Lebanon Weekly Monitor (42) 17-10-2014images.mofcom.gov.cn/lb/201410/20141022233803450.pdf ·...

1Week 42 October 13 - October 19, 2014

OCTOBER 13 - OCTOBER 19, 2014

WEEK 42

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

Micky Chebli

(961-1) 977419

[email protected]

Nadine Akkawi

(961-1) 977401

[email protected]

Bechara Serhal

(961-1) 977421

[email protected]

Private Banking

Toufic Aouad

(961-1) 329328

[email protected]

Corporate Banking

Khalil Debs

(961-1) 977229

[email protected]

LEBANON MARKETS: WEEK OF OCTOBER 13 - OCTOBER 19, 2014

The LEBANON WEEKLY MONITOR

Economy___________________________________________________________________________

p.2 LEBANON’S BANKING SECTOR REPORTED AN ANNUAL RISE IN DEPOSITS OF

7.7% YEAR-ON-YEAR BY END-AUGUSTFinancial sector figures for the month of August suggest that monetary and financial sectors continue

to show resilience, with a further reinforcement of Central Bank’s reserves, a net increase in financial

inflows towards the domestic economy, and a sound growth in banking sector deposits and loans to

the private sector.

Also in this issuep.3 Value of Kafalat guarantees almost constant year-on-year in the first nine months of 2014

p.3 Cleared checks up by 4.2% in the first nine months of 2014

p.4 Relaxed activity at the Port of Beirut

Surveys___________________________________________________________________________

p.5 GROWTH IN LEBANON AT 1.5% IN 2014, AS PER THE WORLD BANKThe World Bank has lately published its MENA Economic Monitor handling the topic of “Corrosive

Subsidies”. The report has analyzed a span of developments affecting Lebanon, including the

repercussions of the regional conflict on the country’s economy.

Also in this issuep.6 Unique subscriber penetration in Lebanon at 51%, as per GSMA

Corporate News___________________________________________________________________________

p.7 NEW CAR SALES UP BY 8.3% YEAR-ON-YEAR IN THE FIRST NINE MONTHS OF

2014 According to data compiled by the Association of Car Importers in Lebanon, the number of newly

registered car sales stood at 28,811 in the first nine months of 2014, up by 8.3% from a total of 26,601

cars sold during the same period of 2013.

Also in this issuep.8 SGBL’s net profits at US$ 80.3 million in the first half of 2014

Markets In Brief___________________________________________________________________________

p.9 EXPANSION IN BOND SPREADS, TINY DECLINES IN EQUITY PRICESLebanese capital markets witnessed this week a net expansion in spreads on the Eurobond market,

a sluggish activity on the equity market coupled with tiny price declines, and a sustained balanced

activity on the FX market. In details, the Eurobond market witnessed some selling operations, especially

from foreigners, amidst local uncertainties and a global sell-off mood that was mainly driven by signs

of a global economic slowdown and bets that the US Federal Reserve would delay timing for interest

rate increases. The average spread expanded by 19 bps to 328 bps due to rises in Lebanese yields and

declines in US Treasuries yields, and the five-year CDS spread expanded by 15 bps to 360 bps. At the

level of the equity market, activity remained sluggish with the total weekly trading value continuing

to hover around US$ 6 million, while the price index retreated by 0.4%. On the FX market, commercial

banks continued to trade the US Dollar at the upper bound of BDL’s intervention bracket, driven by

some commercial demand, while the Central Bank of Lebanon remained on the sidelines.

Marwan Barakat

(961-1) 977409

[email protected]

Jamil Naayem

(961-1) 977406

[email protected]

Salma Saad Baba

(961-1) 977346

[email protected]

Fadi Kanso

(961-1) 977470

[email protected]

Sarah Borgi

(961-1) 964763

[email protected]

Marc Harb

(961-1) 959747

[email protected]

Gerard Arabian

(961-1) 964047

[email protected]

Nivine Turyaki

(961-1) 959615

[email protected]



WEEK 42

ECONOMY______________________________________________________________________________

LEBANON’S BANKING SECTOR REPORTED AN ANNUAL RISE IN DEPOSITS OF 7.7%

YEAR-ON-YEAR BY END-AUGUST

Financial sector figures for the month of August were released last week. The analysis of those statistics

suggests that monetary and financial sectors continue to show resilience, with a further reinforcement

of Central Bank’s reserves, a net increase in financial inflows towards the domestic economy, and a sound

growth in banking sector deposits and loans to the private sector.

Indeed, driven by a 10.9% rise in gross financial inflows over the first eight months of 2014 relative to last

year’s corresponding period, the banking sector reported an annual rise in deposits of 7.7% year-on-

year in August and a 9.2% annual increase in loans over the same period. It is assumed that a 5% annual

deposit growth is needed to finance the domestic economy in its private and public sector components.

It is within this context that Standard and Poor’s affirmed this week its 'B-/B' long- and short-term foreign

and local currency sovereign credit ratings on Lebanon with a stable outlook. According to S&P, deposit

flows into Lebanon's banking system remain resilient and continue to facilitate the government's debt

servicing capacity. The stable outlook reflects S&P’s view that deposit inflows to the financial system will

enable the government to meet its financing needs over the coming year despite the difficult internal

and external political environments.

In details, banking sector deposits have reached a high of US$ 141.5 billion in August, rising by US$ 5.3

billion over the first eight months of the current year. Out of the latter, 60% were accounted for by foreign

currency deposits and 40% were accounted for by Lebanese Pound deposits. This has slightly driven

down the deposit dollarization ratio from 66.1% in December 2013 to 65.9% in August 2014. The growth

in deposits this year was mainly fuelled by resident deposits which accounted for 85% of the total increase

EVOLUTION OF MAIN BANKING AGGREGATES

Source: BDL



WEEK 42

in deposits while non-resident deposits have accounted for the remaining 15%. It is worth mentioning

that non-resident deposits had reported a significant contraction in the first month of the year, mainly

as a result of the reversal of the important window dressing that took place in December of last year.

In parallel, banking sector loans reached US$ 49.7 billion at the end of August, growing by US$ 2.4 billion

since the beginning of the year. Out of the latter, 62% were accounted for by foreign currency loans

and 38% were accounted for by Lebanese Pound loans. This has further contracted loan dollarization

which moved from 76.5% in December 2013 to 75.8% in August 2014, its lowest level for the past three

decades. It is finally worth mentioning that the growth in banking sector loans was fully accounted for

by resident loans, as non-resident loans have contracted in net terms over the first eight-month period,

as continuing regional tensions are still putting pressure on non-resident lending.

_____________________________________________________________________________VALUE OF KAFALAT GUARANTEES ALMOST CONSTANT YEAR-ON-YEAR IN THE FIRST NINE MONTHS OF 2014

Figures released by the Kafalat Corporation indicate that loans extended to small and medium sized

companies under the guarantee of Kafalat totaled US$ 87.0 million in the first nine months of 2014,

almost equal to the value registered during the equivalent period of the year before. Meanwhile, the

aggregate number of guarantees amounted to 671 in the first nine months of the year, up by 4.7% from

641 guarantees given in the same period of 2013.

Agriculture and industry captured again the lion’s share when it comes to the number of extended

guarantees in the first nine months of 2014, with 318 (or 47.4% of the total number of guarantees) and

232 guarantees (or 34.6% of the total), respectively. Tourism came in next with 81 guarantees (12.1%),

followed by handicrafts with 22 guarantees (3.3%), and by specialized technologies with 18 guarantees

(2.7%).

As for the distribution of guarantees by area, Mount Lebanon accounted for the biggest share of given

guarantees, with 290 guarantees (43.3%), followed by the Bekaa with 125 guarantees (18.6%), the South

with 81 guarantees (12.1%), the North with 77 guarantees (11.5%), Nabattieh with 68 guarantees (10.1%),

and Beirut with 30 guarantees (4.5%).

_____________________________________________________________________________CLEARED CHECKS UP BY 4.2% IN THE FIRST NINE MONTHS OF 2014

Total cleared checks, an indicator of consumption and investment spending in the Lebanese economy,

rose by 4.2% in the first nine months of 2014 relative to the corresponding 2013 period. This reflects the

improving status of the economy in relative terms this year, with an improvement in private consumption

and investment from their somehow sluggish base in the past year. It is worth mentioning that over the

past three years of regional turmoil, the growth in cleared checks reported 5.6%, -1.4% and 1.6% in the

first nine months of 2011, 2012, and 2013 respectively.

As a matter of fact, cleared checks reached US$ 56,103 million in the first nine months of 2014, against

US$ 53,735 million, US$ 52,965 million, US$ 53,829 million in the first nine months of 2011, 2012 and 2013,

respectively. Their growth this year results from an increase in banks clearing in LP by 8.2%, moving from

LP 18,868 billion in the first nine months of 2013 to LP 20,415 billion in the first nine months of 2014, while

banks clearing in foreign currency rose by 3.0%, moving from US$ 41,303 million to US$ 42,547 million

respectively.



WEEK 42

_____________________________________________________________________________RELAXED ACTIVITY AT THE PORT OF BEIRUT

The latest statistics released by the Port of Beirut showed that its activity growth eased down during the

first nine months of the year as reflected by most of the Port indicators.

At the level of the quantity of goods, there was an increase of 1.6% year-on-year to 6,277 thousand tons in

the first nine months of 2014 following a much higher one of 15.7% reported in the corresponding period

of 2013. Pertaining to transshipments, they were higher by 26.0% year-on-year to attain a total of 346,190

containers in the first nine months of 2014, after a drop of 13.7% recorded in the first nine months of 2013.

As to the Port’s revenues, they reached US$ 161.2 million in the first nine months of 2014, down from US$

164.6 million seen in the corresponding period of 2013.

With regards to the number of containers, they recorded an annual rise of 0.3% to attain a total of 587,570

containers in the first nine months of 2014. However, the number of ships posted a decrease of 6.5% year-

on- year to reach a total of 1,485 vessels in the first nine months of 2014. During last year’s same period,

the former registered an increase of 20.8% while the latter rose by 0.2% year-on-year.

ACTIVITY OF THE PORT OF BEIRUT (FIRST NINE MONTHS OF THE YEAR)

Sources: Port of Beirut, Bank Audi's Group Research Department



WEEK 42

SURVEYS_____________________________________________________________________________

GROWTH IN LEBANON AT 1.5% IN 2014, AS PER THE WORLD BANK

The World Bank has lately published its MENA Economic Monitor handling the topic of “Corrosive Subsidies”.

The report has analyzed a span of developments affecting Lebanon, including the repercussions of the

regional conflict on the country’s economy.

According to the report, the spillovers of the conflicts, especially those of the Syrian war, are overwhelming.

Lebanon is hosting about 1.6 million (including both official and unofficial) refugees, equivalent to about

a third of its population. It is estimated that the Syrian war cost Lebanon US$ 7 billion, or 23% of the

country’s 2010 GDP, in 2011-13, and is worsening public finances in a country suffering from double-

digit fiscal deficits. For instance, the spread of terrorist groups has blocked trade between Iraq, Jordan,

and Lebanon. For Lebanon, Iraq is both a trading partner and a transit route to the Gulf. Accordingly, the

ongoing Iraqi crisis has effectively blocked Lebanese exporters’ access to Gulf markets. The breakdown of

trade in the sub-region is doubly harmful since the countries of the greater Levant, namely Turkey, Syria,

Iraq, Jordan, Lebanon and Egypt, were trying to deepen their trade relations in 2010.

A modeling exercise presented in the report shows that the combination of direct costs of trade

disintegration and the forgone benefits of integration could add up to sizeable welfare losses for these

countries. In fact, the direct effects of war understate the real costs of disintegration in the Levant. If

one includes the foregone benefits of integration, especially those associated with failed services

liberalization, the total costs of war are sizable for all Levant countries. For Lebanon, the per-capita

welfare loss is at approximately 13%, as per the World Bank.

The average effects hide shifts within countries. According to the World Bank, land and capital owners

in Lebanon have benefited while workers have lost because the inflow of refugees put pressure on

housing demand and augmented labor supply. The conflict has depressed, real wages in Lebanon by an

estimated12%.

When it comes to the topic of “corrosive subsidies”, the World Bank cites Lebanon among the MENA

countries that are running large fiscal deficits, and where those subsidies are crowding out public

spending on health, education, and investment and possibly threatening sustainability of public debt.

LEBANON KEY ECONOMIC INDICATORS

Source: World Bank



WEEK 42

On a brighter side, the report cites Lebanon among the countries of the MENA who have more than 1,000

cubic meters of water per capita per annum of renewable water, compared to an average of 500 cubic

meters for the region, and below 30 cubic meters for countries such as Kuwait, UAE, Qatar, and Yemen.

Moreover, Lebanon, Morocco, and Algeria are the only countries where water withdrawal is less than 50%

of availability. This compares to an average of just below 400% for the MENA region.

Regarding growth forecasts, according to the World Bank, while a mid-year lull in the security environment

led to some improvement in tourism and commercial activities, the Lebanese economy is not expected

to grow by more than 1.5% in 2014. The fiscal deficit is forecast to widen to 10.2% of GDP in 2014,

compared to 9.4% last year. Moreover, Lebanon’s primary balance in 2014 will register a deficit for the

third consecutive year, increasing by a projected 0.7% to 1.2% of GDP. As a result, gross public debt will

rise to a forecast 149% of GDP at end-2014, compared to 143.1% of GDP at end-2013. The government

financed the widening fiscal deficit by issuing Treasury bills and Eurobonds. The current account deficit is

forecast to reach 8.3% of GDP in 2014, in line with the previous two years. To meet its balance of payments,

Lebanon remains dependent on capital inflows, which continue to be robust, supported by remittances

and international aid for refugees. As a result, the stock of international reserves (excluding gold) at the

central bank reached US$ 31.7 billion by end-2013 (equivalent to 12.1 months of imports), increasing by

5.8% compared to end-2012.

Finally, the banking sector remains stable as does the currency. Conservatism in both financial sector

regulations and approach to private sector banking has helped maintain a well-capitalized and resilient

domestic banking sector, despite sluggish growth and downgrades by international rating agencies. High

spreads between domestic and international rates of return have induced sufficient inflows of deposits to

Lebanese banks to maintain solid liquidity buffers, according to the World Bank.

_____________________________________________________________________________UNIQUE SUBSCRIBER PENETRATION IN LEBANON AT 51%, AS PER GSMA

According to a newly released report by GSMA, entitled “The Mobile Economy 2014”, unique subscriber

penetration in Lebanon is at 51% in 2013, while connection penetration reaches 79% for the same year.

The report presents the ratios as available at end-year. It is worth noting that subscribers differ from

connections such that a unique user can have multiple connections.

Also, the report shows that the prepaid proportion of connections is at 82% for Lebanon in 2013. As

to smartphone connection adoption as a percentage of total connections, it is at 34% for Lebanon in

2013, above the global average of 29%. Furthermore, the fixed broadband population penetration is just

below 10% in 2013, while mobile broadband connection penetration is around 47% for the same year. In

fact, according to the report, the general lack of fixed broadband infrastructure in the region means that

internet access is increasingly provided over mobile networks. Fixed broadband population penetration

across the Arab States is less than 5%, and Lebanon is among the only five markets (Bahrain, Lebanon,

Qatar, Saudi Arabia and the UAE), that have a penetration rate of over 5%, due to a relatively advanced

fibre rollout strategy.



WEEK 42

CORPORATE NEWS_____________________________________________________________________________

NEW CAR SALES UP BY 8.3% YEAR-ON-YEAR IN THE FIRST NINE MONTHS OF 2014

According to data compiled by the Association of Car Importers in Lebanon, the number of newly

registered car sales stood at 28,811 in the first nine months of 2014, up by 8.3% from a total of 26,601 cars

sold during the same period of 2013.

During the month of September 2014, newly registered cars totaled 3,454, up from 2,592 cars in

September 2013.

The total number of registered new and imported used cars during the first nine months of 2014

stagnated in comparison with the same period of 2013. It dropped by 7.0% in comparison with the same

period of 2012 and by 12% in comparison with the corresponding period of 2011.

It is important to mention that 90% of the registered cars are small cars with low selling prices (less than

US$ 15,000). The luxury cars with selling price above US$ 100,000 represent only 3.5% of the total new

cars registered.

The orientation of the market toward the small cars is due to the relatively high fuel prices, to the absence

of an adapted and structured public transport, and to the very strong competition between the makes.

Korea’s Kia ranked first in terms of new car registration during the first nine months of 2014 with a total

of 6,597 cars, against a total of 7,063 during the same period of last year.

It was followed by Korea’s Hyundai with a total of 5,637 newly registered cars in the first nine months of

2014, higher than the total of 5,266 cars registered a year earlier.

Third was Japan’s Nissan with 3,628 newly registered cars in the first nine months of 2014, against 3,541

cars recorded in the same period of last year.

In the fourth position came Japan’s Toyota, with a total of 3,517 newly registered cars in the first nine

months of 2014, compared to 1,441 cars recorded in the same period of last year.

TOP TEN BRANDS OF NEWLY REGISTERED CARS IN THE FIRST NINE MONTHS OF 2014

Sources: Association of Car Importers in Lebanon, Bank Audi's Group Research Department



WEEK 42

Fifth was France’s Renault with 1,011 newly registered cars in the aforementioned period, against 751 cars

in the same period of 2013.

_____________________________________________________________________________

SGBL’S NET PROFITS AT US$ 80.3 MILLION IN THE FIRST HALF OF 2014

Société Générale de Banque au Liban (SGBL) posted net profits of US$ 80.3 million in the first half of

2014, up by 33.7% from US$ 60.0 million in the first half of 2013, as per Bankdata Financial Services. Net

provisions for credit losses more than doubled year-on-year to reach US$ 14.0 million in the first half of

2014.

Net interest income amounted to US$ 131.7 million in the first half of 2014, up by 22.1% from US$ 107.9

million recorded in the first half of 2013. Net fees and commission income marginally rose from US$ 24.0

million in the first half of 2013 to US$ 24.5 million in the first half of 2014.

Total operating income increased by 25.1% to attain US$ 190.1 million in the first half of 2014, compared

with US$ 151.9 million in the same period of 2013.

Total operating expenses increased by 11.1% year-on-year to US$ 79.5 million in the first half of 2014, of

which staff expenses reaching US$ 41.9 million, 11.5% higher than those reported in the first half of 2013,

and administrative and other operating expenses reaching US$ 33.2 million, 10.0% higher than those in

the first half of 2013.

SGBL’s cost-to-income ratio decreased from 47.1% in the first half of 2013 to 41.7% in the first half of 2014.

The bank’s return on average assets reached 1.20% in the first half of 2014, against 1.04% in the first half

of 2013. The return on average equity reached 14.89% in the first half of 2014, compared to 14.47% in the

corresponding period of 2013.

SGBL’s assets totaled US$ 13.8 billion at end-June 2014, up by 5.9% from US$ 13.0 billion at end-2013. Net

loans and advances stood at US$ 3.4 billion at end-June 2014, against US$ 3.1 billion at end-2013.

Customers’ deposits amounted to US$ 10.7 billion at end-June 2014, up from US$ 10.2 billion at end-2013.

Shareholders’ equity totaled US$ 1.1 billion at end-June 2014, up from US$ 1.0 billion at end-2013.

SGBL'S NET PROFITS (US$ MILLION)

Sources: Bankdata Financial Services, Bank Audi's Group Research Department



WEEK 42

CAPITAL MARKETS_____________________________________________________________________________

MONEY MARKET: STABILITY IN OVERNIGHT RATE AT 2.75%

The money market maintained its regular norms during this week, with the overnight rate standing at

its low official level of 2.75% set by the Central Bank of Lebanon amidst ample local currency liquidity at

hand. As to Certificates of Deposits, tiny subscriptions of LP 2 billion were made this week in the 60-day

category. Accordingly, total subscriptions since the beginning of the year 2014 reached LP 163 billion and

were distributed as follows: LP 86 billion in the 45-day category and LP 77 billion in the 60-day category.

Interest rates on the 45-day and 60-day categories remained stable at 3.57% and 3.85% respectively.

At the monetary aggregates level, figures for the week ending 2nd of October 2014 released this week

showed a rise in local currency deposits of LP 100 billion, as a result of an increase of LP 191 billion in LP

demand deposits and a decline of LP 91 billion in LP time deposits week-on-week. Deposits in foreign

currencies dropped by US$ 510 million, which is its highest drop this year. These weekly variations

compare to an average weekly rise of LP 76 billion for LP deposits, and an average weekly growth of US$

77 million for foreign currency deposits since the beginning of the year 2014. Total money supply in its

large sense (M4) contracted by LP 233 billion as compared to an average weekly increase of LP 219 billion

since the beginning of the year 2014.

On a cumulative basis, money supply in its large sense (M4) widened by LP 8,498 billion since the

beginning of the year 2014. This is the result of a rise in local currency denominated time deposits of

LP 2,942 billion, an increase in foreign currency deposits of LP 4,046 billion (the equivalent of US$ 2,684

million), a growth in money supply (M1) of LP 358 billion, and an expansion in Treasury bills held by the

public of LP 1,152 billion.

_____________________________________________________________________________

TREASURY BILLS MARKET: SMALL NOMINAL DEFICIT OF LP 5 BILLION

The auction results for value date 9th of October 2014 released by the Central Bank of Lebanon showed

that total subscriptions amounted to LP 189 billion and were distributed as follows: LP 18 billion in the

three-month category, LP 72 billion in the six-month category, and LP 99 billion in the five-year category.

These compare to maturities of LP 194 billion, resulting in a nominal deficit of LP 5 billion. The latest

auction’s results (October 16, 2014) showed that the average yields on the one-year, two-year and three-

year categories remained stable at 5.35%, 5.84% and 6.50% respectively.

INTEREST RATES

Source: Bloomberg



WEEK 42

TREASURY BILLS

Sources: Central Bank of Lebanon, Bloomberg_____________________________________________________________________________

FOREIGN EXCHANGE MARKET: ONGOING BALANCED ACTIVITY

The foreign exchange market maintained its balanced activity during this week, with the LP/US$ interbank

rate hovering between LP 1,513 and LP 1,514 (the upper bound of the BDL’s intervention bracket), mainly

driven by some commercial demand for the green currency. Meanwhile, the Central Bank of Lebanon

remained on the sidelines.

The Central Bank of Lebanon’s latest bi-monthly balance sheet ending 15th of October 2014 showed that

foreign assets increased by US$ 42 million during the first half of the month to reach a new historical

high level of US$ 38.5 billion mid-October 2014. Accordingly, the Central Bank’s foreign assets covered

81.0% of LP money supply, with this coverage ratio rising to 104.8% when accounting for gold reserves

estimated at US$ 11.3 billion. In addition, BDL’s foreign assets covered 21.9 months of imports. These

ratios constitute a solid proof of the Central Bank’s ability to maintain stable monetary conditions.

EXCHANGE RATES

Source: Bank Audi’s Group Research Department_____________________________________________________________________________

STOCK MARKET: SLUGGISH ACTIVITY PREVAILS

Activity remained weak on the Beirut Stock Exchange during this week. The total trading value was

restricted to US$ 5.6 million versus US$ 5.9 million last week and an average weekly trading value of US$

12.7 million since the beginning of the year 2014. The average daily trading value fell from US$ 1.5 million

last week to US$ 1.1 million this week, which resulted into a decline in the trading volume index from

63.44 last week to 47.97 this week. As far as prices are concerned, the BSE price index retreated by 0.4% to

close at 106.32. The BSE market capitalization rose from US$ 10,524 million at the end of last week to US$

10,587 million at the end of this week, driven by tiny price increases and the listing of 4,672,000 priority



WEEK 42

EUROBONDS INDICATORS

Source: Bank Audi’s Group Research Department

AUDI INDICES FOR BSE

Sources: Beirut Stock Exchange, Bank Audi’s Group Research Department

shares issued by Bank of Beirut.

Banking shares captured 83.21% of the BSE activity. Bank Audi’s “listed” share price remained stable at

US$ 6.00. Bank Audi’s GDR price edged up by 0.5% to US$ 6.10. Byblos “listed” share price fell by 2.4% to

close at US$ 1.63. BLOM’s “listed” share price stood unchanged at US$ 8.75. BLOM’s GDR price retreated

by 1.1% to US$ 9.35. Solidere shares accounted for 16.72% of the total trading value. Solidere “A” share

price decreased by 1.3% to US$ 11.89. Solidere “B” share price retreated by 1.1% to US$ 11.84. Amongst

industrials, Holcim Liban’s share price surged by 3.3% to close at US$ 15.50.

The Beirut Stock Exchange’s weekly performance compared to a 9.2% fall in broader Arabian markets’

share prices (as per S&P Pan-Arab Composite Index) and a 1.5% decline in broader emerging markets’

share prices (as per S&P Emerging Frontier Super Composite Index).

_____________________________________________________________________________

BOND MARKET: DECLINE IN BOND PRICES AMIDST A GLOBAL SELL-OFF

The Eurobond market witnessed some selling operations during this week, especially from foreigners,

within the context of lingering local political and security concerns, and tracking declines in global fixed

income markets as signs of an economic slowdown across many parts of the world sent tremors through

global markets, fueling demand for US Treasuries and reducing bets that the US Federal Reserve would

be raising interest rates by September 2015. Medium-term to long-term Lebanese debt papers maturing

in April 2021, October 2022, January 2023 and November 2026 witnessed some offer, mainly from

foreigners, in relatively moderate volumes. This was absorbed by a local demand. Within this context,

the weighted average bond yield rose by 9 basis points to 4.56%, while the weighted average spread

expanded by 19 basis points to 328 basis points amidst rises in Lebanese yields and drops in international

benchmark yields. For instance, the 7-year US Treasuries yields fell from 1.99% at the end of last week to

1.88% this week, and the 10-year US Treasuries yields declined from 2.31% to 2.22% over the said period.

As to the cost of insuring debt, Lebanon’s five-year CDS spread expanded from 345-385 bps last week to

360-390 bps this week amidst local uncertainties.



WEEK 42

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.

Lebanon Weekly Monitor (42) 17-10-2014images.mofcom.gov.cn/lb/201410/20141022233803450.pdf ·...

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