LEBANON WEEKLY MONITOR MAY 31 - JUNE 6, 2021 WEEK 23
______Economy p.2 A 38% DROP IN AVERAGE BDL COINCIDENT INDICATOR IN 2020 BDL’s coincident indicator, a cyclical indicator for Lebanon’s economic activity and which aggregates CONTACTS a number of real sector indicators, has reported 173.9 in December 2020, or an average of 180.2 in the Treasury & Capital Markets year 2020, contracting by 38.4% relative to the year 2019.
Bechara Serhal Also in this issue (961-1) 977421 p.3 Merchandise at Port of Beirut up by 13% in first four months of 2021 [email protected] p.3 Value of cleared checks down by 22% in the first five months of 2021 Private Banking p.4 Tripoli Port revenues improve by 158% year-on-year in March 2021
Toufic Aouad (961-1) 954922 ______Surveys [email protected] p.5 LEBANON'S FINANCIAL CRISIS LIKELY TO RANK IN THE TOP 10, POSSIBLY THREE, MOST Corporate Banking SEVERE CRISES EPISODES GLOBALLY SINCE 1900, AS PER THE WORLD BANK The World Bank recently issued its Lebanon Economic Monitor which provides an update on key Carol Ayat economic developments and policies over the past six months. (961-1) 959675 [email protected] Also in this issue Marketing and Communications p.6 Lebanon is regionally uncompetitive with regard to labor market risks due to a host of issues, as per Fitch Solutions Jean Traboulsi (961- 1) 977350 [email protected] ______Corporate News p.7 BLC BANK’S NET PROFITS AT US$ 2.7 MILLION IN THE FIRST QUARTER OF 2021 BLC Bank announced net profits of US$ 2.7 million in 1Q 2021, according to its latest release. Net interest income reached US$ 25.3 million in 1Q 2021, as per a statement by the bank.
Also in this issue RESEARCH p.7 Sputnik V vaccine to be produced locally by Arwan p.8 Cedar Oxygen approved 22 grants valued at US$ 45 million Marwan Barakat p.8 Glenbey first Scotch bottled and finalized locally (961-1) 977409 p.8 TerraTrue start-up fundraised US$ 15 million in Series A [email protected]
Salma Saad Baba ______Markets In Brief (961-1) 977346 [email protected] p.9 MARKETS IN BRIEF: LP DOWN BY 4% AGAINST US DOLLAR ON BLACK FX MARKET AMID RISING POLITICAL TENSIONS OVER CABINET Farah Nahlawi Amid deepened monthslong cabinet crisis and calls to make a breakthrough in the cabinet formation process (961-1) 959747 to secure international aid and pave the way for long-overdue reforms, and with the start of FX activity on [email protected] the new “Sayrafa” platform while BDL’s FX reserves continued their nosedive, Lebanon’s capital markets saw this week a deterioration in the LP rate against the US dollar on the black FX market, while the equity and Zeina Labban bond markets registered shy price declines. In details, the LP/US$ rate rose by 4% this week, reaching LP/US$ (961-1) 952426 13,450-LP/US$ 13,500 on Friday, while BDL’s liquid FX reserves fell below the US$ 16 billion level, which is [email protected] merely equivalent to banks’ FX required reserves at BDL. Within this context, it is worth mentioning that total FX operations on “Sayrafa” amounted to US$ 10 million this week, at a rate of LP/US$ 12,200. On the bond Michele Sakha market, activity was mostly skewed to the downside in relatively light volumes, while prices ranged between (961-1) 977102 12.63 and 14.0 cents per US dollar on Friday. On the equity market, the BSE registered shy price retreats of [email protected] 0.3%, while the total turnover contracted by 20% week-on-week.
LEBANON MARKETS: MAY 31 - JUNE 6, 2021
Money Market BSE Equity Market LP Tbs Market Eurobond Market ⬇ LP Exchange Market CDS Market - ⬌⬆ ⬇ Week 23 May 31 - June 6, 2021 ⬇ 1 Bank Audi sal - Group Research Department - Bank Audi Plaza - Bab Idriss - PO Box 11-2560 - Lebanon - Tel: 961 1 994 000 - email: [email protected] MAY 31 - JUNE 6, 2021 WEEK 23
ECONOMY ______A 38% DROP IN AVERAGE BDL COINCIDENT INDICATOR IN 2020
BDL’s coincident indicator, a cyclical indicator for Lebanon’s economic activity and which aggregates a number of real sector indicators, has reported 173.9 in December 2020, or an average of 180.2 in the year 2020, contracting by 38.4% relative to the year 2019. Comparatively, the average coincident indicator had grown by 0.4% over the previous three years and by 1.5% over the previous five years.
It was normal that the severe economic crisis that erupted since the last quarter of 2019, the State’s default on its foreign debt in the first quarter of 2020, the Covid-19 Pandemic crisis which left the country in a lockdown over several weeks starting the second quarter of 2020, the devastating Beirut Port explosion in the third quarter, and the domestic political crisis since the fourth quarter all are factors that weighed and continue to weigh on economic activity, generating real sector sluggishness, monetary and financial drifts and significant socio-economic pressures on households.
Within this environment, the IMF had estimated Lebanon growth at a -25% real contraction in the year 2020. GDP has actually contracted from US$ 52 billion to US$ 19 billion, a nominal contraction of 64%, of which a 25% contraction in real GDP and a 39% decrease in prices of goods and services in US$. As a result, income per capita in Lebanon declined from US$ 7,660 in 2019 (ranking 85th in the World out of 192 countries) to US$ 2,745 in 2020 (ranking 135th), with 50 countries surpassing Lebanon in terms of socio-economic conditions in one year.
For 2021, IMF forecasted Lebanon’s growth at –9%. According to the IMF, Lebanon is the only country in the region where activity is expected to contract further, reflecting the deep economic and financial crisis that has been worsened by the pandemic’s second wave. Likewise, the World Bank forecasted growth at -9.5% for 2021, on the back of a 20% contraction in 2020, as per World Bank estimates.
The evolution of real sector indicators this year is actually a mirror image of a further contracting economy. Among the indicators that reported negative growth over the first four months of 2021, we mention the new car sales with a decline of 62.6%, the number of passengers at the Airport with a contraction of 35.2%, the value of cleared checks with a drop of 27.3% and the construction permits with a fall of 36.0% . The indicator with positive growth was Port activity, with the merchandise at the Port of Beirut reporting an expansion of 12.4% year-on-year and the value of property sales with a rise of 36.6% year-on-year.
BDL COINCIDENT INDICATOR
Monthly Monthly Y.o.Y varia- YTD variation Average YTD Average an- Indicator Variation tion Indicator nual variation Dec-19 265.9 -3.0% -11.6% -11.6% 292.6 -4.9% Jan-20 259 -2.6% -12.5% -2.6% 259.0 -12.5% Feb-20 258.3 -0.3% -13.3% -2.9% 258.7 -12.9% Mar-20 199.7 -22.7% -35.5% -24.9% 239.0 -20.6% Apr-20 172.5 -13.6% -45.4% -35.1% 222.4 -27.1% May-20 162.8 -5.6% -45.3% -38.8% 210.5 -30.6% Jun-20 152.8 -6.1% -47.9% -42.5% 200.9 -33.4% Jul-20 151.6 -0.8% -50.2% -43.0% 193.8 -35.8% Aug-20 144.3 -4.8% -50.5% -45.7% 187.6 -37.6% Sep-20 157.8 9.4% -44.5% -40.7% 184.3 -38.3% Oct-20 165.2 4.7% -41.2% -37.9% 182.4 -38.6% Nov-20 164.5 -0.4% -40.0% -38.1% 180.8 -38.7% Dec-20 173.8 5.7% -34.6% -34.6% 180.2 -38.4%
Sources: BDL, Bank Audi's Group Research Department
Week 23 May 31 - June 6, 2021 2 MAY 31 - JUNE 6, 2021 WEEK 23
______MERCHANDISE AT PORT OF BEIRUT UP BY 13% IN FIRST FOUR MONTHS OF 2021
The latest statistics released by the Port of Beirut revealed a 6.2% decline in the Port’s revenues in the first four months of 2021 compared to the same quarter of the previous year. The Port’s revenues actually reached US$ 35.4 million in the first four months of 2021.
In parallel, the number of containers registered an annual increase of 16.8% in the first four months of 2021 against same period in 2020 to attain 155,625 in the first four months of 2021. However, the number of ships revealed a fall of 18.4% year-on-year to reach 418 vessels in the first four months in 2021. The quantity of goods rose by a yearly 12.8% to 1,662 tons in the first four months of 2021, following a fall of 37.3% reported in the same period of 2020.
Transshipments contracted by 70.8% year-on-year to attain 47,950 containers in the first four months of 2021, following a rise of 13.8% in the corresponding period of 2020.
ACTIVITY OF THE PORT OF BEIRUT
u e an e an e nna e
2, 2 2, 3000 2,6 2, 2 00 2,3 0
2000 1,662 1, 1 00
LEBANON'S1000 REAL ESTATE MARKET 6 61 61 6 63 12 00 1
0 4M-15 4M-16 4M-17 4M-18 4M-19 4M-20 4M-21 u e Me an e nna e 000 n
u e n a ne an a e enue
300 2 2 2 2 26 2 2 0 226
200 1 6 1 0 133
100 6 1 2 2 3 6 3 3 0 3
0 4M-15 4M-16 4M-17 4M-18 4M-19 4M-20 4M-21
a e enue n u e n a ne 000
Sources: Port of Beirut, Bank Audi's Group Research Department ______VALUE OF CLEARED CHECKS DOWN BY 22% IN THE FIRST FIVE MONTHS OF 2021
Total value of cleared checks, an indicator of consumption and investment spending in the Lebanese economy, declined by 21.6% year-on-year in the first five months of 2021 referring to regression in spending during the above mentioned period.
Week 23 May 31 - June 6, 2021 3 MAY 31 - JUNE 6, 2021 WEEK 23
The value of cleared checks reached US$ 16,937 million in the first five months of 2021 down from US$ 21,593 million in same period of previous year. A breakdown by currency shows that the banks’ clearings in Lebanese Pounds amounted to LP 11,277 billion (-3.5%) in first five months of 2021 while those in US$ amounted US$ 9,456 million (-31.7%).
Moreover, the number of cleared checks registered 1,550,236 in the first five months of 2021, down by 37.9% from 2,496,338 checks in the corresponding period of 2020.
The average value per check rose by 26.3% year-on-year to attain US$ 10,925 in the aforementioned months of 2020. It is worth noting that the value of returned checks registered US$ 228 million in the first five months of 2021 down by a yearly 52.2%. The number of returned checks stood at 13,101 in the first five months of 2021, down from 71,530 in the same period of 2020.
CLEARING ACTIVITY (IN MILLIONS USD)
30,000 2 ,6 2 ,1 2 ,10 2 ,6 3
2 ,000 23, 0
21, 3
20,000
16, 3
1 ,000
10,000
5M-2015 5M-2016 5M-2017 5M-2018 5M-2019 5M-2020 5M-2021
Sources: Association of Banks, Bank Audi's Group Research Department ______TRIPOLI PORT REVENUES IMPROVE BY 158% YEAR-ON-YEAR IN MARCH 2021
Freight activity via Port of Tripoli hiked by nearly 93 thousand tons to stand at 216.8 thousand in March 2021 up from 123.3 thousand tons by March 2020. Imported freight constituted 79.2% of total freight, while export activity represented 20.8% of the total in March 2021.
In addition, the number of vessels increased significantly by 48.6% to stand at 55 vessels in the same month of 2021, with the number of imported cars via Tripoli Port increased considerably by 381.5% with 443 cars in March 2021. Within this context, Tripoli port revenues increased by 157.8% year-on-year to reach US$ 1.9 million in March 2021 against US$ 0.7 million over same period previous year.
TRIPOLI PORT ACTIVITY
Mar-20 Mar-21 Mar-21/Mar-20 Freight activity 123 217 76.4% (thousand tons) Number of Vessels 37 55 48.6% Number of imported 92 443 381.5% cars Port revenues (US$ 0.723 1.864 157.8% million)
Sources: Al Bayan Magazine, Port of Tripoli,Bank Audi'S Group Research Department
Week 23 May 31 - June 6, 2021 4 MAY 31 - JUNE 6, 2021 WEEK 23
SURVEYS ______LEBANON'S FINANCIAL CRISIS LIKELY TO RANK IN THE TOP 10, POSSIBLY THREE, MOST SEVERE CRISES EPISODES GLOBALLY SINCE 1900, AS PER THE WORLD BANK
The World Bank recently issued its Lebanon Economic Monitor which provides an update on key economic developments and policies over the past six months. According to the report, the Lebanon financial and economic crisis is likely to rank in the top 10, possibly top three, most severe crises episodes globally since the mid-nineteenth century.
In fact, Lebanon’s GDP plummeted from close to US$ 55 billion in 2018 to an estimated US$ 33 billion in 2020, with US$ GDP/capita falling by around 40%.
Even prior, the World Bank has long identified Lebanon as a Fragility, Conflict & Violence (FCV) State, and as such, the dire socio-economic conditions risk systemic national failings with regional and potentially global consequences. This illustrates the magnitude of the economic depression that the country is enduring, with no clear turning point on the horizon, given the deliberate policy in action.
According to the report, monetary and financial turmoil are driving crisis conditions, more palpably through interactions between the exchange rate, narrow money and inflation. Acute exchange market pressures in Lebanese markets are reflected by heavy fluctuations in the US$ banknote exchange rate, which temporarily breached LBP 15,000/US$, before falling back down. This is within the context of a multiple exchange rate system, which includes the official exchange (LP 1,507.5/US$) as well Banque du Liban’s (BdL) platform rate set at LP 3,900/US$. Overall, the World Bank Average Exchange Rate (AER) depreciated by 129% in 2020. Exchange rate pass through effects on prices have resulted in surging inflation, averaging 84.3%in 2020. Meanwhile, the stock of currency in circulation increased by 197%, even as broad money supply (which includes bank deposits) declined, with the latter weighed down by deleveraging in the financial sector.
The financial and economic crisis has intensified Lebanon’s fragility and fragmentation, increasing the risk to social and civil unrest. The crisis has exacerbated long-term national deficiencies including institutional weaknesses, failed economic and social policy, and dismal public service delivery. In such an environment, there is growing weariness of triggers for social unrest. In this report, the World Bank highlights two potential economic triggers that are under increased scrutiny, and which can have significant social implications.
The first Special Focus examines Lebanon’s FX subsidy for critical and essential imports, which offers a serious political and social challenge.
On the one hand, the current FX subsidy is both distortionary, expensive and regressive. It exerts considerable stress on Lebanon’s balance of payments. On the other hand, the subsidy prevents the prices of these products from increasing, which would exacerbate inflationary-depreciation pressures, further striking at residents purchasing power.
The second Special Focus discusses the impact that the crises are having on four basic public services: electricity, water supply, sanitation and education. The Deliberate Depression has further undermined already weak public services via two effects: (i) it has significantly increased poverty rates expanding the demography that is not able to afford private substitutable (the way citizens had previously adapted to abysmal quality of public services), and are thus more dependent on public services; and (ii) threatens financial viability and basic operability of the sector by raising its costs and lowering its revenues.
According to the report, the Lebanon financial crisis is likely to rank in the top 10, possibly three, most severe crises episodes globally since 1900. In order to compute a Crisis Severity Index (CSI) for the Lebanon financial crisis, the World Bank makes assumptions commensurate to (relatively) good and bad case scenarios. In the good case scenario, it assumes: (i) real GDP per capita trough occurs in 2021 at the World Bank projected growth rate (–9.5%), inducing an overall –35.1% peak (2017) to trough (2021) change in real GDP per capita; and that (ii) it takes 12 years for Lebanon to recover to 2017 real income per capita levels. The good case CSI would be 47.1, ranking the Lebanon episode 6th after Australia (1893) and aligned with Mexico (1929). In the
Week 23 May 31 - June 6, 2021 5 MAY 31 - JUNE 6, 2021 WEEK 23
bad case scenario, the World Bank assumes: (i) real GDP trough occurs in 2022 at an additional 5% annual contraction in real GDP, resulting in an overall –38.6% peak (2017) to trough (2022) change in real GDP per capita; and that (ii) it takes 19 years for Lebanon to recover to 2017 real GDP levels, the average crisis duration of the top 10 cases in R&R. Bad case CSI would be 57.6, ranking the Lebanon financial crisis third after Chile (1926) and the Spanish civil war.
______LEBANON IS REGIONALLY UNCOMPETITIVE WITH REGARD TO LABOR MARKET RISKS DUE TO A HOST OF ISSUES, AS PER FITCH SOLUTIONS
According to a recent report by Fitch Solutions, Lebanon is regionally uncompetitive with regard to labor market risks due to a host of issues making the process of hiring and maintaining a suitable workforce difficult for investors. Among the many key concerns are a small labor force, high employment costs, regionally low school enrolment rates, the influx of refugees, low expenditure on education and a brain drain of talented graduates. Recruitment options are limited by very low female labor force participation, a spatial disparity in refugee camps and regulations preventing refugees from entering the labor force. The country's overall ranking is slightly uplifted by the lack of onerous regulations and low costs related to hiring and firing local workers; however, this leaves the supply chain vulnerable to legal risks as a result of widespread exploitative labor practices. As such, Lebanon receives a middling overall score of 52.1 out of 100 in its Labor Market Risk Index. This places it in eighth place out of 18 countries in the MENA region, and 80th out of 201 global states.
Looking at Labor Costs, the country scored 49.3/100. The cost of labor in Lebanon is regionally high and holds significant risks for Lebanese employers over the medium term. In particular, the high minimum wage and mandatory social security contributions will increase direct operational costs without providing a significant corresponding boost in productivity, given pertinent skills gaps in the market. Additionally, due to significant domestic and regional security challenges, businesses will also have to factor in additional compensation requirements in order to attract foreign skilled workers such as hardship and danger pay premiums. In terms of labor flexibility, there are few restrictions on the hiring and firing of employees, annual paid leave days are comparatively low and there is no severance pay requirement. Though this relieves employment costs to some extent, it does not offset the high labor cost burden that firms face.
At the level of Education, it scored 51.9/100. Lebanon's education system faces enormous challenges in providing equal access to quality schooling for the domestic population and the large group of Syrian refugees it is hosting. While enrolment rates were higher across the board prior to the outbreak of the Syrian civil war in 2011, the education system already struggled with equality of access due to the predominance of private institutions and underfunding of public schools. The influx of Syrian refugees, many of them young children, has exacerbated these issues, placing an unsustainable strain on the Lebanese education system. While international aid has offered some stabilization, a reduction in enrolment rates combined with stretched infrastructure and teaching resources will impact on education quality and the skills of the labor market for many years to come, as per Fitch Solutions.
At the level of Availability Of Labor, Lebanon scored 55.1/100. Lebanon's limited capacity to effectively integrate the large refugee and swelling youth population groups into the labor market combined with low female labor force participation rates highlight the long-term labor and social stability risks facing the country's small population. Although the availability of labor is bolstered by relatively high life expectancy and urbanization, as well as a large migrant stock, key labor market risks will likely emanate from poor skills development of disadvantaged groups.
Week 23 May 31 - June 6, 2021 6 MAY 31 - JUNE 6, 2021 WEEK 23
CORPORATE NEWS ______BLC BANK’S NET PROFITS AT US$ 2.7 MILLION IN THE FIRST QUARTER OF 2021
BLC Bank announced net profits of US$ 2.7 million in 1Q 2021, according to its latest release. Net interest income reached US$ 25.3 million in 1Q 2021, as per a statement by the bank. Net fee and commission income stood at US$ 3.1 million in the aforementioned period of this year. Net financial revenues registered US$ 26.7 million in 1Q 2021.
Total assets of the bank reached US$ 3.9 billion at end-March 2021, without any significant change from end 2020.
Loans to customers declined from US$ 0.9 billion at end-2020 to US$ 0.8 billion at end-March 2021.
Customers’ deposits amounted to US$ 3.0 billion at end-March 2021, down from US$ 3.1 billion at end-2020.
Shareholders’ equity stood at US$ 508.1 million at end-March 2021, down from US$ 517.0 million at end-2020.
BLC BANK'S MAJOR BALANCE SHEET AGGREGATES (US$ BILLION)
6 0
0
3 3 3 0 3 3 1 3 0 e 3 0 u e e
an 2 0 1 6 1 0 1 0 0
0 0 End-18 End-19 End-20 March-21
Sources: BLC Bank- Bank Audi's Group Reseach Department ______SPUTNIK V VACCINE TO BE PRODUCED LOCALLY BY ARWAN
An agreement will be signed in June between Arwan Pharmaceutical Industries (Arwan), based in Jadra (Chouf) and Russian Direct Investment Fund (RDIF) for the production of the Russian Sputnik V vaccine, as per the caretaker Ministry of Industry.
Arwan will be importing the raw materials from Russia to manufacture Lebanon’s share in the Sputnik V vaccine which will be offered at a lower price than the Sputnik V imported by local companies, as said in a statement.
Arwan is ready to start its production as of next month where its capacity to produce up to 60 million doses of the vaccine per year, said the Deputy Chairman at Arwan.
Product will be exported to regional countries, where RDIF will be in charge of the trade and marketing process.
Week 23 May 31 - June 6, 2021 7 MAY 31 - JUNE 6, 2021 WEEK 23
______CEDAR OXYGEN APPROVED 22 GRANTS VALUED AT US$ 45 MILLION
Cedar Oxygen approved 22 loans for around US$ 45 million supporting eight sectors and industries; loans are ranging between US$ 200,000 and US$ 5 million.
This fund allows manufacturers who have very difficult access to the greenback to subscribe to loans in dollars for the import of the raw materials they need. Loans that they will be able to repay thanks to their sales made abroad.
Founded in May 2020, the Cedar Oxygen Fund aims to raise a total of US$ 750 million, with only US$ 175 million obtained so far. Following its goal to support local industries, the fund organized a virtual fair to connect local manufacturers with fellow Europeans and suppliers.
______GLENBEY FIRST SCOTCH BOTTLED AND FINALIZED LOCALLY
Ets. Antoine Massoud (EAM), a food distributor, in collaboration with Domaine des Tourelles, a boutique winery and a Scotland-based whisky maker launched the first Scotch whisky that is bottled in Lebanon.
A major part of the production process is carried out in Scotland with the last stages of production and bottling executed in Lebanon by Domaine des Tourelles, as per the CEO of EAM.
The product marketed by EAM under the Glenbey brand, is of a premium quality. The 70-centiliter bottle is priced at LP 60,000. It is a blend scotch made from a mixture of barley malt and grain (wheat). The proportion of malt is very high that gives the good quality and same category of a Johnny Walker Red Label, as per the CEO of EAM.
EAM is targeting the local market in addition to the diaspora.
______TERRATRUE START-UP FUNDRAISED US$ 15 MILLION IN SERIES A
The startup TerraTrue announced that it achieved a fundraising of US$ 15 million financing in Series A. In 2019, the startup raised US$ 4.5 million from Chris Sacca and Anthos Capital. It is based in San Francisco, California where currently employs around 15 people.
TerraTrue was launched in 2018 offering companies the opportunity to develop their services and products taking into account the rules of the confidentiality and protection of private data like the European GDPR or the California CCPA. This approach is described as privacy-by-design. This platform integrates all the old confidentiality rules and those in preparation in order to report in an automated and simple way the non-compliance of products with certain criteria.
This new fundraising will help it grow on two fronts: improving the platform and expanding commercial reach, said a co-founder of TerraTrue.
Week 23 May 31 - June 6, 2021 8 MAY 31 - JUNE 6, 2021 WEEK 23
CAPITAL MARKETS ______MONEY MARKET: EXTENDED WEEKLY CONTRACTIONS IN TOTAL RESIDENT DEPOSITS
A lull mood swayed over the money market over this week, as the local currency liquidity remained quite abundant. This kept the overnight rate stable at 3%, noting that its official rate stays quoted at 1.90%.
In parallel, the latest monetary aggregates released by the Central Bank of Lebanon for the week ending 20th of May 2021 showed that total resident banking deposits contracted further by LP 516 billion. This is mainly driven by a LP 238 billion fall in total LP resident deposits amid an LP 165 billion decrease in LP demand deposits and a LP 73 billion decline in LP saving deposits, while foreign currency resident deposits dropped by LP 278 billion (the equivalent of US$ 184 million as per the official rate of LP 1,507.5). Within this context, money supply in its largest sense (M4) contracted by LP 645 billion over the covered week amid a rise in the currency in circulation of LP 96 billion and a fall in the non-banking Treasury bills portfolio of LP 224 billion.
INTEREST RATES
04/06/21 28/05/21 31/12/20 Overnight rate (official) 1.90% 1.90% 1.90% 7 days rate 2.00% 2.00% 2.00% 1 month rate 2.75% 2.75% 2.75% ⬌ 45-day CDs 2.90% 2.90% 2.90% ⬌ 60-day CDs 3.08% 3.08% 3.08% ⬌ ⬌ ⬌ Source: Bloomberg ______TREASURY BILLS MARKET: NOMINAL WEEKLY SURPLUS OF LP 216 BILLION
The latest Treasury bills auction results for value date 3rd of June 2021 showed subscriptions in the six- month category (offering a yield of 4.0%), the two-year category (offering a coupon of 5.0%) and the ten- year category (offering a coupon of 7.0%).
In parallel, the Treasury bills auction results for value date 27th of May 2021 showed that total subscriptions amounted to LP 362 billion, distributed as follows: LP 10 billion in the three-month category (offering a yield of 3.50%), LP 208 billion in the one-year category (offering a yield of 4.50%) and LP 144 billion in the five-year category (offering a coupon of 6.0%). These compare to maturities of LP 146 billion, resulting into a nominal weekly surplus of LP 216 billion.
On a cumulative basis, total subscriptions amounted to LP 5,007 billion during the first five months of 2021. The five-year category captured 24.6% of the total, followed by the seven-year category with 21.3%, the one-year and three-year categories with 15.2% each and the ten-year category with 15.1%, while the three- month, six-month and two-year categories accounted for the remaining 8.6%. These compare to maturities of LP 3,033 billion, resulting into a nominal surplus of LP 1,974 billion during the first five months of 2021.
______FOREIGN EXCHANGE MARKET: LP LOSES MORE GROUND AGAINST US DOLLAR IN PARALLEL MARKET
Amid deepened cabinet formation crisis and dwindling BDL’s FX reserves, and with the start of FX operations on the new “Sayrafa” platform, the LP/US$ exchange rate crossed above the LP/US$ 13,000 level on the black FX market this week, ranging between LP/US$ 13,450 and LP/US$ 13,500 on Friday as
Week 23 May 31 - June 6, 2021 9 MAY 31 - JUNE 6, 2021 WEEK 23
TREASURY BILLS
04/06/21 28/05/21 31/12/20 3-month 3.50% 3.50% 3.50% 6-month 4.00% 4.00% 4.00% 1-year 4.50% 4.50% 4.50% ⬌ 2-year 5.00% 5.00% 5.00% ⬌ 3-year 5.50% 5.50% 5.50% ⬌ 5-year 6.00% 6.00% 6.00% ⬌ 7-year - - 6.50% ⬌ 10-year 7.00% - 7.00% ⬌ Nom. Subs. (LP billion) 362 122 Short-term (3&6 mths) 10 - Medium-term (1&2 yrs) 208 - Long-term (3 yrs) - 20 Long-term (5 yrs) 144 - Long-term (7 yrs) - 102 Maturities 146 191 Nom. Surplus/Deficit 216 -69
Sources: Central Bank of Lebanon, Ministry of Finance
compared to LP/US$ 12,850-LP/US$ 12,900 at the end of the previous week, which marks a 4% increase week-on-week. Within this context, it is worth mentioning that BDL announced that it would sell US dollar banknotes to Lebanese banks at a rate of LP/US$ 12,000, while the latter would sell the greenback at a rate of LP/US$ 12,120.
In parallel, the Central Bank of Lebanon’s latest bi-monthly balance sheet ending 31st of May 2021 showed that BDL’s foreign assets contracted by US$ 333 million during the second half of the month to reach US$ 21.1 billion at end-May (including BDL’s Eurobond holdings estimated at US$ 5 billion). Accordingly, BDL’s foreign assets accumulated contractions of US$ 3 billion over the first five months of the year 2021.
EXCHANGE RATES
04/06/21 28/05/21 31/12/20 LP/US$ 1,507.50 1,507.50 1,507.50 LP/£ 2,129.95 2,140.65 2,048.54 LP/¥ 13.69 13.72 14.61 ⬌⬆ LP/SF 1,666.67 1,678.54 1,706.67 ⬆ LP/Can$ 1,243.40 1,247.62 1,178.66 ⬆ LP/Euro 1,825.88 1,838.55 1,851.21 ⬆ ⬆ Source: Bank Audi’s Group Research Department ______STOCK MARKET: SHY WEEKLY EQUITY PRICE RETREATS ON BSE
The Beirut Stock Exchange registered shy price declines this week, as reflected by a 0.3% retreat in the price index. Three out of eight traded stocks posted price falls, while four stocks recorded price gains and one stock saw no price change week-on-week. In details, Bank Audi’s “listed” share price shed 5.5% week- on-week to reach US$ 2.22, followed by Byblos Bank’s “listed” shares with -2.1% to US$ 0.93, Solidere “B”
Week 23 May 31 - June 6, 2021 10 MAY 31 - JUNE 6, 2021 WEEK 23
shares with -0.4% to US$ 24.83. In contrast, Holcim Liban’s share price jumped by 17.7% week-on-week to US$ 20.01, followed by Bank Audi’s GDRs with +0.5% to US$ 2.01, Solidere “A” shares with +0.4% to US$ 25.0 and Byblos Bank Preferred 2008 shares with +0.1% to US$ 35.05. BLOM’s GDR price remained stable at US$ 3.29.
As to trading volumes, the BSE total turnover amounted to US$ 5.2 million this week as compared to US$ 6.4 million last week, noting that Solidere shares captured 94% of activity. On a cumulative basis, the BSE total trading value expanded by 40% year-on-year during the first five months of 2021 to reach US$ 133 million. Concurrently, the BSE market capitalisation grew by 49% between end-May 2020 and end-May 2021. Within this context, the total turnover ratio, measured by the annualized trading value to market capitalization, reached 3.4% during the first five months of 2021 and compared to 3.6% during the corresponding period of the previous year.
AUDI INDICES FOR BSE
22/1/96=100 04/06/21 28/05/21 31/12/20 Market Cap. Index 395.80 396.83 302.49 Trading Vol. Index 46.38 72.10 86.63 ⬇ Price Index 83.09 83.31 63.50 ⬇ Change % -0.26% -1.32% 4.60% ⬇ 04/06/21 28/05/21 31/12/20 ⬇ Market Cap. $m 9,390 9,414 7,176 No. of shares traded (Exc. BT) 381,366 452,533 650,340 ⬇ Value Traded $000 (Exc. BT) 5,186 6,453 5,834 ⬇ o.w. : Solidere 4,882 6,102 5,565 ⬇ Banks 264 350 264 ⬇ Others 40 1 5 ⬇ ⬆ Sources: Beirut Stock Exchange, Bank Audi’s Group Research Department ______BOND MARKET: ACTIVITY IN LEBANESE BOND MARKET MOSTLY SKEWED TO DOWNSIDE THIS WEEK
Amid rising cabinet uncertainties and prospects of long-delayed discussions with bondholders, a sluggish mood reigned over the Eurobond market over this week, while activity was mostly skewed to the downside. In details, sovereigns maturing in 2020, 2022, 2025, 2026, 2027, 2028, 2029 and 2037 registered weekly price contractions of 0.13 pt each, while papers maturing in May 2023, April 2024 and November 2024 posted price rises of 0.13 pt each. Within this context, prices of sovereigns maturing between 2020 and 2037 ranged between 12.63 cents per US dollar and 14.0 cents per US dollar on Friday as compared to 12.75-14.13 cents per US Dollar at the end of last week. Accordingly, Lebanese sovereigns accumulated price contractions between 0.13 pt and 1.13 pt since the beginning of the year 2021.
EUROBONDS INDICATORS
04/06/21 28/05/21 31/12/20 Total tradable size $m 32,364 32,364 32,364 o.w.: Sovereign bonds 31,314 31,314 31,314 Average Yield 69% 68% 57% ⬌ Average Life 6.66 6.68 7.04 ⬌⬆ Yield on US 5-year note 0.83% 0.81% 0.37% ⬇ ⬆
Source: Bank Audi’s Group Research Department
Week 23 May 31 - June 6, 2021 11 MAY 31 - JUNE 6, 2021 WEEK 23
INTERNATIONAL MARKET INDICATORS
Weekly Year-to-date 4-Jun-21 28-May-21 31-Dec-20 change change EXCHANGE RATES YEN/$ 109.53 109.85 103.32 -0.3% 6.0% $/£ 1.416 1.419 1.367 -0.2% 3.6% $/Euro 1.217 1.219 1.222 -0.2% -0.4% STOCK INDICES DOW JONES INDUSTRIAL 34,756.39 34,529.45 30,606.48 0.7% 13.6% AVERAGE S&P 500 4,229.89 4,204.11 3,756.07 0.6% 12.6% NASDAQ 13,814.49 13,748.74 12,888.28 0.5% 7.2% CAC 40 6,515.66 6,484.11 5,551.41 0.5% 17.4% Xetra Dax 15,692.90 15,519.98 13,718.78 1.1% 14.4% FT-SE 100 7,069.04 7,022.61 6,460.52 0.7% 9.4% NIKKEI 225 28,941.52 29,149.41 27,444.17 -0.7% 5.5% COMMODITIES (in US$) GOLD OUNCE 1,891.59 1,903.77 1,898.36 -0.6% -0.4% SILVER OUNCE 27.79 27.94 26.40 -0.5% 5.3% BRENT CRUDE (per barrel) 71.89 68.72 51.80 4.6% 38.8% LEADING INTEREST RATES (%) 1-month Libor 0.08 0.09 0.14 0.00 -0.06 US Prime Rate 3.25 3.25 3.25 0.00 0.00 US Discount Rate 0.25 0.25 0.25 0.00 0.00 US 10-year Bond 1.55 1.59 0.91 -0.04 0.64
Sources: Bloomberg, Bank Audi's Group Research Department
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