding 4.3%. Georgian Railway Eurobonds (GRAIL) traded at a premium at 112.1 (-0.4% w/w), yielding 4.7%.

Georgian Sovereign Eurobonds (GEORG) closed at 109.7 (-0.4% w/w) at 3.6% yield to maturity. Georgia Eurobonds, YTM (%)

Equities

BGEO Group (BGEO LN) shares closed at GBP 36.98/share (-2.53% w/w and +3.96% m/m). More than 354k shares traded in the range of GBP 36.56 – 37.70/share. Average daily traded volume was 73k in the last 4 weeks. FTSE 250 Index, of which BGEO is a constituent, lost 1.45% w/w and lost 1.71% m/m. The volume of BGEO shares traded was at 0.65% of its capitalization.

TBC Bank Group (TBCG LN) closed the week at GBP 16.02 (-8.25% w/w and -8.46% m/m). More than 84k shares changed hands in the range of GBP 15.68 – 17.24 share. Averaged daily traded volume was 15k in the last 4 weeks.

Georgia Healthcare Group (GHG LN) shares closed at GBP 3.22/share (-6.67% w/w and -9.30% m/m). More than 38k shares were traded in the range of GBP 3.20 – 3.44/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 987.5mn (US$ 395.6mn).

Ministry of Finance Treasury Notes:

The nearest treasury security auction is scheduled for February 7, 2018, where GEL 40.0mn nominal value 1-year T-Bills will be sold.