LEBANON WEEKLY MONITOR...1 Bank Audi sal - Group Research Department - Bank Audi Plaza - Bab Idriss...

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Bank Audi sal - Group Research Department - Bank Audi Plaza - Bab Idriss - PO Box 11-2560 - Lebanon - Tel: 961 1 994 000 - email: [email protected]

CONTACTS

RESEARCH

Treasury & Capital Markets

Bechara Serhal(961-1) [email protected]

Private Banking

Toufic Aouad(961-1) [email protected]

Corporate Banking

Carol Ayat(961-1) [email protected]

LEBANON MARKETS: WEEK OF FEBRUARY 15 - FEBRUARY 21, 2021

Marwan Barakat(961-1) [email protected]

Jamil Naayem(961-1) [email protected]

Salma Saad Baba(961-1) [email protected]

Fadi Kanso(961-1) [email protected]

Farah Nahlawi(961-1) [email protected]

Economy____________________________________________________________________________p.2 2020 END-OF-PERIOD INFLATION AT 111% AS PER CRI AND AVERAGE INFLATION AT 85% AS PER CASThe Central Administration (CAS) figures for CPI for full-year 2020 show that the average inflation (Average price index 2020/Average price index 2019) was 85%. In parallel, the end-of-year inflation (Dec 2020 relative to Dec 2019) stands at 111% as per the Consultation and Research Institute (CRI).

Also in this issuep.3 Deceleration in the activity of the property market in January 2021p.4 Lebanon's economy will continue to contract in 2021, as per the EIU

Surveys____________________________________________________________________________p.5 BEIRUT RANKS FIRST REGIONALLY IN NUMBEO’S COST OF LIVING SURVEY 2021Numbeo, a global statistics website, recently released its global cost of living index in which Beirut ranked first in the region.

Also in this issuep.6 Household spending in Lebanon to begin a muted recovery in 2021, as per Fitch Solutions

Corporate News____________________________________________________________________________p.7 CASTANIA AND TECHNICA ARE THE FIRST BENEFICIARIES OF THE CEDAR OXYGEN FUNDThe Cedar Oxygen platform obtained a fund from the Central Bank of Lebanon to finance imports by Lebanese industrialists allowing manufacturers to purchase the needed raw materials.

Also in this issuep.8 Lebanon Outsourcing Initiative, a platform to promote Lebanese talentsp.8 Canadian start-up allows doctors in Lebanon to give teleconsultations to patients across the Atlantic

Markets In Brief____________________________________________________________________________p.9 MARKETS IN BRIEF: DOWNWARD SPIRAL OF LP AGAINST US DOLLAR ON BLACK MARKET AMID HEATED POLITICAL BICKERING Amid heated domestic political bickering further worsening the prospect of a cabinet breakthrough and along continuous international calls to form a “mission” government that can pull the country out of a myriad of accumulated crisis and secure much-needed international financial support, Lebanon’s capital markets saw this week a downward spiral of the Lebanese pound against the US dollar on the black FX market, across-the-board price contractions on the Eurobond market and price stability on the equity market. In details, the LP/US$ exchange rate crossed the LP/US$ 9,000 level for the first time since early-July 2020, ranging between LP/US$ 9,350 and LP/US$ 9,400 on Friday amid increased commercial demand for the greenback following eased Coronavirus-related restrictions, and on dwindling FX reserves and continuing cabinet gridlock. In parallel, Lebanese bonds posted across-the-board price falls of 0.13 pt to 0.50 pt on prospects of long-delayed negotiations with bondholders. Finally, the equity market saw stability in prices, while the BSE total turnover more than quadrupled week-on-week.

Money Market ⬌LP Tbs Market ⬇LP Exchange Market ⬇

BSE Equity Market ⬌Eurobond Market ⬇CDS Market -

FEBRUARY 15 - FEBRUARY 21, 2021WEEK 08

LEBANONWEEKLY

MONITOR

Week 08 February 15 - February 21, 2021 1

Week 08 February 15 - February 21, 2021


2

ECONOMY______________________________________________________________________________2020 END-OF-PERIOD INFLATION AT 111% AS PER CRI AND AVERAGE INFLATION AT 85% AS PER CAS

The Central Administration (CAS) figures for CPI for full-year 2020 show that the average inflation (Average price index 2020/Average price index 2019) was 85%. In parallel, the end-of-year inflation (Dec 2020 relative to Dec 2019) stands at 111% as per the Consultation and Research Institute (CRI).

All nine main indices registered increased this December according to CRI. The highest increase was registered by the “Durable Consumer Goods” category (251.5%), followed by the “Apparel” category (223.1%), then by the “Food and Beverages” category (135.1%), the “Transportation and Telecommunications” category (117.6%), the “Recreation” category (100.8%), the “Other goods and Services” category (86.3%), the “Housing” category (64.3%), the “Healthcare” category (30.6%) and the “Education” category (9.9%).

The main drive for inflation is related to the Lebanese Pound sharp depreciation on the parallel market causing corollary inflationary spikes. It is worth recalling that the Lebanese pound, which remained pegged to the US dollar at LL/US$ 1,507.5 on the official market, was in free fall against the US dollar on the black FX market over the year 2020, mainly pressured by a complete loss of confidence, dwindling financial inflows, a deficit monetization from BDL and a long-simmering cabinet impasse. The LP/US$ exchange rate ended the year 2020 at LL/US$ 8,425 at year-end, rising by 266% relative to the 2,300 market rate that was prevailing at end-2019.

In fact, the main reasons behind currency depreciation and corollary inflation in 2020 were actually multiple. First, they revolve around the increased political uncertainties leading to a gradual loss of confidence and Exchange market concerns. Then rises the significant money creation in Lebanese Pound with currency in circulation almost tripling over the past year, moving from LL 10 trillion at end-2019 to LL 30 trillion at end-2020, amid large fiscal deficits with direct monetization on behalf of the Central Bank. This excessive money creation has put pressure on the parallel exchange market and fueled inflation, especially that it is coupled with a local shortage of US$ amid declining inflows and consecutive balance of payments deficits.

A containment of the monetary drift looking forward is conditional upon a positive confidence shock related to political and economic management and a parallel decline of Lebanon’s excessive money creation through the containment of Lebanon’s external and fiscal deficits, with a corollary containment of the State’s financing needs at large.

Source: Consultation and Research Institute

CONSUMER PRICE INDEX

Weights Variation

CPI (Dec-20/Dec-19) +110.7%

Food and beverages 35.4% +135.1%

Apparel 6.6% +223.1%

Housing 6.5% +64.3%

Durable consumer goods 8.2% +251.5%

Healthcare 9.8% +30.7%

Transportation and telecommunications 14.4% +117.6%

Education 12.5% +9.9%

Recreation 2.7% +100.8%

Other goods and services 4.0% +86.3%

3Week 08 February 15 - February 21, 2021


_____________________________________________________________________________ DECELERATION IN THE ACTIVITY OF THE PROPERTY MARKET IN JANUARY 2021

The statistics published by the Directorate of Land Registry and Cadastre covering the first month of 2021 showed that realty markets have undergone a decrease in property transactions and sales activity, reversing the significant improvement seen in 2020. The number of sales operations retreated by a yearly 68.3% from 4,668 sales operations in the first month of 2020 to 1,482 operations in the first month of 2021.

In parallel, sales to foreigners contracted by 75.0% year-on-year to reach 18 operations in the first month of 2021. The value of property sales transactions encountered a slowdown in the first month of 2021. It posted a fall of 70.6% year-on-year to attain a total of US$ 222.8 million during the first month of 2021.

Accordingly, the average sales value decreased from US$ 162,134 in the first month of 2020 to US$ 150,338 in the first month of 2021. All the regions recorded a decrease in the value of sales transactions, with the most significant movements coming as follows: Metn (-97.3%), Bekaa (-81.0%) and Baabda (-77.8%).

1,5181,688

1,857 1,964 1,936

924

200

0

500

1,000

1,500

2,000

2015 2016 2017 2018 2019 H1-19 H1-20

(000s)

- 78.4%

1,5181,688

1,857 1,964 1,936

924

200

0

500

1,000

1,500

2,000

2015 2016 2017 2018 2019 H1-19 H1-20

(000s)

- 78.4%

562.1

480.4

766.8

524.8 524.8570.8

684.4

504.7

756.8

222.8

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Value of Sales Transactions (US$ million)

5,387

4,553 4,959

3,551

4,295 4,350

5,346

3,667

4,668

1,482

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Number of Sales Operations

-

1,000

2,000

3,000

4,000

5,000

6,000

PROPERTY MARKET (FIRST MONTH OF EACH YEAR)

Sources: Directorate of Land Registry and Cadastre, Bank Audi's Group Research Department



4

_____________________________________________________________________________LEBANON'S ECONOMY WILL CONTINUE TO CONTRACT IN 2021, AS PER THE EIU

According to a recent report by the Economist Intelligence Unit (EIU), Lebanon will rely on the international community, led by France for financial support over 2021-2025. The EIU expects international players to provide the necessary pressure to break the current political deadlock over government formation. Once a government is formed Lebanon is expected to begin to fall in line with the main requirements of the French initiative, in order to secure crucial funding, including from the IMF.

According to the EIU, policymakers will prioritize mitigating pandemic-related economic disruptions, as well as repairing the extensive damage to Beirut's commercial centers. In January 2021, the caretaker government signed an agreement with the World Bank to disburse US$ 246 million to the country's poverty and safety-net program in a bid to mitigate some of the pandemic's immediate impact; however, this sum remains paltry considering the scale of Lebanon's issues. To unlock more substantive and frequent funding disbursements Lebanon will be forced to liberalize its exchange rate, resolve immediate debt-sustainability difficulties, reform its fiscal accounts and restructure the banking sector, as per the same source.

Lebanon's economy will continue to contract in 2021-2022, after shrinking by an estimated 21% in 2020. The unfolding financial, fiscal, debt and currency crises will be exacerbated by political stagnation, pandemic-related economic disruption and the devastation inflicted on central Beirut by the August 4th Port disaster, which will continue to drag down growth in 2021.

Households will limit their purchases owing to a loss of income, and businesses will delay investment.

The pandemic is likely to remain an economic weight throughout 2021 and into 2022. In the absence of a wide rollout of the vaccine (which Lebanon will be unable to afford, distribute or administer quickly) the periodic resumption of quarantine measures will be the government's only effective tool to reduce infection and mortality rates, limiting business and household consumption.

Fiscal consolidation efforts (particularly of subsidies) will dampen government and private consumption further, compounding these factors as per te EIU. As a result Lebanon's GDP is expected to contract by a further 4.6% in 2021.

According to the EIU, inflation will remain extremely high in 2021, at 68.7%, following a spike to an estimated 84.2% in 2020. Exchange-rate reform and cuts to subsidy rates will be the main factors driving prices up in 2021. The expected abandonment of the Lebanese peg in the first half of the year will cause a sharp loss in value of the Lebanese pound against the US dollar, raising the price of dollar-denominated imports. Reductions to subsidies on vital goods, meanwhile, will lead to price rises as businesses are unable to incur the extra costs.

Still-low domestic demand and ongoing currency pressures will sustain inflation in 2022, at an average of 32.2%. Price pressures will ease steadily in 2023-25 as the currency stabilizes and inflation expectations begin to reset, tax rates are raised and private consumption growth resumes. The EIU forecasts that inflation will drop sharply in 2023-2025 as the economy begins to turn around following two years of rapid inflation, to an average of 9.2% a year.

Looking at the external sector, after a sharp correction in 2020, the EIU expects the trade deficit to widen once again in 2021, albeit marginally. Although the expected sharp devaluation of the currency and extremely low private consumption will depress import demand, owing to the higher oil price environment in 2021 the unit cost of imports will be considerably higher than in 2020. The small export sector will also grow marginally in volume terms as the pandemic-related external demand slump lessens in 2021, as per the same source.



SURVEYS_____________________________________________________________________________BEIRUT RANKS FIRST REGIONALLY IN NUMBEO’S COST OF LIVING SURVEY 2021

Numbeo, a global statistics website, recently released its global cost of living index in which Beirut ranked first in the region. The survey compares cities worldwide based on their scores in the index when benchmarked to New York City. The Cost of Living Index (Excl. Rent) is a relative indicator of consumer goods prices, including groceries, restaurants, transportation and utilities. Numbeo provides other indices like the Rent Index which is an estimation of prices of renting apartments in the city compared to New York City. Groceries Index is an estimation of grocery prices in the city compared to New York City. To calculate this section, Numbeo uses weights of items in the "Markets" section for each city. Restaurants Index is a comparison of prices of meals and drinks in restaurants and bars compared to NYC. Cost of Living Plus Rent Index is an estimation of consumer goods prices including rent comparing to New York City.

In its recently released statistics, Beirut ranked first in the region and 57th globally in Numbeo’s 2021 Cost of Living Index. The city was followed by Dubai which has a score of 66.95 and ranked 262nd globally and Doha which scored 64.14 and ranked 288th globally. In details, Beirut’s index stood at 83.64, its rent index was 25.44, its cost of living + rent index reported 55.83, its groceries index registered 82.09, its restaurant index was 72.25 and its local purchasing power index was 24.92. It is worth noting that Bermuda’s Hamilton ranked first globally with an index of 146.33.

Sources: Numbeo, Bank Audi's Group Research Department

RANKING BY COST OF LIVING INDEX 2021Cost of Living Index

Beirut 83.64

Dubai 66.95

Doha 64.14

Abu Dhabi 59.76

Manama 58.20

Ajman 55.09

Amman 54.81

Riyad 52.72

Sharjah 52.63

Muscat 52.31

Jeddah 51.65

Kuwait City 49.37

Al Dammam 49.22

Marrakech 41.73

Tangier 40.18

Casablanca 39.81

Rabat 37.95

Agadir 36.63

Erbil 35.58

Damascus 34.18

Al Marsa 33.90

Baghdad 33.54

Cairo 32.37

Tunis 31.96

Algiers 30.46

Alexandria 28.71



6

_____________________________________________________________________________HOUSEHOLD SPENDING IN LEBANON TO BEGIN A MUTED RECOVERY IN 2021, AS PER FITCH SOLUTIONS

Fitch Solutions forecasts household spending in Lebanon to begin a muted recovery in 2021, following a historic contraction due to COVID-19, soaring inflation and the explosion in the Port of Beirut in August 2020, which destroyed the port and large parts of the capital city.

According to the report, the continued implementation of strict lockdown restrictions is weighing down on the country's economic recovery, with upside risk presented by the roll-out of COVID-19 vaccinations expected in February 2021. Nevertheless, Fitch Solutions highlight that economic hardship has sent many households below the poverty line, meaning that growth in consumer spending will be driven by spending on essential categories, such as food and non-alcoholic drinks.

Fitch Solutions forecasts household spending in Lebanon to gradually recover in 2021, after the COVID-19 pandemic led to a steep contraction in consumer spending in 2020.

In local currency terms, Fitch Solutions forecasts Lebanon's real total household spending will contract by 1.8%, a marked improvement from the estimated contraction of 21% in 2020. Total household spending will improve thereafter, at an compound annual growth rate of 3.1% over 2022-2025. Lebanon's recovery from COVID-19 was cut short due to the Beirut explosion on August 4 2020. COVID-19 cases saw a spike over January 2021, with the Lebanese government implementing a 24-hour curfew, effective until February 22 2021. The Lebanese government has announced that it has contracted to purchase an initial supply of vaccine from Pfizer and is engaged in discussions to procure additional vaccine from other sources.

According to the report, Fitch Solutions’ forecast for household spending in Lebanon over 2021 factors in the impact of the COVID-19 pandemic, subsequent lockdown measures, the 2020 Beirut explosion and government stimulus measures. The agency forecasts real growth in household spending to improve 2021, contracting by 1.8%. This is an improvement on the 21.0% year-on-year contraction estimated for household spending in 2020, Lebanon's sharpest decline on record.

Fitch Solutions highlights, however, that in nominal terms all consumer spending segments posted double-digit growth in 2020, driven by soaring consumer price inflation (CPI), which was estimated to average 112% in 2020, up from 2.9% in 2019.

Hyperinflation in Lebanon has been fueled by the rapid depreciation of the Lebanese pound against the US dollar on the black market, where a majority of transactions now take place, and the potential of a removal/reduction of subsidies on essential consumer items, including fuel, wheat and medication, in Q420. As such, many consumer goods, including staples, have become unaffordable for low and middle-income households over 2020.

Fitch Solutions notes that double-digit nominal growth across major spending categories, including food and drink, clothing and footwear, and restaurant and hotel spending, is purely driven by inflationary pressures in 2020. Growth in all of these categories is below the average CPI rate in 2020, indicating that consumers have purchased significantly lower quantities of products during 2020.

Fitch Solutions’ Country Risk team projects the CPI to decelerate over 2021, averaging 65.0%. Therefore, it projects that nominal consumer spending growth will also slow, compared with the year before.

While Fitch Solutions projects the start of a muted recovery in real household spending in 2021, it highlights that nominal year-on-year growth in non-priority consumer spending categories (including clothing and footwear, alcoholic drinks and tobacco, recreation and culture, and hospitality) will remain below the average CPI, indicating that consumers will continue to purchase lower volumes of non-essential products and services over the year.

Food and non-alcoholic drink spending, which was prioritized in household budgets in 2020, will see the strongest growth over 2021, as many Lebanese consumers will be forced financially to focus on essentials.



CORPORATE NEWS_____________________________________________________________________________CASTANIA AND TECHNICA ARE THE FIRST BENEFICIARIES OF THE CEDAR OXYGEN FUND

The Cedar Oxygen platform obtained a fund from the Central Bank of Lebanon to finance imports by Lebanese industrialists allowing manufacturers to purchase the needed raw materials. The fund will take care of paying the amounts due to suppliers in foreign banks, then recover them, a few months later, from Lebanese industrialists, thus replacing the credit facilities traditionally offered by banks

The Cedar Oxygen fund will start by financing two Lebanese industrialists to enable them to import the raw materials they need. Announced more than six months ago, the actual launch of this fund has been delayed by the pandemic.

The first beneficiary Castania is the producer of pistachios, peanuts and hazelnuts. The second is Technica, a company specializing in the production of conveyors. The agreement is for a line of credit of up to US$ 3 million, repayable over four to five months with an interest rate of 6-7% depending on the amount borrowed and maturity, as per a company official.

After these first two agreements, the pace should pick up. Cedar Oxygen has already four financings in the final stages, while about 20 more are in advanced preparation, as per the Business Development Manager at Cedar Oxygen.

The objective of this fund is bringing a breath of fresh air to Lebanese industry as since the start of the crisis at the end of 2019, manufacturers were deprived from banking facilities, which notably caused delays in payments to their suppliers.

The Cedar Oxygen fund is initiated by entrepreneurs from the Lebanese diaspora in April 2020 and supported by the Association of Lebanese Industrialists (AIL) that benefits from investments from the Banque du Liban (BDL). It also plays an intermediary role between local manufacturers and their respective supplier.

However, Cedar Oxygen is not intended to replace local commercial banks, rather it offers itself as an alternative and crisis response fund, as per the Business Development Manager at Cedar Oxygen.

In the future, Cedar Oxygen intends to establish itself as a funding platform for Lebanese industry.

It is worth noting that, initially, the fund aimed to raise US$ 750 million, but so far it has only benefited from an envelope of US$ 175 million invested by the BDL. The goal is to raise an additional US$ 200 million to US$ 250 million this year and reach US$ 575 million by 2022, says the business development manager at Cedar Oxygen.

These amounts will then be allocated to manufacturers in the form of short-term loans (between 3 and 6 months), with an average duration of four months and an interest rate of around 6 to 7%, which takes into account several variables, in particular the country risk, the financial situation of the company and its customers abroad, as per the same source.

At the same time, the Cedar Oxygen team is preparing to launch a digital platform that would allow manufacturers to carry out foreign exchange transactions (FX Peer-2-Peer).

This secure and transparent platform would allow some to exchange dollars to pay some fees in Lebanese pounds, while for others it would allow them to obtain dollars to insure their imports. The rate will be predetermined by an algorithm that takes into account demand and supply as well as the various current rates, as per the Director of the Cedar Oxygen office in Paris and the responsible for operations and this fin-tech platform.



8

____________________________________________________________________________LEBANON OUTSOURCING INITIATIVE, A PLATFORM TO PROMOTE LEBANESE TALENTS

Lebanon Outsourcing Initiative is launched by the startup B.O.T and supported by the L’Orient-Le Jour group, aims to encourage employers, especially those from the Diaspora, to entrust any ad hoc service missions to independent competitive, multilingual, qualified and talented workers in Lebanon in various fields such as human resources, finance, IT, translation or the creative industries, through a free networking platform.

Around 165 employers and candidates have already registered on the platform and it has further potential, as per the Director of Marketing and Development at B.O.T.

Lebanon Outsourcing Initiative has around ten employees, where the number of assignments carried out in 2020 increased by 26% over one year allowing the freelancers involved to generate around US$ 363,000.

Launched in 2017 as a program of Unicef, in partnership with the NGO DOT Lebanon, B.O.T has been a social enterprise since July 2018, supported by the Alfanar association and the network of Lebanese financiers abroad, LIFE.

Its mission is to obtain subcontracting contracts, mainly in the field of data collection and processing, and to entrust their execution to Lebanese, from disadvantaged backgrounds or from groups often discriminated against in the labor market, such as women or young people looking for a first job. The candidates are beneficiaries of partner NGOs, in particular DOT Lebanon, which specializes in training in digital tools, and take an exam before being added to its database, as per B.O.T.

____________________________________________________________________________CANADIAN START-UP ALLOWS DOCTORS IN LEBANON TO GIVE TELECONSULTATIONS TO PATIENTS ACROSS THE ATLANTIC

Doc Clik, a Canadian start-up offers medical appointments and teleconsultations features, decided to extend the platform's services free of charge to doctors in Lebanon to treat patients in Canada.

Their objective is enabling the Lebanese white coats to provide their medical services remotely to patients in Canada, while being remunerated in fresh dollars.

Doc Clik is a start-up launched in Canada, which connects patients to practitioners. The Canadian version of this platform already brings together more than 200 health professionals, is booming with the Coronavirus pandemic.

The service could have stopped at the Canadian boarders but three out of the five founder are of originally Lebanese.

It is worth noting that patients too could benefit from it as well. Doc clik is counting on the competitiveness and reputation of certain specialties in Lebanon.

In this case, the platform could serve as a contact between patients and professionals and allow a pre-consultation online before a visit, as per one of the founders.

Currently, the start-up, which has just opened pre-registrations for professionals in Lebanon, has already received more than fifty requests from patients in Canada.



INTEREST RATES

CAPITAL MARKETS_____________________________________________________________________________MONEY MARKET: TOTAL RESIDENT DEPOSITS REMAIN ON DECLINE IN 2021, ON FC DEPOSIT DECLINES

The Central Bank of Lebanon released this week monetary aggregates for four consecutive weeks ending February 4, 2021. On a cumulative basis, weekly monetary aggregates showed that total resident deposits contracted further by LP 880 billion since the beginning of the year 2021 till February 4. This is mainly attributed to a LP 939 billion fall in foreign currency resident deposits (the equivalent of US$ 623 million, as per the official rate of LP/US$ 1,507.5), while total LP resident deposits grew by LP 59 billion amid an increase in LP demand deposits of LP 629 billion and a drop in LP saving deposits of LP 570 billion. Yet, Money supply in its largest sense (M4) expanded by LP 1,474 billion between end-2020 and February 4, 2021, mainly due to a significant growth in money in circulation of LP 2,158 billion amid a nationwide Coronavirus-induced lockdown that has started on January 14, 2021.

____________________________________________________________________________TREASURY BILLS MARKET: 10-YEAR TENOR CAPTURES LARGEST SHARE OF OUTSTANDING TBS PORTFOLIO

The latest Treasury bills auction results for value date 18th of February 2021 showed that the Central Bank of Lebanon allowed banks to subscribe in full to the three-month category, the one-year category and the five-year category.

The Central Bank of Lebanon released this week Tbs results for value date 4th and 11th of February 2021. In details, the Tbs auction results for value date 4th of February 2021 showed that total subscriptions amounted to LP 532 billion, distributed as follows: LP 5 billion in the three-month category, LP 0.07 billion in the one-year category and LP 527 billion in the five-year category. These compare to maturities of LP 12 billion, resulting into a nominal surplus of LP 520 billion. In parallel, the Tbs auction results for value date 11th of February 2021 showed that total subscriptions amounted to LP 111 billion, allocated as follows: LP 0.03 billion in the six-month category, LP 0.6 billion in the two-year category and LP 110 billion in the ten-year category. These compare to maturities of LP 129 billion, resulting into a nominal deficit of LP 18 billion.

The latest “Lebanese Treasury Securities” report released by the Association of Banks in Lebanon showed that the total outstanding LP Tbs portfolio amounted to LP 88,141 billion at end-December 2020, up from LP 85,700 billion at end-December 2019. The ten-year category captured 37.9% of the total (the equivalent of LP 33,372 billion), followed by the five-year category with 24.5% (the equivalent of LP 21,631 billion), the seven-year category with 21.3% (the equivalent of LP 18,741 billion) and the three-year category with 7.6% (the equivalent of LP 6,714 billion), while all other categories accounted for the remaining 8.7% of the total (the equivalent of LP 7,683 billion).

Source: Bloomberg

19/02/21 12/02/21 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% ⬌



10

EXCHANGE RATES

TREASURY BILLS

____________________________________________________________________________FOREIGN EXCHANGE MARKET: LP PLUNGES AGAINST US DOLLAR ON BLACK FX MARKET AMID INTENSIFIED DOMESTIC POLITICAL TENSIONS

The LP/US$ rate plunged on the black FX market this week to levels unseen since early-July 2020, mainly weighed down by intensified domestic political tensions that have worsened the cabinet formation outlook and amid dwindling FX reserves. In details, the LP/US$ exchange rate fell by 6.4% week-on-week, moving from LP/US$ 8,800-LP/US$ 8,825 at the end of last week to LP/US$ 9,350 LP/US$ 9,400 on Friday. In parallel, the Central Bank of Lebanon’s latest bi-monthly balance sheet ending February 15, 2021 showed that BDL’s foreign assets contracted further by US$ 323 million during the first half of February to reach US$ 23.1 billion mid-month. This brought year-to-date contractions in BDL’s foreign assets to circa US$ 1 billion, and followed large contractions of US$ 13.2 billion in 2020.

__________________________________________________________________________STOCK MARKET: MIXED PRICE MOVEMENTS ON BSE THIS WEEK

Activity was mixed on the Beirut Stock Exchange during this week, which left the price index relatively unchanged on Friday when compared to the closing of last week. Three out of nine traded stocks

Source: Bank Audi’s Group Research Department

*latest available Tbs auction results for value date 28th of January 2021

Sources: Central Bank of Lebanon, Bloomberg

19/02/21 12/02/21 31/12/203-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) 111 122

Short-term (3&6 mths) 0.03 -

Medium-term (1&2 yrs) 0.61 -

Long-term (3 yrs) - 20

Long-term (5 yrs) - -

Long-term (7 yrs) - 102

Long-term (10 yrs) 110 -

Maturities 129 191

Nom. Surplus/Deficit -18 -69

19/02/21 12/02/21 31/12/20LP/US$ 1,507.50 1,507.50 1,507.50 ⬌LP/£ 2,108.69 2,078.24 2,048.54 ⬇LP/¥ 14.30 14.35 14.61 ⬆LP/SF 1,685.68 1,689.26 1,706.67 ⬆LP/Can$ 1,191.13 1,183.10 1,178.66 ⬇LP/Euro 1,829.05 1,825.28 1,851.21 ⬇



AUDI INDICES FOR BSE

EUROBONDS INDICATORS

Source: Bank Audi’s Group Research Department

Sources: Beirut Stock Exchange, Bank Audi’s Group Research Department*Latest activity before lockdown

_____________________________________________________________________________BOND MARKET: ACROSS-THE-BOARD WEEKLY BOND PRICE CONTRACTIONS

Lebanese Eurobonds saw across-the-board price contractions this week amid heightened domestic political bickering that has further dimmed the prospect of a cabinet breakthrough and on growing concerns over long-delayed negotiations with bondholders. In details, sovereigns maturing between 2020 and 2037 registered price declines of 0.13 pt to 0.50 pt week-on-week. Accordingly, prices of Lebanese Eurobonds ranged between 12.88 cents per US dollar and 13.63 cents per US dollar on Friday as compared to 12.88 -14.13 cents per US dollar at the end of last week, amid continuous international calls to form a “mission” government that can pull the country of its accumulated crisis and help unlock much-needed international financial aid.

registered price gains, while five stocks posted price falls and one stock saw no price change week-on-week. In details, BLOM’s GDRs were top gainers on the BSE this week, recording strong price rises of 9.4% to reach US$ 2.32, followed by BLOM’s “listed” shares with +6.3% to US$ 2.20 and Bank Audi’s “listed” shares with +2.3% to US$ 1.35. On the other hand, Byblos Bank Preferred shares 2008 were top losers, posting price drops of 18.6% to reach US$ 35.0, followed by Holcim Liban shares with -3.7% to US$ 13.0, Solidere “A” shares with -2.2% to US$ 19.25, Solidere “B” shares with -1.1% to US$ 19.19, and Byblos Bank Preferred shares 2009 with -1.1% to US$ 39.55, while Bank Audi Preferred “I” shares remained stable at US$ 44.90.

As to trading volumes, the BSE total turnover more than quadrupled week-on-week, moving from US$ 3.7 million last week to US$ 16.7 million this week due to large cross trades. The banking shares accounted for 60.1% of activity, followed by Solidere shares with 38.7% and industrial shares with 1.2%.

22/1/96=100 19/02/21 12/02/21 31/12/20Market Cap. Index 310.77 310.71 302.49 ⬆Trading Vol. Index 149.15 41.43 86.63 ⬆Price Index 65.24 65.23 63.50 ⬆Change % 0.02% 2.15% 4.60% ⬆

19/02/21 12/02/21 31/12/20

Market Cap. $m 7,373 7,371 7,176 ⬆No. of shares traded (Exc. BT) 7,669,525 676,839 650,340 ⬆Value Traded $000 (Exc. BT) 16,723 3,714 5,834 ⬆o.w. : Solidere 6,473 3,091 5,565 ⬆ Banks 10,043 572 264 ⬆ Others 207 51 5 ⬆

19/02/21 12/02/21 31/12/20Total tradable size $m 32,364 32,364 32,364 ⬌o.w.: Sovereign bonds 31,314 31,314 31,314 ⬌Average Yield 61% 60% 57% ⬆Average Life 6.92 6.94 7.04 ⬇Yield on US 5-year note 0.56% 0.46% 0.37% ⬆



12

INTERNATIONAL MARKET INDICATORS

Sources: Bloomberg, Bank Audi's Group Research Department

___________________________________________________________________________DISCLAIMER

The content of this publication is provided as general information only and should not be taken as an advice to invest or engage in any form of financial or commercial activity. Any action that you may take as a result of information in this publication remains your sole responsibility. None of the materials herein constitute offers or solicitations to purchase or sell securities, your investment decisions should not be made based upon the information herein.

Although Bank Audi sal considers the content of this publication reliable, it shall have no liability for its content and makes no warranty, representation or guarantee as to its accuracy or completeness.

19-Feb-21 12-Feb-21 31-Dec-20 Weekly change

Year-to-date change

EXCHANGE RATES

YEN/$ 105.43 104.92 103.32 0.5% 2.0%

$/£ 1.402 1.385 1.367 1.2% 2.5%

$/Euro 1.212 1.212 1.222 0.0% -0.8%

STOCK INDICESDOW JONES INDUSTRIAL AVERAGE 31,494.32 31,458.40 30,606.48 0.1% 2.9%

S&P 500 3,906.71 3,934.83 3,756.07 -0.7% 4.0%

NASDAQ 13,874.46 14,095.47 12,888.28 -1.6% 7.7%

CAC 40 5,773.55 5,703.67 5,551.41 1.2% 4.0%

Xetra Dax 13,993.23 14,049.89 13,718.78 -0.4% 2.0%

FT-SE 100 6,624.02 6,589.79 6,460.52 0.5% 2.5%

NIKKEI 225 30,017.92 29,520.07 27,444.17 1.7% 9.4%

COMMODITIES (in US$)

GOLD OUNCE 1,784.25 1,824.23 1,898.36 -2.2% -6.0%

SILVER OUNCE 27.29 27.36 26.40 -0.3% 3.4%

BRENT CRUDE (per barrel) 62.91 62.43 51.80 0.8% 21.4%

LEADING INTEREST RATES (%)

1-month Libor 0.12 0.11 0.14 0.01 -0.02

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 1.34 1.21 0.91 0.13 0.43

LEBANON WEEKLY MONITOR...1 Bank Audi sal - Group Research Department - Bank Audi Plaza - Bab Idriss...

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