The LEBANONWEEKLY MONITOR...Marwan Barakat (961-1) 977409 [email protected] Jamil...

1Week 39 September 21 - September 27, 2020

SEPTEMBER 21 - SEPTEMBER 27, 2020

WEEK 39

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

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LEBANON MARKETS: WEEK OF SEPTEMBER 21 - SEPTEMBER 27, 2020

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The LEBANON WEEKLY MONITOR

Economy_____________________________________________________________________________

p.2 DOUBLE-DIGIT CONTRACTIONS IN FISCAL REVENUES AND EXPENDITURES

OVER THE FIRST HALF-YEARThe public finance figures for the first half of 2020 suggest that both public revenues and public

expenditures were down by double-digit contractions, generating a slight decline in fiscal deficit.

Also in this issuep.3 Construction permits down by a yearly 44% in first eight months of 2020

p.3 Value of cleared checks registered a yearly contraction of 3.5% in first eight months of 2020

p.4 Real GDP shrinking by 15% in fourth quarter of 2019 according to national accounts

Surveys_____________________________________________________________________________

p.5 LEBANON SCORES 0.52 ON THE WORLD BANK’S HUMAN CAPITAL INDEX 2020The World Bank published “The Human Capital Index (HCI) 2020 Update”. The Human Capital Index is an

international metric that benchmarks key components of human capital across countries.

Also in this issuep.5 Lebanese economy to contract by 15.0% in 2020, as per Bloomberg survey

p.6 Vast public assets in Lebanon are a hidden gold mine, as per Carnegie Middle East Center

Corporate News_____________________________________________________________________________

p.7 LEBANESE-OWNED CMA CGM SIGNS MoU FOR THE ACQUISITION OF 30% OF

GROUPE DUBREUIL AÉROGroupe DUBREUIL Aéro and CMA CGM Group announced the signature of a Memorandum of

Understanding for the acquisition of 30% of Groupe DUBREUIL Aéro by the CMA CGM Group.

Also in this issue

p.8 Gemmayzeh’s ArtHaus to be inaugurated in October

p.8 The development of Linord project intended to create residential and commercial areas

reactivated

p.8 Lebanese travel agencies facing high risks

Markets In Brief_____________________________________________________________________________

p.9 BOND PRICE CONTRACTIONS ON DEADLOCKED CABINET FORMATION PROCESSAmid the deadlock in the cabinet formation process and rising international pressures to overcome

obstacles hindering the formation of a “rescue” government that should carry swift reforms and help

unlocking much-needed international financial assistance, and on talks about plans to reduce subsidies

and launch subsidy cards that would allow poor families to buy basic products at a rate of LP/US$ 1,515,

the Lebanese pound dropped against the US dollar on the black market this week, ranging between

LP/US$ 7,650-LP/US$ 7,750 on Friday as compared to LP/US$ 7,500-LP/US$ 7,600 at the end of last

week. In parallel, the Eurobond market traced a downward trajectory amid continuous cabinet impasse,

while also tracking declines in emerging debt markets on fears over renewed Coronavirus lockdowns.

Accordingly, bond prices ranged between 15.75 cents per US dollar and 18.63 cents per US dollar versus

16.50 -19.63 cents per US dollar the week before. On the equity market, the BSE price index remained

stable amid mixed price movements, while activity stayed quite shy.



WEEK 39

ECONOMY______________________________________________________________________________

DOUBLE-DIGIT CONTRACTIONS IN FISCAL REVENUES AND EXPENDITURES OVER

THE FIRST HALF-YEAR

The public finance figures for the first half of 2020 suggest that both public revenues and public

expenditures were down by double-digit contractions, generating a slight decline in fiscal deficit. As a

matter of fact, total public expenditures were down by 16.3% over the first half-year, while total public

revenues were down by 19.8% over the period, generating an 8.1% contraction in fiscal deficit.

Public expenditures were actually down by US$ 1.4 billion, moving from US$ 8.2 billion in the first half of

2019 to US$ 6.8 billion in the first half of 2020. The retreat in public spending is mainly tied to the decline

in interest payments primarily due to the State’s default in March of this year. In fact, debt service was

down by a yearly 51.5% in the first half of 2020, moving from US$ 2.6 billion to US$ 1.3 billion, with interest

payment on foreign currency debt down by 87.6% and interest payment on domestic debt down by

26.1% year-on-year.

Public revenues were down by US$ 1.2 billion, moving from US$ 5.8 billion to US$ 4.6 billion between

the two half-years. The retreat in total revenues is mainly tied to the decline in budget revenues by US$

1.5 billion, while Treasury revenues increased by US$ 0.3 billion over the period. In turn, the significant

decline in budget revenues is related to the prevailing macro sluggishness as a result of the preveiling

economic crisis, the spillover effects of the Corona Pandemic and the drastic drop in imports amid

weakened domestic consumption and investment demand. It is worth mentioning that custom revenues

were down by 32.4%, VAT revenues were down by 49.8% and Telecom revenues were down by 44.4%.

Paradoxically, property taxes were up by 47.7% year-on-year as a result of significant property transactions

within the context of investors fleeing to real estate to escape any haircut on their financial investments.

The more significant absolute drop in public spending relative to public revenues lead to small savings in

the overall public finance deficit. As a matter of fact, the 2020 first half deficit amounted to US$ 2.2 billion,

against US$ 2.4 billion over the same period in 2019. However, as a percentage of public spending, fiscal

deficit rose from 29.6% to 32.5%, with an even more significant rise relative to GDP that is believed to

have significantly contracted this year. a e s g ca t y co t acted t s yea .

BREAKDOWN OF PUBLIC REVENUES AND EXPENDITURES (H1-20)

Sources: Ministry of Finance, Bank Audi's Group Research Department



WEEK 39

Finally, when looking at the primary balance, the primary surplus of US$ 0.3 billion over the first half of

2019 (the equivalent of 3.8% of expenditures) turned into a primary deficit of US$ 0.9 billion over the

first half of 2020 (the equivalent of 12.8% of expenditures), highlighting the unsustainable nature of

public finances that require a significant deal of fiscal adjustment to avoid further monetary drift looking

forward.

_____________________________________________________________________________CONSTRUCTION PERMITS DOWN BY A YEARLY 44% IN FIRST EIGHT MONTHS OF 2020

Construction permits, an indicator of forthcoming construction activity, registered a net contraction

of 44.1% during the first eight months of 2020 when compared to the previous year’s corresponding

period, according to the latest figures released by the Orders of Engineers of Beirut and Tripoli.

In details, construction permits covered an area of 2,570,858 square meters in the first eight months of

2020 amid developers hesitation to launch new investment projects, against an area of 4,600,033 square

meters in the first eight months of 2019. This followed a yearly contraction of 27.7% registered in the

aforementioned period of 2019.

The breakdown by region shows that most of the regions reported contractions in construction permits,

with Beirut and Mount Lebanon reporting the highest contractions of 86.1% and 48.2% respectively in

the first eight months of 2020. As for the breakdown of construction permits, Mount Lebanon continued

to capture the highest share in newly issued construction permits in the first eight months of 2020 with

a share of 32.6%. It was followed by South Lebanon with 22.9%, North Lebanon with a share of 21.2%,

Nabatiyeh with 12.3%, Bekaa with 9.2% and Beirut with 1.8%.

AREA OF CONSTRUCTION PERMITS ISSUED IN LEBANON

Sources: Orders of Engineers of Beirut and Tripoli, Bank Audi's Group Research Department

_____________________________________________________________________________VALUE OF CLEARED CHECKS REGISTERED A YEARLY CONTRACTION OF 3.5% IN FIRST EIGHT MONTHS OF 2020

As an indicator of consumption and investment spending in the Lebanese economy, the total value of

cleared checks went down by 3.5% year-on-year in the first eight months of 2020. The value of cleared

checks reached US$ 36,073 million in the first eight months of 2020, against US$ 37,397 million in the same

period of 2019. Such a contraction comes despite the rise in banking checks for real estate investments.

A breakdown by currency shows that the banks’ clearings in Lebanese pounds amounted to LP 19,313

billion (-9.0%) in the first eight months of 2020, while those in foreign currency amounted to US$ 23,262

million, slightly down by 0.3% year-on-year.



WEEK 39

Furthermore, the number of cleared checks registered 3,979,043 in the first eight months of 2020, down

by 42.3% from 6,899,575 in the same period of 2019. The average value per check rose by 67.3% year-on-

year to stand at US$ 9,066 in the previously mentioned period of 2020.

In parallel, the value of returned checks reached US$ 702 million in the first eight months of 2020, against

US$ 925 million in the same period of 2019, while the number of returned checks registered 91,046 in the

first eight months of 2020, down by 47.5% from 173,409 in the same period of 2019.

LEBANON'S REAL GDP GROWTH

CLEARING ACTIVITY (FIRST EIGHT MONTHS OF EACH YEAR)

Sources: Central Administration for Statistics, Bank Audi's Group Research Department

Sources: BDL, Bank Audi's Group Research Department

_____________________________________________________________________________REAL GDP SHRINKING BY 15% IN FOURTH QUARTER OF 2019 ACCORDING TO NATIONAL ACCOUNTS

The Central Administration for Statistics (CAS) has recently released national economic data covering

official figures for the year 2019, while switching from an annual system to a new quarterly system of

national accounts. As such, quarterly series of Lebanon’s real GDP estimates for the year 2019 shows a

yearly contraction by 3% in the first quarter, by 7% in the second quarter, by 2% in the third quarter and

by 15% in the fourth quarter. Accordingly, the CAS estimated that Lebanon’s real GDP contracted by 6.7%

in full-year 2019, following a contraction of 1.9% in 2018.

In parallel, the nominal Gross Domestic Product (GDP) of Lebanon, for the year ending December 2019, is

provisionally estimated at 80.8 trillion Lebanese Pounds. In terms of value, this is 2.5% lower than in the

year ending December 2018.



WEEK 39

SURVEYS_____________________________________________________________________________LEBANON SCORES 0.52 ON THE WORLD BANK’S HUMAN CAPITAL INDEX 2020

The World Bank published “The Human Capital Index (HCI) 2020 Update”. The Human Capital Index is an

international metric that benchmarks key components of human capital across countries. Measuring the

human capital that a child born today can expect to attain by his 18th birthday, the HCI highlights how

current health and education outcomes shape the productivity of the next generation of workers. In this

way, it underscores the importance for governments and societies of investing in the human capital of

their citizens. The HCI was launched in 2018 as part of the Human Capital Project (HCP), a global effort to

accelerate progress towards a world where all children can achieve their full potential.

Lebanon recorded a Human Capital Index value of 0.52 for the year 2020, unchanged from its 2018 value.

In other words, children who are born in Lebanon today will only have, by the time they grow up, 52% of

the productivity they could have enjoyed had they benefited from a complete education and full health,

In details, Lebanon registered a “probability of survival to age 5” of 0.99, meaning that 99% of children

born in Lebanon will survive past the age of 5. Lebanon’s “expected years of learning-adjusted school”

stood at 6.3. Lebanon’s expected years of school is 10.2 . Lebanon got 390 Harmonized Test Score (noting

that 300 stands for the minimum attainment and 625 for advanced learning attainment). Furthermore,

Lebanon’s adult survival rate reached 0.93.

Over the past decade, many countries have made important progress in improving human capital. Today,

however, the COVID-19 pandemic threatens to reverse many of those gains. Urgent action is needed

to protect hard-won advances in human capital, particularly among the poor vulnerable. This report

presents an update to the Human Capital Index (HCI), using the most recent health and education data

available as of 2020. It documents new evidence on trends over time in the HCI, examples of success, and

new analytical work on utilization of human capital, as well as a primer on the COVID-19 (coronavirus)

pandemic and its potential impact on human capital. COVID-19 is taking a tremendous toll on lives

and economies. Disruptions in supply chains and the lockdowns that have been enacted to stave off

contagion are putting hardship on families’ incomes. Coupled with disruptions in basic health services

and school closures, these repercussions of COVID shocks are likely to have a significant impact on the

human capital accumulation process in the short run and in the long run. HCI 2020 data have been

collected before the onset of COVID-19 and can act as a baseline to track the effects of COVID-19 on

health and education outcomes, as policymakers consider how best to protect human capital from the

shock of the pandemic.

The 2020 update of the HCI incorporates the most recent available data to report HCI scores for 174

countries, adding 17 new countries to the index relative to the 2018 edition. The 2020 update uses new

and expanded data for each of the HCI components, available as of March 2020. As in 2018, data were

obtained from official sources and underwent a careful process of review and curation. Given the timing

of data collection, this update can serve as a benchmark of the levels of human capital accumulation that

existed immediately prior to the onset of the COVID-19 pandemic. The HCI is designed to highlight how

improvements in current health and education outcomes shape the productivity of the next generation

of workers, assuming that children born today experience over the next 18 years the educational

opportunities and health risks that children in this age range currently face. The HCI quantifies the key

stages in a child’s human capital trajectory and their consequences for the productivity of the next

generation.

_____________________________________________________________________________LEBANESE ECONOMY TO CONTRACT BY 15.0% IN 2020, AS PER BLOOMBERG SURVEY

According to a recent survey conducted by Bloomberg, the Lebanese economy is expected to be in

contraction mode with negative growth at -15.0% in 2020, and 0% in 2021. It is worth noting that the

survey was completed by seven economists. With regards to inflation, the country’s CPI is estimated to

reach 45.0% in 2020, and forecast at 15.0% in 2021. Lebanon’s current account balance is anticipated

to attain a deficit of 15.0% of GDP in 2020, and a deficit of 15.4% of GDP in 2021, as per the Bloomberg

survey.



WEEK 39

Last but not least, the country’s budget balance, as a percentage of GDP, is estimated to post a deficit of

12.2% in 2020. The latter is expected to reach a deficit of 10.0% of GDP in 2021.

_____________________________________________________________________________VAST PUBLIC ASSETS IN LEBANON ARE A HIDDEN GOLD MINE, AS PER CARNEGIE MIDDLE EAST CENTER

Since October 2019, Lebanon has been in the throes of an economic and financial meltdown, says Carnegie

Middle East Center. Unsustainable monetary and fiscal policies and an overvalued fixed exchange rate

have led to persistent fiscal and current account deficits. These twin deficits have led to a rapid buildup of

debt to finance current spending, with limited public or private real investment. Lebanon is simultaneously

facing a public health crisis, a debt crisis, a banking crisis and an exchange rate and balance of payments

crisis. The deep recession has led to a steep reduction in government revenues and a rapid increase in the

budget deficit financed by the BDL. In turn, the enduring and unsustainable monetization of deficits and

debt by the central bank has accelerated inflation, depreciated the pound’s value on the black market,

and reduced real income—thereby further depressing consumption, investment, and growth. Given

the economic and monetary dynamics, Lebanon’s prospects are dismal unless a comprehensive reform

package is implemented. It must comprise a macroeconomic, fiscal, financial, banking, and structural

reform plan that includes restructuring the public debt and fundamentally reforming the public sector.

The policy imperative should be credible and sustainable structural reforms with an immediate focus on

combating the root causes of Lebanon’s dire predicament—endemic corruption and bad governance.

Policymakers and markets characteristically focus on public debt but largely ignore public assets. In

most countries, public wealth is larger than public debt. Better management could help resolve debt

problems while providing resources for future economic growth. This should be part of any solution for

Lebanon, as per the same source. How public wealth is managed is a crucial difference between well-run

countries and failed states. Public wealth can be a curse when it tempts political overseers to engage in

illicit activities. Public assets in Lebanon are vast, as they are in virtually all countries. In fact, they are a

hidden gold mine. Public assets worldwide are larger than public debt and worth at least twice the global

GDP. But unlike listed equity assets, public wealth is unaudited, unsupervised, and often unregulated.

Even worse, it is almost entirely unaccounted for. When developing budgets, most governments largely

ignore their assets and the value they could generate. Professionally managed public assets could, on

average, add another 3 percent of GDP in additional revenues to a government’s budget.

Public assets can be divided into two main types: operational and real estate. In most countries, the

value of real estate is often several times that of all other assets combined, with government-owned

commercial real estate assets accounting for a significant portion of land. But governments often know

about only a fraction of these properties, most of which are not visible in their accounts. Typically, it

requires a crisis to bring the issue of public assets to the surface. The political will to address this arises

from a recognition that every dollar generated with an increase in yield from public commercial assets is

a dollar less gained from budgetary cuts or taxation increases. That is the case today in Lebanon, where a

public debate over the management and value of public assets is growing, according to Carnegie.

When properly designed, measures to improve public wealth management can help win a war against

corruption. Efficient management of public assets can generate revenues to pay for public services, fund

infrastructure investments, and boost government revenues without raising taxes. Such outcomes would

simultaneously address two of Lebanon’s greatest problems: the shortage of infrastructure investment

due to the public debt overhang and the undermining of democracy through bad governance and

through the capture of public assets by politicians and their cronies, as per Carnegie Middle East.

The key to unlocking public wealth lies in separating the management of public commercial assets

from policymaking and of ownership from regulatory functions. This ensures a level playing field with

the private sector and provides a healthy environment for competition. Lebanon’s portfolio of public

commercial assets comprises a wide range of operational assets. These include telecoms infrastructure,

such as the Ogero fixed network and the Alfa and Touch mobile networks; Electricité du Liban, which is

responsible for electricity production and transmission; and four water utilities. The government also

owns Middle East Airlines; the Rafiq al-Hariri and Rene Mouawad airports; the Beirut, Sidon, Tripoli,

and Tyre ports; the Casino du Liban; the Régie Libanaise des Tabacs et Tombacs; the Intra Investment

Company; the Finance Bank; and two refineries in Tripoli and Zahrani.



WEEK 39

CORPORATE NEWS______________________________________________________________________________LEBANESE-OWNED CMA CGM SIGNS MoU FOR THE ACQUISITION OF 30% OF GROUPE DUBREUIL AÉRO

Groupe DUBREUIL Aéro and CMA CGM Group announced the signature of a Memorandum of

Understanding for the acquisition of 30% of Groupe DUBREUIL Aéro by the CMA CGM Group.

France's private airline group, shareholder of the Air Caraïbes and French Bee companies, is thereby

welcoming into its capital a renowned shareholder.

The CMA CGM Group investment will result from the combination of a subscription to a capital increase

for an amount of € 50 million and the acquisition of shares. This operation was approved by Groupe

DUBREUIL Aéro employee representative bodies and is still subject to the approval of the competition

authorities in France, French Polynesia and Austria as well as authorization from the French Ministry of

Economy and Finances.

At the end of this procedure, CMA CGM will own 30% of Groupe DUBREUIL Aéro and will designate two

representatives at Groupe DUBREUIL Aéro Board of Directors, as per a statement by CMA CGM.

The CMA CGM Group provides its recognized logistics expertise to contribute to the development of

Groupe DUBREUIL Aéro cargo activity, notably through Hi Line Cargo, a subsidiary tasked with commercial

distribution of freight on Air Caraïbes and French Bee’s aircrafts. The two companies boast modern fleets

totaling 14 long-haul aircrafts including 8 Airbus A350s, a modern and particularly efficient asset capable

of transporting, in addition to its passengers and their luggage, between 15 and 25 tons of freight.

According to the statement, the partnership initiated between the two groups occurs in the context

of Covid-19 pandemic. It demonstrates the strength of the two groups and shows a shared trust in the

potential of both Groupe DUBREUIL Aéro airlines. Since the reopening of Orly on June 26, Air Caraïbes

and French Bee have refocused their routes on overseas territories. These major routes for both airlines

benefit from important affinity traffic with French overseas markets, cushioned from geopolitical or health

constraints. The months of July and August also allowed both airlines to consolidate their respective

market shares in the French overseas territories.

Groupe DUBREUIL Aéro and the CMA CGM Group are both already present throughout the overseas

territories. Through their cooperation, they aim at supporting and enhancing economic development

in Guadeloupe, Martinique, Guyana, Reunion and Polynesia. The synergy between the CMA CGM Group

and Groupe DUBREUIL Aéro will notably enable the CMA CGM Group to offer its clients services that are

complementary to ocean freight, while keeping a hold on the transport chain in markets served by both

groups.

Dubreuil Aéro Group runs the Dubreuil Group's aviation division, which employs 1,300 people in its

companies. The fleet is made up of 17 aircraft, including 14 wide-bodies, Airbus A330s and A350s. 17,300

tons of freight were transported on the routes of the two airlines in 2019.

The Dubreuil group employs nearly 5,000 people. In 2019, it achieved a consolidated turnover of € 2.2

billion. Distribution activities account for two thirds of the turnover and Air Transport for the remaining

third: Automobile (38% of turnover), Energy (8%), Public Works equipment (10%), Agricultural Machinery

(10%), Heavy Goods Vehicles (1%), Hotels and Real Estate (1%), and Air Transport with Air Caraïbes and

French bee (32%).



WEEK 39

______________________________________________________________________________GEMMAYZEH’S ARTHAUS TO BE INAUGURATED IN OCTOBER

ArtHaus, a boutique hotel in Gemmayzeh, will be inaugurated in the first week of October. It was initially

slated to be launched in mid-August, but plans were postponed due to damage sustained by the Port

Explosion.

The totally renovated 18th Century structure, on Gouraud Street, suffered severe damage by the blast that

hit the hotel’s historical arches, woodwork and artworks.

The hotel includes 25 suites and rooms, spread over four buildings, built on the grounds of a Roman villa

whose vestiges remain in the hotel’s garden.

ArtHaus consists of a collection of homes transformed into guest houses.

The co-owner is also working on a new property in the old district of Havana (Cuba).

All properties house collections of internationally acclaimed artists, as indicated by the name of this hotel

chain.

______________________________________________________________________________THE DEVELOPMENT OF LINORD PROJECT INTENDED TO CREATE RESIDENTIAL AND COMMERCIAL AREAS REACTIVATED

The development project for the northern coast (Linord), abandoned at the end of the 1990s, resurfaced.

Following a decision of the Council of Ministers dated September 2019, the Council for Development and

Reconstruction (CDR) launched a call for tenders for the realization of the preliminary study of the project,

in which four companies participated.

The Linord project is intended to create residential and commercial areas, as well as entertainment areas

integrated into their surroundings and to accommodate the fishermen of the region. A high-speed

motorway will be included, in order to resolve the traffic jam problem on the current route. The project

is also to include wastewater treatment plants for the Beirut and Metn regions, as well as a centralized

infrastructure for oil and gas storage, CDR said.

The Linord project aims to entrust a private company with the development of nearly 200 hectares on the

coast between the Beirut river and Antelias, by means of embankments allowing the recovery of land on

the sea.

______________________________________________________________________________LEBANESE TRAVEL AGENCIES FACING HIGH RISKS

Lebanese travel agencies are facing a perfect storm, strangled by the global crisis of the COVID-19

pandemic and the economic crisis in Lebanon, as per Le Commerce du Levant.

The double crisis has wiped out demand. The agencies’ sales are down by nearly 90% , as per the president

of the union of owners of travel agencies. In 2019, the industry's revenue US$ 21 million per month on

average. Since the start of the year, the monthly average has not exceeded US$ 3 million. In June, for

example, sales totaled just US$ 200,000. A descent weighs heavily on employment, with the workforce

reduced by six, from 6,000 employees with the crisis to less than a thousand today. Those who stay are

often only half paid, as per the same source.

Furthermore, the number of travel agencies accredited by the International Air Transport Association

(IATA) has fell from 213 to 168 in less than a year.

It is worth noting that travel has become a luxury for the Lebanese. Before the crisis, many went on

vacation abroad. Students, for example, could leave by borrowing a few hundred dollars from the bank.

Today the market is very small, as agencies are only targeting 2-3% of the population, as per the same

source.



WEEK 39

CAPITAL MARKETS_____________________________________________________________________________MONEY MARKET: FURTHER WEEKLY CONTRACTIONS IN TOTAL RESIDENT DEPOSITS

The overnight rate remained stable at 3% this week amid abundant local currency liquidity on the money

market, noting that its official level stayed quoted at 1.90%.

In parallel, total resident banking deposits contracted further by LP 409 billion over the week ending

10th of September 2020, as per the latest monetary aggregates released by the Central Bank of Lebanon.

This is mainly driven by a LP 277 billion fall in total LP resident deposits amid a LP 28 billion decline in

LP demand deposits and a LP 249 billion decrease in LP saving deposits, in addition to a LP 132 billion

contraction in foreign currency resident deposits. Within this context, the money supply in its largest

sense (M4) contracted by LP 261 billion week-on-week amid a LP 373 billion expansion in the currency in

circulation and a LP 225 billion decrease in the non-banking sector Treasury bills portfolio.

On a cumulative basis, total resident deposits contracted by circa LP 17,100 billion since the beginning

of the year 2020, mainly due to a LP 13,800 billion fall in total LP resident deposits and a LP 3,300 billion

decline in foreign currency resident deposits.

______________________________________________________________________________TREASURY BILLS MARKET: NOMINAL WEEKLY SURPLUS OF LP 207 BILLION

The latest Treasury bills auction results for value date 24th of September 2020 showed that the Central

Bank of Lebanon allowed banks to subscribe in full to 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 17th of September 2020 showed that total

subscriptions amounted to LP 324 billion, distributed as follows: LP 11 billion in the three-month category

(offering a yield of 3.50%), LP 106 billion in the one-year category (offering a yield of 4.50%) and LP 207

billion in the five-year category (offering a coupon of 6.0%). These compare to weekly maturities of LP

117 billion, resulting into a nominal weekly surplus of LP 207 billion.

INTEREST RATES

Source: Bloomberg



WEEK 39

TREASURY BILLS

_____________________________________________________________________________FOREIGN EXCHANGE MARKET: LP FALLS AGAINST US DOLLAR ON LINGERING CABINET IMPASSE

Amid continuous efforts to break the cabinet formation impasse and rising international pressures for

the swift formation of a government of mission, and on talks about possible subsidy cuts and plans

to distribute subsidy cards to needy families in the aim to preserve FX buffers, the LP/US$ exchange

rate saw some fluctuations over this week. After crossing the LP/US$ 8,000 threshold for the first time

since July 2020 early this week on rising concerns over deadlocked cabinet formation process, the LP/

US$ exchange rate hovered between LP/US$ 7,650-LP/US$ 7,750 on Friday, compared to LP/US$ 7,500-

LP/US$ 7,600 at the end of the previous week. Concurrently, the money changers syndicate kept the

exchange rate at LP/US$ 3,850-LP/US$ 3,900.

EXCHANGE RATES

Source: Bank Audi’s Group Research Department

Sources: Central Bank of Lebanon, Bloomberg

_____________________________________________________________________________STOCK MARKET: MIXED PRICE MOVEMENTS ON BSE AMID SHY ACTIVITY

The BSE price index remained stable this week (+0.01%) amid mixed price movements. One out of four

traded stocks posted price rises, while one stock registered price declines and two stocks saw no price

change week-on-week. In details, Solidere “A” share price declined by 1.0% to US$ 15.81, while Solidere “B”

share price edged up by 0.3% to close similarly at US$ 15.81. As to banking shares, Bank Audi’s Preferred

“I” share price stood unchanged at US$ 44.90. BEMO’s “listed’ share price remained stable at US$ 1.20.



WEEK 39

EUROBONDS INDICATORS

Source: Bank Audi’s Group Research Department

AUDI INDICES FOR BSE

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

_____________________________________________________________________________BOND MARKET: WEEKLY BOND PRICE CONTRACTIONS ON CONTINUOUS CABINET FORMATION IMPASSE

Amid continuous efforts to resolve a cabinet crisis and international calls to press ahead with the

formation of a new government that would carry swift reforms and help unlocking international financial

assistance, Lebanon’s Eurobond market came under downward price pressures this week, while also

tracking declines in emerging debt markets (as reflected by a circa 6.0% expansion in JP Morgan EMBIG

Z-spread) on growing concerns over renewed COVID-19 lockdowns.

Lebanese Eurobonds maturing between 2021 and 2037 registered price contractions ranging between

0.50 pt and 1.0 pt week-on-week. Accordingly, prices of Lebanese Eurobonds ranged between 15.75

cents per US dollar and 18.63 cents per US dollar at the end of this week. This compared to a range of

16.50 -19.63 cents per US dollar at the end of the week before.

As to trading volumes, the BSE total turnover expanded by 4.1% week-on-week, moving from US$ 6.0

million last week to US$ 6.3 million. Solidere shares continued to capture the bulk of activity (89.8%),

while the banking shares accounted for the remaining 10.2% over the week.



WEEK 39

INTERNATIONAL MARKET INDICATORS

Sources: Bloomberg, Bank Audi's Group Research Department

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The LEBANONWEEKLY MONITOR...Marwan Barakat (961-1) 977409 [email protected] Jamil...

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