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WeeklyMarketWatch

IssueNo.443

December29th2014‐January9th2015

LLEEBBAANNOONN NEWS

ECONOMIC INSIGHTS

> Beirut Second Most Expensive Capital in the Arab Region in 2014 1

> Lebanon’s External Debt Posted Returns of 8.80% in 2014 2 > BSE Announces Delisting of Maturing Eurobonds 2 > Tax-Free Shopping up by 8% in Q4-2014 3 > Banks’ Assets at $172.21 Billion in November 2014 4 > Public Debt at $66.63 Billion in November 2014 5 > Annual Inflation at 0.48% in November 2014 6 > Coincident Indicator up by 0.78% in October 2014 6 > Investment Banks’ Assets at $4.04 Billion in November 2014 7 > Balance of Trade Deficit at $15.81 Billion in November 2014 8 > Customs Collections Down by 4.63% up to November 2014 9 > Total Reserves at $48.81 Billion in 2014 10 > BSE Activity Soars by 61% in the Full Year 2014 11 > Number of BIA Passengers up by 4.84% in 2014 12

CORPORATE NEWS

> Kafalat Loans Attain $109.55 Million in 2014 13

MONETARY PERFORMANCE

> Monetary Aggregates 14 > Money Markets 14

FIXED INCOME

> Fixed Income 15

LEBANESE EQUITIES

> Lebanese Equities & Credit Libanais Indices 16

Lebanon's Economic & Financial Sector Indicators 18 Lebanon's Ratings 19

BEIRUT SECOND MOST EXPENSIVE CAPITAL IN THE ARAB REGION IN 2014

Beirut ranked 2nd regionally and 233rd worldwide in Numbeo’s Consumer Price Index (CPI) when benchmarked to that of New York city, with a CPI score of 69.89 by end of year 2014. TAX-FREE SHOPPING UP BY 8% IN Q4-2014

Global Blue published its quarterly “Insights into Tourist Spending” report conveying some 8% annual expansion in tax-free shopping in Lebanon during the fourth quarter of 2014. BANKS’ ASSETS AT $172.21 BILLION IN NOVEMBER 2014

The consolidated balance sheet of commercial banks operating in Lebanon posted an annual increase of 6.35% to LBP 259,606 billion ($172.21 billion) during the month of November 2014, from LBP 244,094 billion ($161.92 billion) in November 2013. PUBLIC DEBT AT $66.63 BILLION IN NOVEMBER 2014

On the public finance front, Lebanon’s gross public debt added $4.20 billion on an annual basis to $66.63 billion as at the end of November 2014, from $62.44 billion as at end of November 2013. INVESTMENT BANKS’S ASSETS AT $4.04 BILLION IN NOVEMBER 2014

According to Banque Du Liban (BDL) statistics, the consolidated balance sheet of investment banks operating in Lebanon expanded by 1.25% during the first eleven months of the year 2014 to nearly $4.04 billion, up from nearly $3.99 billion as at year-end 2013.

TABLE OF CONTENTS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-398169 FAX: 01-398169 EXT. 1085

"BDL" Banque Du Liban "ABL" Association of Banks in Lebanon "MOF" The Lebanese Ministry of

Finance "BOP" Balance of Payment "IMF" The International Monetary Fund "Moody's" Moody's Investors Service "BSE" Beirut Stock Exchange "GDRs" Global Depositary Receipts "M1" Currency in Circulation + Demand

Deposits in LBP "M2" M1 + Other Deposits in LBP "M3" M2 + Deposits in Foreign Currencies "M4" M3+ Treasury Bills Held By Non Banking System, Including Accrued

Interests "CPI" Consumer Price Index "PPI" Producer Price Index "CLASI" Credit Libanais Aggregate Stock Index "CLFI" Credit Libanais Financial Sector Stock Index

"CLCI" Credit Libanais Construction Sector Stock Index “EIU” Economist Intelligence Unit “EOY” End of Year "P/E" Price to Earnings Multiple "P/BV" Price to Book Multiple "YTD" Year To Date "YTD Price Performance" Yield to Date Price Appreciation

"Forex" Foreign Exchange "LBP" The Lebanese Pound "USD" The United States Dollar "Yen" The Japanese Yen "GBP" The British Pound/ Sterling Pound "CHF" The Swiss Franc "Y-O-Y" Year-On-Year "GDP" Gross Domestic Product "MENA" Middle East and North Africa

“LE” Livre Egyptienne – Egyptian Pound

“SAR” Saudi Arabian Riyal “AED” United Arab Emirates Dirham “BD” Bahraini Dinar

SYNOPSIS OF TERMS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-398169 FAX: 01-398169 EXT. 1085

BEIRUT SECOND MOST EXPENSIVE CAPITAL IN THE ARAB REGION IN 2014

Numbeo.com, a global statistics website, released on January 1, 2015 its global cost of living index for the year 2014, in which it compared cities worldwide based on their Consumer Price Index (CPI) when benchmarked to that of New York city, while also uncovering the values of three other indices namely the Rent Index, the Restaurant Price Index, and the Local Purchasing Power Index for each city, always when benchmarked to the city of New York. Hamilton, Bermuda emerged as the most expensive city in the world, with a CPI of 163.55 as at end of December 2014, implying that prices in Hamilton were 63.55% more expensive than prices in New York by the end of December 2014, trailed by Geneva, Switzerland (CPI of 145.18) and Caracas, Venezuela (CPI of 141.41). Regionally, Doha, Qatar ranked as the most expensive Arab capital with a CPI of 74.00 (ranking 208th globally), trailed by Beirut (ranking 2nd regionally and 233rd worldwide) with a CPI score of 69.89 by end of year 2014, meaning that prices in Beirut are 30.11% cheaper than prices in New York. In addition, Beirut scored a Rent Index of 33.89, a Restaurant Price Index of 73.54 (the second highest among Arab capitals after Doha, Qatar “78.18”), and a Local Purchasing Power Index of 46.77. From a historical perspective, Beirut has become relatively cheaper over the last couple of years, with its CPI dwindling from 88.92 by year-end 2011 to 73.62 by year-end 2013 and 69.89 by year-end 2014. Moreover, Beirut’s Local Purchasing Power Index has improved markedly on a relative basis when compared to year-end 2011 (from 25.73 to 46.77), while its Restaurant Price Index has remained relatively stable over the 2012- 2014 period. This further depicted by the below table:

LEBANON NEWS

Weekly Market Watch

SOURCE: NUMBEO, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 1

Beirut (Indices Relative to New York City)

2011 2012 2013 2014

Consumer Price Index 88.92 79.27 73.62 69.89

Rent Index 37.05 41.72 36.08 33.89

Restaurant Price Index 76.19 77.42 75.15 73.54

Local Purchasing Power Index 25.73 42.19 40.45 46.77Source: Numbeo, Credit Libanais Economic Research Unit

City

Consumer Price Index

(CPI)

Global Rank

Regional Rank (Arab

Capitals)Rent Index Restaurant

Price Index

Local Purchasing Power Index

Hamilton, Bermuda 163.55 1 - 120.02 132.91 69.79

Geneva, Switzerland 145.18 2 - 81.46 141.23 130.21

Caracas, Venezuela 141.41 3 - 60.46 122.27 9.73

New York, USA 100.00 31 - 100.00 100.00 100.00Doha, Qatar 74.00 208 1 75.51 78.18 114.56

Beirut, Lebanon 69.89 233 2 33.89 73.54 46.77

Amman, Jordan 62.63 265 3 16.48 59.46 39.15

Abu Dhabi, UAE 62.28 268 4 75.13 62.95 105.35

Muscat, Oman 57.93 288 5 32.91 49.85 106.09

Manama, Bahrain 57.60 291 6 33.71 61.70 67.53

Tripoli, Libya 56.64 294 7 25.93 52.38 44.58

Khartoum, Sudan 52.33 322 8 15.08 35.84 51.35

Riyadh, KSA 52.22 323 9 19.03 35.46 132.80

Baghdad, Iraq 51.66 328 10 17.44 43.82 41.11

Casablanca, Morocco 42.49 386 11 18.56 31.40 40.71

Damascus, Syria 40.36 403 12 12.20 37.00 20.40

Cairo, Egypt 38.18 414 13 10.04 33.11 27.48Source: Numbeo, Credit Libanais Economic Research Unit

Cost of Living Index 2015

LEBANON’S EXTERNAL DEBT POSTED RETURNS OF 8.80% IN 2014

According to the “High Yield & Emerging Market Profiles” report published by Merrill Lynch this week, the yield on Lebanon’s external debt stood at 8.80% as at end of 2014, from 8.94% a month earlier. This poises Lebanon to occupy the sixth place among 10 MENA countries included in the index in terms of total yield, with Egypt topping the list with a year to date (YTD) return of 21.01%, followed by Turkey (18.22%), Tunisia (15.65%), and Morocco (15.16%), only to name a few. When factoring in all emerging market countries, Belize emerged as the best performer with a yield of 21.54% as at end of year 2014, and Venezuela suffering the worst performance (-30.81%). As for the month of December alone, Lebanon achieved a negative return of -0.13%, compared to 0.71% in November. In parallel, Lebanon’s YTD excess return stood at 4.51% by end of 2014, ranking as such 5th among surveyed MENA countries, with Egypt also occupying the first place with an excess return of 13.38, followed by Turkey (9.99%), Tunisia (9.06%), and Morocco (5.91%). In addition, the report indicated that option adjusted spreads on Lebanon’s Eurobonds expanded to 381 basis points (bps) as at end of December, up from 375 bps at end of November. Finally, the weight assigned to Lebanon in Merrill Lynch’s Emerging Markets’ Eurobond Index rose to 3.37% in December, up from 3.24% in November, as illustrated in the section below: BSE ANNOUNCES DELISTING OF MATURING EUROBONDS

According to the Beirut Stock Exchange (BSE) circular number 404/2015 and dated January 9, 2015, the BSE announced the delisting of the Republic of Lebanon (ROL) Eurobond issue number 53 having a face value of $250 million, and this becoming effective as at the end of the trading session of Monday January 12, 2015. The bonds, which are denominated in USD, carry a coupon rate of 5.875% and mature in January 2015.

LEBANON NEWS

Weekly Market Watch

SOURCE: MERRILL LYNCH, BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2

Country Returns (%) MENA RankExcess Return (%) MENA Rank

Egypt 21.01 1 13.38 1

Turkey 18.22 2 9.99 2

Tunisia 15.65 3 9.06 3

Morocco 15.16 4 5.91 4

Bahrain 9.42 5 2.83 7

Lebanon 8.80 6 4.51 5

UAE 8.12 7 2.48 8

Qatar 7.62 8 0.54 9

Iraq 4.97 9 -3.07 10

Jordan 4.62 10 4.18 6Source: M errill Lynch, Credit Libanais Economic Research Unit

YTD Return on Sovereign External Debt Among MENA Countries in 2014

November 2014

December 2014

Up to November 2014

Up to December 2014

Returns (%) 0.71 -0.13 8.94 8.80

Excess Return (%) -0.02 0.01 4.51 4.51

November 30, 2014

December 31, 2014

Option Adjusted Spreads (bps) 375.0 381.0 - -

Lebanon's Weight in the Index (%) 3.24 3.37 - -Source: M errill Lynch, Credit Libanais Economic Research Unit

Lebanon's Sovereign External Debt

TAX-FREE SHOPPING UP BY 8% IN Q4-2014

Global Blue, one of the world’s leaders in Tax Refund services, published its quarterly “Insights into Tourist Spending” report conveying some 8% annual expansion in tax-free shopping in Lebanon during the fourth quarter of 2014. The report showed that spending by French tourists rose by 50% y-o-y in Q4-2014, accompanied by a 36% increase in spending by Saudi Arabian nationals, a 33% improvement in spending by tourists from the United States, and a 21% rise in spending by Jordanian tourists, only to name a few. On the other hand, spending by UAE and Syrian tourists shed by 9% and 24% on a respective basis, as sketched in the chart below: The lion’s share of spending goes to Saudi Arabian visitors (15%), followed by UAE (13%), Egyptian (8%), and Kuwaiti (7%) tourists.

As for the breakdown of spending, “Fashion & Clothing” articles accounted for 67% of total Q4 tourists’ spending, trailed, and by far, by “Watches & Jewelry” items (20%) and “Home & Garden” (3%) appliances. As far as the geographical distribution of spending is concerned, Beirut, which hosts most pertinent shopping malls and brands, amassed 81% of total spending, followed by the Metn (12%), Baabda (4%), and Kesserwan (2%) regions.

LEBANON NEWS

Weekly Market Watch

SOURCE: GLOBAL BLUE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3

-60%

-40%

-20%

0%

20%

40%

60%

All

Cou

ntri

es

Sau

di A

rabi

a

UA

E

Kuw

ait

Jord

an

Egyp

t

Fran

ce

Qat

ar

Syr

ia

Uni

ted

Sta

tes

Nig

eria

Oth

er C

ount

ries

8%

36%

-9%

5%

21%14%

50%

13%

-24%

33%

11%

2%

Annual Growth in Spending in the Fourth Quarter of 2014

Source: Global Blue, Credit Libanais Economic Research Unit

Saudi Arabia, 15%

UAE, 13%

Kuwait, 7%

Egypt, 8%

Jordan, 7%

Other, 50%

Total Spending Distribution by Country of Residence in the Fourth Quarter of 2014


Fashion & Clothing 67%Watches & Jewelry 20%Home & Garden 3%Department Stores 3%Souvenirs & Gifts 2%Consumer Electronics & Household Appliances 1%Others 4%Total 100%Source: Global B lue, Credit Libanais Economic Research Unit

Total Spending Distribution by Category in the Fourth Quarter of 2014

Beirut, 81%

Metn, 12%

Kesserwan, 2%

Baabda, 4%

Others, 1%

Spending Distribution by Area in the Fourth Quarter of 2014


BANKS’ ASSETS AT $172.21 BILLION IN NOVEMBER 2014

The consolidated balance sheet of commercial banks operating in Lebanon rose by LBP 1,421 billion ($942.62 million) during the month of November 2014 to LBP 259,606 billion ($172.21 billion), up from 258,185 billion ($171.27 billion) in October. Said increase can be mainly attributed to the 1.30% monthly rise in claims on the resident private sector to LBP 67,941 billion ($45.07 billion), in part financed by the 0.41% rise in resident private sector deposits to LBP 170,444 billion ($113.06 billion). Furthermore, the consolidated assets of the banking sector posted an annual increase of 6.35%, from a reading of LBP 244,094 billion ($161.92 billion) in November 2013. The sector remains highly liquid, enjoying a primary liquidity ratio of 77.29% as at the end of November 2014, compared to a liquidity level of 78.51% a year earlier. The compounded annual growth rate (CAGR) in the consolidated assets of the banking sector reached 11.06% over the November 2008 – November 2014 period, as captured by the chart hereunder: On the funding side, customer deposits rose by LBP 943 billion ($625.54 million) month-on-month to LBP 219,889 billion ($145.86 billion) as at end of November, up from LBP 218,946 billion ($145.24 billion) in October. Moreover, deposits at Lebanese bank grew by 7.21% year-on-year, from LBP 205,090 billion ($136.05 billion) in November 2013, mimicking the trend in total assets. It is worth noting that the still prevailing presidential void coupled with the political and security tensions continued to weigh negatively on investors’ sentiment, resulting in an increase in the deposits’ dollarization rate to 65.68% in November 2014, up from 65.66% in November 2013.

On the lending front, loans to the private sector increased to LBP 76,145 billion ($50.51 billion) in November, up from LBP 75,125 billion ($49.83 billion) in October. The loans portfolio also rose by 7.91% annually, with the ratio of customer loans to customer deposits firming at 34.63% as at end of November 2014, from 34.31% in October and 34.41% in November of the previous year.

LEBANON NEWS

Weekly Market Watch

SOURCE: ABL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

Nov-2008

2009 2010 2011 2012 2013 Nov-2014

91.76

115.25128.93

140.58151.88

164.82172.21

US

D B

illio

n

Evolution of Commercial Banks' Consolidated Assets

Source: ABL, Credit Libanais Economic Research Unit

0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%

0.0020.0040.0060.0080.00

100.00120.00140.00160.00

2008 2009 2010 2011 2012 Nov-2013 2013 Nov-2014

Activity in the Lebanese Banking Sector

Loans (USD Billion) Deposits (USD Billion)Dollarization Rate (Deposits) Loans/Deposits Ratio


USD Billion 2008 2009 2010 2011 2012 Nov-2013 2013 Nov-2014

Total Assets 94.26 115.25 128.93 140.58 151.88 161.92 164.82 172.21

Loans to the Private Sector 25.04 28.37 34.93 39.38 43.45 46.81 47.38 50.51

Customer Deposits 78.66 96.82 108.60 117.70 127.66 136.05 139.17 145.86

Capital Accounts 7.10 7.94 9.22 10.72 12.64 14.09 14.20 15.48

Dollarization Rate 69.57% 64.46% 63.24% 65.92% 64.82% 65.66% 66.10% 65.68%

Private Sector Loans/Deposits Ratio 31.83% 29.31% 32.16% 33.45% 34.04% 34.41% 34.05% 34.63%

- LBP Private Sector Loans/LBP Deposits 13.69% 12.93% 16.88% 20.53% 20.84% 22.66% 22.65% 23.63%

- FC Private Sector Loans/FC Deposits 40.06% 38.62% 41.36% 40.47% 41.63% 40.94% 40.26% 40.74%Source: The Association of Banks in Lebanon, Credit Libanais Economic Research Unit

PUBLIC DEBT AT $66.63 BILLION IN NOVEMBER 2014

On the public finance front, Lebanon’s gross public debt widened by $394.03 million during the month of November 2014 to $66.63 billion, up from $66.23 billion in October. On an annual basis, gross public debt added $4.20 billion, from $62.44 billion as at end of November 2013. It is worth highlighting, in this context, that 55.97% of the country’s gross public debt is financed by the Lebanese banking sector. As far as domestic debt is concerned, the latter rose by 1.51% month-on-month and by 13.25% year-on-year to $40.87 billion. External debt, on the other hand, fell by 0.82% on a monthly basis and by 2.25% on a yearly basis to settle at $25.76 billion. The share of domestic debt continued to pile up, reaching 61.34% of gross public debt as at end of November, with that of external debt narrowing to 38.66%. Net public debt, which factors out public sector deposits, came in 8.00% higher y-o-y at $56.70 billion as at end of November 2014, from $52.50 billion as at end of November 2013. The chart below sketches the annual evolution of Lebanon’s public debt since November 2007, pointing to some 5.61% compounded annual growth rate in net public debt over the concerned period.

LEBANON NEWS

Weekly Market Watch


November 2013

November 2014

Y-O-Y % Change

Gross Public Debt 62.44 66.63 6.71% Domestic Debt 36.09 40.87 13.25% External Debt 26.35 25.76 -2.25%Public Sector Deposits 9.94 9.92 -0.16%

Net Public Debt 52.50 56.70 8.00%

Public Debt (USD Billion)

Source: The Association of Banks in Lebanon, Credit Libanais Economic Research Unit

Domestic Debt

61.34%

External Debt

38.66%

Composition of Gross Public Debt as at End of November 2014


0.00

10.00

20.00

30.00

40.00

50.00

60.00

Nov-2007 Nov-2008 Nov-2009 Nov-2010 Nov-2011 Nov-2012 Nov-2013 Nov-2014

38.70 40.7443.73 44.91 45.83

48.3852.50

56.70Billions of USD

Evolution of Net Public Debt


ANNUAL INFLATION AT 0.48% IN NOVEMBER 2014

According to the Association of Banks in Lebanon (ABL), inflation, as captured by the annual change in ABL’s consumer price index (CPI), stood at 0.48% in November 2014, in comparison with a negative 0.27% in October and a positive 1.24% in September. More specifically, November’s CPI rose to 151.16, up from 150.44 during that same month a year before. On a monthly basis, Lebanon’s CPI added 0.68% in November, compared to some 1.28% contraction in October. COINCIDENT INDICATOR UP BY 0.78% IN OCTOBER 2014

Banque Du Liban’s coincident indicator, which is an indicative measure of the country’s overall economic activity, rose by 3.14% during the month of October 2014 to 272.6, up from 264.3 in September. Concurrently, the coincident indicator came in 0.78% higher on a twelve-month basis from a reading of 270.5 in October 2013, thus portraying a shy improvement in the overall macroeconomic environment.

LEBANON NEWS

Weekly Market Watch


CPI Monthly % Change

Yearly % Change

Nov-2013 150.44 -0.07% 0.16%Dec-2013 148.91 -1.02% 2.05%Jan-2014 153.29 2.94% 2.52%Feb-2014 149.86 -2.24% 0.86%Mar-2014 149.43 -0.29% -0.23%Apr-2014 149.71 0.19% -0.03%May-2014 150.41 0.47% 0.63%Jun-2014 150.79 0.25% 1.19%Jul-2014 150.11 -0.45% 1.54%Aug-2014 149.99 -0.08% 0.81%Sep-2014 152.09 1.40% 1.24%Oct-2014 150.14 -1.28% -0.27%Nov-2014 151.16 0.68% 0.48%Source: ABL, Credit Libanais Economic Research Unit

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

146.00

147.00

148.00

149.00

150.00

151.00

152.00

153.00

154.00

Nov

-201

3

Dec

-201

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Jan-

2014

Feb-

2014

Mar

-201

4

Apr

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4

May

-201

4

Jun-

2014

Jul-

2014

Aug

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Sep

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Nov

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4

Evolution of Lebanon's Consumer Price Index

Consumer Price Index CPI (%)


230

240

250

260

270

280

290

Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14

270.5

278.8

267.9

280.3

272.5 271.8

285.1 283.8

273.4

248.4

265.0 264.3

272.6

Evolution of Lebanon's Coincident Indicator


INVESTMENT BANKS’S ASSETS AT $4.04 BILLION IN NOVEMBER 2014

According to Banque Du Liban (BDL) statistics, the consolidated balance sheet of investment banks operating in Lebanon expanded by 1.25% during the first eleven months of the year 2014 to nearly $4.04 billion, up from nearly $3.99 billion as at year-end 2013. This expansion owes, in the first place, to the 13.66% hike in claims on the private sector to $1,367 million, coupled with the 8.94% rise in claims on the public sector to $537 million.

Abiding by legislative decree number 50 and subsequent BDL circulars, investment banks operating in Lebanon have managed over the last couple of years to dampen their exposure to the public sector at the expense of increasing loans to the private sector. Consequently, the surplus representing the difference between loans to the private sector and claims on the public sector ended the eleventh month of 2014 up at $830 million, in comparison with a surplus of $710 million in the full year 2013, $419 million in 2012, and $353 million in 2011.

It is worth noting that the number of investment banks operating in Lebanon stood at 16 as at end of Q1-2014, allocated over 21 branches, as captured by the chart below:

LEBANON NEWS

Weekly Market Watch

SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 7

0

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013 Q1-2014

12 12 1213

1517 17

1617 17 17

1820

22 2221

Evolution of the Number of Investment Banks and Branches in Lebanon

Number of Investment Banks Number of Branches

in Millions of USD 2011 2012 2013 Nov-2014 % change

Cash and Banks 1,916 1,736 1,922 1,841 -4.20%Claims on Private Sector 1,147 1,181 1,203 1,367 13.66%Claims on Public Sector 794 762 493 537 8.94%Other Items 320 338 368 290 -21.10%Total Assets 4,178 4,017 3,986 4,036 1.25%

Private Sector Deposits: 2,335 2,178 1,946 1,977 1.60% o/w Resident Deposits in LBP 924 849 688 678 -1.51% o/w Resident Deposits in Foreign Currencies 1,005 1,022 971 956 -1.63% o/w Non Resident Deposits in LBP 109 74 66 67 1.54% o/w Non Resident Deposits in Foreign Currencies 296 233 220 277 25.57%Liabilities to the Public Sector 283 162 193 178 -7.49%Liabilities to the Financial Sector 558 570 598 587 -1.83%Capital Accounts 811 927 1,000 1,137 13.68%Other Items 190 181 250 157 -37.08%Total Liabilities 4,178 4,017 3,986 4,036 1.25%

Evolution of Investment Banks Consolidated Balance Sheet

Source: BDL, Credit Libanais Economic Research Unit

0

200

400

600

800

1,000

1,200

1,400

2011 2012 2013 Nov-2014

794 762

493537

1,147 1,181 1,203

1,367

Investment Banks' Loans to the Private Sector V/S Claims on The Public Sector ($ Million)

Claims on the Public Sector Claims on the Private Sector

Starting the year 2010, Investment Banks' Loans to the Private Sector > Claims on the Public Sector in Conformity with BDL's Directives

BALANCE OF TRADE DEFICIT AT $15.81 BILLION IN NOVEMBER 2014

On the current account side of the balance of payment, Lebanon’s balance of trade deficit widened by $67 million year-on-year to around $15.81 billion as at the end of the first eleven months of the year 2014, and this according to statistics published by Lebanon’s Higher Customs Council. Said increase in the deficit was buoyed by some $654 million contraction in exports to $3.04 billion, which outweighed the $587 million y-o-y drop in imports to around $18.85 billion. China topped the list of countries exporting to Lebanon, with its exports’ bill exceeding $2.27 billion (12.06% of Lebanon’s imports) as at end of November 2014. Saudi Arabia, on the other hand, led the list of countries importing from Lebanon, with its imports’ invoice aggregating to $345 million (11.35% of Lebanon’s exports). This is further elaborated in the tables below: Exports of “pearls, precious or semi-precious stones” accounted alone for 16.81% ($511 million) of total Lebanese exports up to November 2014, followed by “prepared foodstuffs” ($466 million <15.33%>), “machinery & mechanical appliances” ($406 million <13.36%>), and “chemical products” ($347 million <11.41%>). On the other hand, “mineral products” constituted the lion’s share of imported goods ($4,566 million <24.23%>), trailed, and by far, by “machinery & mechanical appliances” ($1,993 million <10.58%>), “chemical products” ($1,840 million <9.76%>), and “transport equipment” ($1,274 million <6.76%>).

LEBANON NEWS

Weekly Market Watch

SOURCE: HIGHER CUSTOMS COUNCIL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 8

-20,000-16,000-12,000-8,000-4,000

04,0008,000

12,00016,00020,00024,000

November-2013 November-2014

USD MillionCumulative Balance of Trade Deficit

Exports Imports Deficit

Source: Higher Customs Council, Credit Libanais Economic Research Unit

China 2,273 12.06%Italy 1,535 8.15%France 1,198 6.36%Germany 1,154 6.12%USA 1,125 5.97%Source: Higher Customs Council, Credit Libanais Economic Research Unit

Major Import Sources (in USD Million)Saudi Arabia 345 11.35%South Africa 291 9.57%UAE 291 9.57%Iraq 235 7.73%Syria 221 7.27%Source: Higher Customs Council, Credit Libanais Economic Research Unit

Major Export Destinations (in USD Million)

Product Value ($ Million)

% ofTotal

Mineral Products 4,566 24.23%

Machinery & Mechanical Appliances 1,993 10.58%

Chemical Products 1,840 9.76%

Transport Equipment 1,274 6.76%Others 9,172 48.67%Total Imports 18,845 100%Source: Higher Customs Council, Credit Libanais Economic Research Unit

Breakdown of Imports by Product During the First Eleven Months of the Year 2014

Product Value ($ Million)

% ofTotal

Pearls, Precious or Semi-Precious Stones 511 16.81%

Prepared Foodstuffs 466 15.33%

Machinery & Mechanical Appliances 406 13.36%

Chemical Products 347 11.41%

Others 1,310 43.09%Total Exports 3,040 100%Source: Higher Customs Council, Credit Libanais Economic Research Unit

Breakdown of Exports by Product During the First Eleven Months of the Year 2014

Balance of Trade Y-O-Y

(US$ Million) November-2013 November-2014 % ChangeExports 3,694 3,040 -17.70%Imports 19,432 18,845 -3.02%

Trade Balance (15,738) (15,805) 0.43%Source: H igher C us toms C ounc il, C redit Libanais Economic Research Unit

For the Period Ending

CUSTOMS COLLECTIONS DOWN BY 4.63% UP TO NOVEMBER 2014

Figures released by the Lebanese Customs unveil a 4.63% annual contraction in customs collections to around $2,541 million by the end of the eleventh month of the year 2014, down from $2,664 million over the same period in 2013. These figures lag behind customs collection proceeds of $2,775 million, $2,767 million, and $3,150 million over the same period in each of the years 2012, 2011, and 2010 respectively. This year-on-year drop in customs collections in 2014 can be mainly attributed to the 2.62% contraction in VAT revenues to around $1,255 million up to November, coupled with some 6.51% decline in custom revenues to $1,286 million. The Port of Beirut continued to account for the lion’s share (84.70% <$2,152.13 million>) of customs receipts up to November 2014, trailed, and by far, by the Beirut International Airport (9.11% <$231.58 million>) and the Tripoli Port (3.63% <$92.19 million>). The average customs tariff rate remained flat on a monthly basis at 8% in November, yet came in higher than the 7% reading reported in November of last year.

LEBANON NEWS

Weekly Market Watch

SOURCE: HIGHER CUSTOMS COUNCIL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 9

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Up to November 2010

Up to November 2011

Up to November 2012

Up to November 2013

Up to November 2014

1,7791,387 1,434 1,375 1,286

1,371

1,380 1,341 1,289 1,255

Custom Revenues VAT Revenues

3,150

2,7672,775

2,664 2,541

Breakdown of Aggregate Customs Collections

USD Million

Source: Lebanese Customs, Credit Libanais Economic Research Unit

in USD Million November 2013 November 2014 % Change

Custom Revenues 1,375 1,286 -6.51%

VAT Revenues 1,289 1,255 -2.62%

Custom Collections 2,664 2,541 -4.63%Source: Lebanese Customs, Credit Libanais Economic Research Unit

For the Eleven-Month Period Ending

Port of Beirut 2,152.13

Beirut International Airport ("BIA") 231.58

Tripoli Port 92.19

Others 64.73

Total 2,540.63

Breakdown of Custom Collections During the First Eleven Months of of the Year 2014 ($ Million)

Source: Lebanese Customs, Credit Libanais Economic Research Unit

Port of Beirut

84.70%

BIA9.11%

Tripoli Port3.63%

Others2.56%

Breakdown of Customs Collections per Custom OfficeDuring the First Eleven Months of the Year 2014

Source: Lebanese Customs, Credit Libanais Economic Research

TOTAL RESERVES AT $48.81 BILLION IN 2014

The Lebanese Central Bank published its bi-weekly balance sheet this week conveying some $397.54 million contraction in the foreign assets (foreign currency reserves) portfolio to $37.86 billion as at end of year 2014, from $38.26 billion as at mid-December. Said reserves represent 77.57% of the total reserves portfolio at BDL. Concurrently, the value of gold reserves at BDL shed $225.49 million during the second half of December 2014 to $10.95 billion (22.43% of total reserves). On an annual basis, however, foreign assets at BDL came in 7.28% higher than end of year 2013’s reading of $35.29 billion. The value of gold reserves, on the other hand, fell by $0.15 billion (1.37%) year-on-year from $11.10 billion as at year-end 2013, and this owing to the downturn in the gold commodity price throughout the year 2014 amid the upturn in US financial markets. Overall, total reserves (foreign currency and gold) at BDL added $2.41 billion y-o-y to settle at $48.81 billion as at end of December 2014, up from $46.40 billion a year before, as elaborated hereunder:

The Central Bank’s balance sheet also depicts a 1.37% bi-weekly contraction in BDL’s total assets during the second half of December 2014 to $85.70 billion, mainly dragged by the 1.26% depreciation in the value of gold and foreign currency reserves at BDL to $48.81 billion, which outweighed the 5.43% rise in the portfolio of loans to local financial sector to $4.22 billion. The share of gold and foreign currency reserves at BDL advanced to 56.96% of the Central Bank’s total assets as at end of year 2014, up from 56.90% as at mid-December, yet remained below the 60.24% level recorded as at year-end 2013.

LEBANON NEWS

Weekly Market Watch

SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10

$ Billion End of Year 2008

End of Year 2009

End of Year 2010

End of Year 2011

End of Year 2012

End of Year 2013

End of Year 2014

Gold 8.03 10.06 13.01 14.40 15.31 11.10 10.95Foreign Assets 19.73 28.30 30.60 32.24 35.74 35.29 37.86Total Reserves 27.76 38.36 43.61 46.64 51.05 46.40 48.81Source: Banque Du Liban, Credit Libanais Economic Research Unit

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

End of Year2008

End of Year2009

End of Year2010

End of Year2011

End of Year2012

End of Year2013

End of Year2014

8.03 10.0613.01

14.40 15.31

11.10 10.95

19.73

28.3030.60 32.24

35.74 35.2937.86

Gold Foreign Assets

Source: Banque Du Liban, Credit Libanais Economic Research Unit

Evolution of Total Reserves at Banque Du Liban

Gold22.43%

Foreign Assets

77.57%

Breakdown of BDL's Total Reserves as at Year-end 2014


$ Billion End of Year 2013

Mid December

2014

End of Year 2014

Bi-weekly (% change)

Y-O-Y (% change)

Total Reserves 46.40 49.44 48.81 -1.26% 5.21%Securities Portfolio 12.22 13.95 13.98 0.17% 14.35%Loans to Public Sector 0.00 0.00 0.00 - -Loans to Local Financial Sector 2.30 4.00 4.22 5.43% 83.54%Valuation Adjustment 0.00 0.00 0.00 0.00% 0.00%Other Assets 15.84 19.24 18.46 -4.02% 16.53%Fixed Assets 0.25 0.26 0.23 -12.59% -9.84%Total Assets 77.02 86.89 85.70 -1.37% 11.28%Currency in Circulation Outside BDL 2.64 2.70 2.82 4.48% 6.79%Financial Sector Deposits 57.35 67.28 67.49 0.31% 17.68%Public Sector Deposits 7.32 6.70 6.05 -9.71% -17.31%Valuation Adjustment 5.59 5.35 5.40 0.92% -3.32%Other Liabilities 0.71 1.49 0.50 -66.17% -29.07%Capital Accounts 3.41 3.36 3.43 2.12% 0.76%Total Liabilities 77.02 86.89 85.70 -1.37% 11.28%Source: Banque Du Liban, Credit Libanais Economic Research Unit

Total Reserves56.96%

Securities Portfolio16.31%

Loans to Public Sector0.00%

Loans to Local Financial Sector

4.92%

Valuation Adjustment

0.00%

Other Assets21.54%

Fixed Assets0.26%

Breakdown of BDL's Balance Sheet as at Year-end 2014


BSE ACTIVITY SOARS BY 61% IN THE FULL YEAR 2014

Activity on the Beirut Stock Exchange (BSE) was vivid during the month of December 2014, which witnessed a block trade on Bank Audi’s GDRs involving some 722,264 securities. More specifically, the BSE traded value rose to around $69.47 million in December 2014, up from $25.15 million in November and $30.06 million in December 2013. Concurrently, traded volume surged to 10.83 million shares in December, compared to 3.44 million shares in November and nearly 3.19 million shares in December of last year. Trades mainly consisted of listed banking stocks (9,970,802 shares <92.04%>), with the lion’s share (63.86%) going to Bank Audi (6,918,090 shares). The stake of listed real estate stocks was a thin 7.66% (829,686 shares) of total BSE traded volume, followed by industry & trading stocks (32,408 shares <0.30%>). As far as market capitalization is concerned, the latter reached around $11.22 billion in December, down from $11.29 billion in November, yet came in higher than the $10.55 billion reading reported in December 2013. On a cumulative basis, the aggregate traded value on the Beirut Bourse rallied to $602.78 million in the full year 2014, from $375.16 million during the year 2013. Traded volume was no exception, adding 104.02 million shares y-o-y to around 155.43 million shares. The BSE’s weighted average Price to Book (P/BV) multiple remained flat month-on-month at 0.97x as at end of December 2014, yet stood lower than the 1.01x figure reported in December of the previous year. On the other hand, the Price to Earning (P/E) metric rose shyly to 7.80x in December 2014, up from 7.73x in December of the previous year.

LEBANON NEWS

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 11

Real Estate Sector, 7.66%

Banking Sector, 92.04%

Industry & Trading Sector, 0.30%

Allocation of Traded Volume in December 2014

Real Estate Sector,13.52%

Banking Sector,86.26%

Industry & Trading Sector,0.22%

Allocation of Traded Value in December 2014

375,161

602,776

51,412

155,427

10,545

11,222

10,200

10,400

10,600

10,800

11,000

11,200

11,400

0

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200,000

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700,000

Dec-2013 Dec-2014

Evolution of Beirut Bourse Cumulative Trading Activity

Traded Value ($ 000) Traded Volume (000) Market Capitalization ($ Million)

2013 2014 % ChangeTraded Value ($ 000) 375,161 602,776 60.67%Traded Volume (000) 51,412 155,427 202.32%Market Capitalization ($ Million) 10,545 11,222 6.42%Traded Value/Market Capitalization 3.56% 5.37%Turnover Ratio 3.07% 8.98%Weighted Average P/E 7.73 7.80Weighted Average P/BV 1.01 0.97

Analysis of the BSE Activity During the Year

Source: BSE, Credit Libanais Economic Research Unit

NUMBER OF BIA PASSENGERS UP BY 4.84% IN 2014

The number of passengers travelling via the Beirut International Airport (BIA) increased by 34.11% during the month of December 2014 to 573,229 (including transit travelers), up from 427,403 in November. On a cumulative basis, moreover, the number of passengers via the BIA came in 4.84% higher y-o-y at 6,567,833 during the year 2014, from 6,264,448 passengers a year earlier. More specifically, the number of arriving travelers rose by 6.35% y-o-y to 3,222,542 in 2014, accompanied by some 3.53% increase in the number of departing travelers to 3,332,916. On the other hand, the number of transit travelers dropped by a sharp 17.24% on an annual basis to 12,375, with the number of flights rising shyly to 63,566.

LEBANON NEWS

Weekly Market Watch

SOURCE: BIA, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 12

Beirut InternationalAirport 2013 2014 % ChangeTotal Passengers 6,264,448 6,567,833 4.84% o/w Arriving Passengers 3,030,191 3,222,542 6.35% o/w Departing Travelers 3,219,305 3,332,916 3.53% o/w Transit Travelers 14,952 12,375 -17.24%Number of Flights 62,484 63,566 1.73%

During the Year

Source: BIA, Credit Libanais Economic Research Unit

-1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000

Total Passengers Arriving Passengers

Departing Travelers

Transit Travelers

6,567,833

3,222,542 3,332,916

12,375

BIA's Passengers in 2014


-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

3,177,021 2,739,606

3,326,433

3,869,607

4,985,499

5,552,746 5,653,969

5,960,4146,264,368

6,567,833

BIA Total Passengers (Cumulative)


Weekly Market Watch

SOURCE: KAFALAT, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 13

KAFALAT LOANS ATTAIN $109.55 MILLION IN 2014

The number of guarantees issued by the government-subsidized program “KAFALAT” contracted by 3.79% y-o-y to 838 during the year 2014, down from 871 in 2013. Concurrently, the face value of guarantees fell by 7.28% y-o-y to around LBP 165.15 billion ($109.55 million) by end of 2014, from LBP 178.13 billion ($118.16 million) a year before. Consequently, the average value per guarantee shed 3.63% y-o-y to LBP 197.08 million ($130.73 thousand), compared to LBP 204.51 million ($135.66 thousand) in the year 2013. The agricultural sector detained the bulk (48.14%) of issued Kafalat loans during the covered period, followed by the industrial sector (35.15%) and companies operating in the tourism sector (11.21%). The pie below depicts a high concentration of Kafalat loans in the “Mount Lebanon” region, amassing alone 42.77% of the total outstanding Kafalat portfolio, followed by the “Bekaa” (19.81%), “South” (11.89%), “North” (11.46%), “Nabatieh” (9.97%) and “Beirut” (4.10%) regions, as highlighted hereunder:

CORPORATE NEWS

2013 2014Y-O-Y

% ChangeAgriculture 374 399 6.68%Industry 293 295 0.68%Tourism 142 98 -30.99%Others 62 46 -25.81%Total 871 838 -3.79%Value of Guarantees($ million)

118.16 109.55 -7.28%

Average Value per Guarantee ($000) 135.66 130.73 -3.63%

Source: Kafalat, Credit Libanais Economic Research Unit

Kafalat Loans by Sector During the Year

Agriculture48.14%

Industry35.15%

Tourism11.21%

Others5.50%

Breakdown of Kafalat Loans By Sector in 2014


2013 2014Y-O-Y

% ChangeBeirut 55 32 -41.82%Mount Lebanon 348 354 1.72%South 117 99 -15.38%Nabatieh 64 88 37.50%

Bekaa 188 169 -10.11%

North 99 96 -3.03%Total 871 838 -3.79%


Kafalat Loans by Region During the Year

Beirut 4.10%

Mount lebanon42.77%South

11.89%

Nabatieh9.97%

Bekaa19.81%

North11.46%

Breakdown of Kafalat Loans By Region in 2014


MONETARY AGGREGATES

On the monetary front, all monetary aggregates ended the week of December 25, 2014 on a positive note. More specifically, the overall money supply, “M4”, widened by $698.37 million on a weekly basis to just over $124.30 billion, with the non-banking sector’s treasury bills’ portfolio increasing by $15.26 million. In parallel, Lebanese-pound denominated deposits and currency in circulation, “M1”, rose by $335.89 million week-on-week to around $5.40 billion, thanks to some $232.17 million expansion in demand deposits and $103.48 million hike in money in circulation. Similarly, local currency term deposits, “M2”, gained some $397.58 million on a weekly basis and rose by 6.69% year-on-year to $48.54 billion. Consequently, private sector term and saving deposits denominated in LBP (“M2- M1”) notched slightly higher to nearly $43.14 billion during the concerned week, with deposits denominated in foreign currencies (“M3–M2”) firming at $68.84 billion. MONEY MARKETS

The January 1st Treasury bill auction raised around LBP 181.56 billion ($120.44 million).

Subscriptions were majority (37.81%) concentrated in the five-year to maturity T-bonds, followed by the three-month (33.87%) and six-month (28.32%) tenure bills.

The weighted average yield on Lebanese Pound Treasury bills dropped to 5.47% during the auction of January 1, down from 5.83% in the latest auction of same maturities held on the 18th of December. This mainly owes to the decreasing participation in the high-yielding five-year to maturity bonds to 37.81% in the current auction, from 54.84% in that of December 18th. The yields on the three-month, six-month, and five-year term-bills remained unchanged at 4.44%, 4.99%, and 6.74% respectively.

MONETARY PERFORMANCE

Weekly Market Watch

SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 14

3 Months6 Months

12 Months24 Months

36 Months

60 Months

84 Months96 Months

120 Months144 Months

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

0 2 4 6 8 10 12

On The Run Yield Curve

Lebanese Treasury Bills

Yield (%) Face Value (in billions

of LBP)

% of Total Face Value

3 Months 4.44% 61.500 33.87%6 Months 4.99% 51.421 28.32%60 Months 6.74% 68.643 37.81% Total 181.564 100.00%Source: Reuters, Credit Libanais Economic Research Unit

January 1, 2015

Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 96 Months 120 Months 144 MonthsTreasury Yield 4.44% 4.99% 5.35% 5.84% 6.50% 6.74% 7.50% 7.80% 7.98% 8.74%

Mone y Supply

USD Million

M1 5 ,0 6 8 5 ,4 0 4 6 .6 3 %

M2 4 8 ,14 5 4 8 ,5 4 3 0 .8 3 %

M3 116 ,7 0 0 117 ,3 8 4 0 .5 9 %

M4 12 3 ,6 0 4 12 4 ,3 0 2 0 .5 7 %

M2 - M1 4 3 ,0 7 7 4 3 ,13 9 0 .14 %

M3 - M2 6 8 ,5 5 5 6 8 ,8 4 1 0 .4 2 %Source: Banque Du Liban, Credit Libanais Economic Research Unit

De c e mbe r 18 , 2 0 14 De c e mbe r 2 5 , 2 0 14 % Cha nge

6,000

26,000

46,000

66,000

86,000

December 18,2014

December 25,2014

123,604 124,302116,700 117,384

Money Supply - USD Million -

M4 M3


FIXED INCOME

Activity on the Lebanese Eurobond market was calm this week bearing in mind that the 5.875% ROL Eurobond maturing in January 2015 and amounting to $250 million is likely to be redeemed in cash at maturity. In fact, Lebanon’s five-year spreads on credit default swap hovered between 380 and 400 basis points, with static spreads increasing to 328.92 bps, from 319.13 bps last week.

FIXED INCOME

Weekly Market Watch

SOURCE: CREDIT LIBANAIS CAPITAL MARKETS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 15

Lebanese Eurobonds Currency Coupon Maturity Bid Ask Bid Yield Bid Static Spread

Republic of Lebanon USD 5.875% Jan-15 100.02 100.04 3.000% 281Banque Du Liban USD 10.000% Apr-15 101.82 102.19 3.500% 326Republic of Lebanon USD 8.500% Aug-15 102.72 103.32 3.600% 330Republic of Lebanon USD 8.500% Jan-16 104.69 105.47 3.750% 331Republic of Lebanon USD 4.000% Dec-17 100.00 101.00 4.000% 273Republic of Lebanon USD 4.500% Apr-16 100.86 101.80 3.800% 325Republic of Lebanon USD 11.625% May-16 109.98 110.81 3.850% 329Republic of Lebanon USD 4.750% Nov-16 101.29 102.23 4.000% 323Republic of Lebanon USD 9.000% Mar-17 110.00 111.00 4.170% 326Republic of Lebanon USD 5.000% Oct-17 101.00 102.00 4.610% 349Republic of Lebanon USD 5.150% Dec-18 100.50 101.50 4.990% 368Republic of Lebanon USD 5.500% Apr-19 101.25 102.25 5.170% 370Republic of Lebanon USD 6.000% May-19 103.00 104.00 5.220% 374Republic of Lebanon USD 6.375% Mar-20 104.38 105.38 5.390% 378Republic of Lebanon USD 5.800% Apr-20 101.50 103.00 5.470% 384Republic of Lebanon USD 6.150% Jun-20 102.75 103.75 5.560% 391Republic of Lebanon USD 8.250% Apr-21 113.60 114.60 5.640% 392Republic of Lebanon USD 6.100% Oct-22 102.00 103.00 5.770% 390Republic of Lebanon USD 6.000% Jan-23 100.75 101.75 5.880% 398Republic of Lebanon USD 7.000% Dec-24 106.00 107.00 6.180% 418Republic of Lebanon USD 6.250% Jun-25 100.25 101.25 6.220% 418Republic of Lebanon USD 6.600% Nov-26 102.50 103.50 6.300% 420Republic of Lebanon USD 6.750% Nov-27 103.50 104.50 6.350% 422Source: Credit Libanais Capital Markets

LEBANESE EUROBONDS

Government Eurobonds

LEBANESE EQUITIES

Activity on the Beirut Stock Exchange watered down this week in the absence of large traded chunks on any particular security. In fact, the number of shares changing hands plunged to 977,698 shares this week, down from 1,266,419 shares last week, with value traded slipping to around $6.13 million, from nearly $7.14 million a week before. The bulk of weekly trades (61.58%) mainly revolved around Byblos Bank’s listed shares, with a shy turnover ratio of 0.11%. In this perspective, this week’s average daily trading value narrowed to around $1.53 million, down from $1.78 million last week, with the average daily trading volume receding to 244,425 shares, from 316,605 shares a week before. Six losers and six gainers were spotted this week, dragging the BSE’s market capitalization down to $11.30 billion. In this context, the Credit Libanais Aggregate Stock Index (“CLASI”) reversed its upturn this week, closing 0.14% lower at 1,093.56. In the real estate sector, the price of Solidere “A” shares shed 2.18% this week to $11.22, with that of Solidere “B” losing 1.07% to $11.11. Consequently, the Credit Libanais Construction Sector Stock Index (“CLCI”) ended its week on a negative note, down by 1.27% to a market close of 625.54. In the banking sector, the Credit Libanais Financial Sector Stock Index (“CLFI”) notched 0.20% higher this week to close at 1,391.24. This primarily owes to the 2.62% appreciation in the price of Bank Audi’s listed shares to $6.26, the 2.29% increase in the price of BEMO Bank’s listed shares to $1.79, and the 1.22% rise in the price of BLOM Bank’s GDRs to $9.92.

LEBANESE EQUITIES

Weekly Market Watch


Credit Libanais Previous Closing WeeklyIndices 2-Jan-15 9-Jan-15 % ChangeCredit Libanais Aggregate StockIndex <.CLASI> 1,095.11 1,093.56 -0.14%

Credit Libanais Financial Sector StockIndex <.CLFI> 1,388.53 1,391.24 0.20%

Credit Libanais Construction SectorStock Index <.CLCI> 633.56 625.54 -1.27%

Source: Credit Libanais Economic Research Unit

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1,000

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Credit Libanais Aggregate Stock IndexWeekly Performance

CLASI

CLASI 0.14%

.CLASI Credit Libanais Aggregate Stock Index

Value Daily % Chng Daily Net Chng

1,093.56 0.980% 10.66

Yr.High Year Hi.Date Yr.Low Year.Lo.Date

1,095.11 2-Jan-15 1,082.91 8-Jan-15

Life High Life Hi.Date Life Low Life.Lo.Date

1,801.01 7-Jul-08 836.11 25-Mar-09

Friday, January 09, 2015

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Credit Libanais Financial Sector Stock IndexWeekly Performance

CLFI

CLFI 0.20%

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Credit Libanais Construction Sector Stock IndexWeekly Performance

CLCI

CLCI 1.27%

The weighted average price to earnings (P/E) and price to book (P/BV) multiples of the Beirut Bourse ended their week lower at 7.695x and 0.960x on a respective basis.

LEBANESE EQUITIES

Weekly Market Watch


Previous Last % ChangeValue Traded ($) 7,138,327 6,134,863 -14.06%Volume Traded 1,266,419 977,698 -22.80%Average Daily Trading Value ($) 1,784,582 1,533,716 -14.06%Average Daily Trading Volume 316,605 244,425 -22.80%Market Cap - BSE ($) 11,319,825,896 11,304,538,752 -0.14%Weighted Average P/E 7.736 7.695 -0.54%Weighted Average P/BV 0.961 0.960 -0.05%

Activity Analysis

Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

Source: BSE, Credit Libanais Economic Research Unit

0.000

2.000

4.000

6.000

8.000

January 2, 2015 January 9, 2015

7.736 7.695

0.961 0.960

Evolution of Beirut Bourse Comparable Benchmarks

P/E P/BV

P/E P/BV

Solidere A $11.22 -2.18% 35,117 $395,994 100,000,000 $1,122,000 10.16 1.07 -2.18%Solidere B $11.11 -1.07% 19,537 $219,097 65,000,000 $722,150 10.06 1.06 -1.07%BLC Bank $1.70 0.00% - - 51,033,333 $86,757 7.73 1.13 0.00%-BLC Bank Preferred Class "A" $100.00 -2.91% 10,000 $1,000,000 400,000 $40,000 n.a n.a -2.91%BLC Bank Preferred Class "B" $100.00 0.00% 10,000 $1,000,000 550,000 $55,000 n.a n.a 0.00%BLC Bank Preferred Class "C" $100.00 0.00% 3,000 $300,000 350,000 $35,000 n.a n.a 0.00%Bank Audi - Listed Shares $6.26 2.62% 73,560 $443,334 399,749,204 $2,502,430 6.20 0.98 2.62%Bank Audi GDR $6.50 -3.42% 1,428 $9,282 115,515,853 $750,853 6.44 1.02 -3.42%Bank Audi Preferred "E" $102.20 0.00% - - 1,250,000 $127,750 n.a n.a 0.00%-Bank Audi Preferred "F" $102.80 0.59% 2,000 $205,600 1,500,000 $154,200 n.a n.a 0.59%Bank Audi Preferred "G" $101.50 0.00% - - 1,500,000 $152,250 n.a n.a 0.00%Bank Audi Preferred "H" $102.30 0.00% - - 750,000 $76,725 n.a n.a 0.00%Bank Of Beirut - Listed Shares $18.40 0.00% - - 16,822,467 $309,533 7.83 0.85 0.00%-Bank Of Beirut Priority Shares 2014 $21.00 0.00% - - 4,762,000 $100,002 8.94 0.97 0.00%Bank Of Beirut Preferred "E" $26.25 0.00% - - 2,400,000 $63,000 n.a n.a 0.00%-Bank Of Beirut Preferred "H" $26.25 0.00% - - 5,400,000 $141,750 n.a n.a 0.00%-Bank Of Beirut Preferred "I" $25.90 0.00% - - 5,000,000 $129,500 n.a n.a 0.00%-Byblos Bank - Listed Shares $1.60 -3.61% 602,068 $963,879 565,515,040 $904,824 8.42 0.75 0.00%Byblos Bank Preferred Class 2008 $102.00 0.00% - - 2,000,000 $204,000 n.a n.a 0.00%-Byblos Bank Preferred Class 2009 $101.20 -0.88% 3,083 $312,000 2,000,000 $202,400 n.a n.a -0.88%Byblos Bank GDR $76.00 0.00% - - 1,309,078 $99,490 8.00 0.72 0.00%-BEMO Bank - Listed Shares $1.79 2.29% 123,374 $220,273 51,400,000 $92,006 10.53 1.64 2.29%BEMO Bank Preferred Class 2013 $101.00 1.00% 2,400 $242,400 350,000 $35,350 n.a n.a 1.00%BLOM Bank GDR $9.92 1.22% 420 $4,166 73,896,010 $733,048 6.20 0.87 1.22%BLOM Bank Listed Shares $8.80 0.00% 89,043 $783,578 215,000,000 $1,892,000 5.50 0.77 0.00%BLOM Bank Preferred Class 2011 $10.20 0.00% 1,150 $11,730 20,000,000 $204,000 n.a n.a 0.00%RYMCO Class "B" $3.23 0.00% - - 10,920,000 $35,272 26.50 1.66 0.00%-Holcim Liban $15.50 1.64% 1,518 $23,529 19,516,040 $302,499 16.8 1.46 1.64%Ciment Blancs Bearer $3.75 0.00% - - 6,000,000 $22,500 13.39 2.11 0.00%-Ciment Blancs Nominal $2.75 0.00% - - 3,000,000 $8,250 9.82 1.54 0.00%-

Weekly %ChangeClosing

Source: Beirut Stock Exchange, Credit Libanais Economic Research UnitNote: n.a stands for not applicable

Market Capitalisation

($000)

YTD Price Perf.

Weekly Volume Traded

Lebanese Equities

BEIRUT STOCK EXCHANGEWeekly Value

TradedTotal Listed

Shares

LEBANON’S MAIN INDICATORS

Weekly Market Watch

SOURCE: BDL, ABL, MOF, IMF, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 18

2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 10 2 0 11 2 0 12 2 0 13 2 0 14

MACROECONOMIC INDICATORS

GDP ($ Billion) 20.96 21.29 21.80 24.58 28.83 35.14 38.01 40.08 42.96* 45.02* 47.50*

Real GDP Growth Rate 5.06% 2.70% 1.60% 9.40% 9.10% 10.30% 8.00% 2.00% 1.50% 1.50% 1.80%*

GDP Per Capita ($) 5,438 5,339 5,343 5,937 6,888 8,274 8,756* 9,145* 9,609* 9,920* 10,086*

Net Foreign Direct Investment ($ Billion) 1.99 2.79 2.68 3.38 4.33 4.84 4.96 3.40 2.30 3.79

FDI/GDP Ratio 9.51% 13.11% 12.30% 13.74% 15.02% 13.77% 13.05% 11.79% 7.86% 12.71%

INDUSTRY

Industrial Exports ($ Million) 1,467 1,667 1,737 2,353 2,978 2,595 3,291 3,530 2,952 3,076 2,119 (4)

Import of Industrial Machinery ($ Million) 142 137 130 163 188 199 227 239 288 300 193 (4)

TOURISM

Total Number of Tourists 1,278,469 1,139,524 1,062,635 1,017,072 1,332,551 1,851,081 2,167,989 1,655,051 1,365,845 1,274,362 1,132,607 (6)

Growth in Tax- Free Spending N.A 2% - 15% 17% 56% 13% 21% 10% - 6% 4% 8% (9)

REAL ESTATE

Value of Real Estate Transactions ($ Million) 2,883.0 3,295.9 3,120.3 4,174.8 6,443.7 6,958.4 9,478.8 8,841.0 9,175 8,708 8,048 (7)

Number of Real Estate Sales Transactions 50,582 50,057 49,051 65,681 80,018 83,465 94,202 82,984 74,569 69,198 63,580 (7)

Construction Permits (000 sqm) 7,719 7,928 7,532 7,919 14,281 11,509 15,187 13,980 12,362 10,527 10,456 (7)

Cement Delivery (000 tons) 2,729 3,040 3,423 3,945 4,219 4,897 5,227 5,550 5,309 5,831 3,693 (4)

TRANSPORTATION

Beirut Port: Freight Activity (000 Tons) 5,060 4,476 4,226 5,318 5,746 5,769 6,469 6,677 7,225 8,268 6,568 (9)

Beirut Airport: Number of Passengers (million) 3.2 3.18 2.74 3.41 3.87 4.74 5.55 5.65 5.96 6.26 5.99 (7)

FOREIGN TRADE

Imports ($ Million) 9,397 9,340 9,398 11,815 16,137 16,242 17,964 20,158 21,280 21,228 18,845 (7)

Exports ($ Million) 1,747 1,880 2,283 2,816 3,478 3,484 4,253 4,265 4,483 3,936 3,040 (7)

Trade Balance ($ Million) (7,650) (7,460) (7,115) (8,999) (12,658) (12,758) (13,711) (15,893) (16,797) (17,292) (15,805) (7)

BALANCE OF PAYMENTS

Net Foreign Assets at the Financial Sector ($ Million) 168 747 2,792 2,037 3,460.60 7,899.00 3,325.20 (1,996) (1,537) (1,127) (867.4) (6)

Foreign Assets ($ Billion) 11.48 11.66 12.97 12.39 19.73 28.30 30.85 32.24 35.74 35.29 37.86 (9)

PUBLIC FINANCE

Government Expenditures ($ Million) 6,992 6,768 7,880 8,350 9,922 11,388 11,336 11,675 13,321 13,640 8,899 (4)

Government Revenues ($ Million) 4,984 4,912 4,853 5,804 7,000 8,428 8,414 9,333 9,396 9,420 7,242 (4)

Budget Primary Defic it / Surplus ($ Million) 1,851 1,802 1,335 1,787 2,730 3,380 1,203 1,662 (110) (240) 951 (4)

Total Defic it ($ Million) (2,008) (1,856) (3,027) (2,546) (2,921) (2,960) (2,894) (2,342) (3,925) (4,220) (1,658) (4)

Defic it / GDP Ratio 9.58% 8.72% 13.89% 10.36% 10.13% 8.42% 7.61% 5.65% 9.23% 9.52%

Debt Service / GDP Ratio 12.43% 10.88% 13.47% 13.08% 12.16% 11.49% 10.85% 9.99% 8.51% 8.55%

Net Public Debt ($ Billion) 32.98 34.76 37.42 39.02 41.50 44.11 45.01 46.35 49.12 53.18 56.70 (7)

Gross Public Debt/GDP Ratio 171.18% 180.70% 185.19% 171.02% 163.09% 145.57% 138.39% 133.88% 135.67% 139.68%

MONETARY AGGREGATES & INFLATION

M4 ($ Billion) 49.63 51.59 56.08 63.56 72.58 87.08 97.31 103.5 110.0 117.4 124.30 (8)

(M2- M1) ($ Billion) 15.22 14.27 13.37 14.11 21.93 31.14 35.66 35.82 39.32 40.56 43.14 (8)

Monetization Level (M2/GDP Ratio) 80.27% 74.24% 69.39% 65.76% 85.55% 97.35% 103.46% 99.31% 103.14% 102.75%

Change in CPI (%) 1.70% - 2.60% 5.60% 9.30% 6.36% 4.20% 6.19% 4.27% 4.68% 2.05% 0.48% (7)

BANKING SYSTEM

Number of Commercial Banks 53 54 54 54 53 53 54 54 54 56 56 (1)

Number of Branches 799 825 830 847 860 885 912 948 962 985 986 (1)

Total Assets ($ Million) 67,786 70,325 76,179 82,255 94,255 115,250 128,925 140,576 151,883 164,821 172,210 (7)

Total Deposits ($ Million) 55,835 58,117 61,541 68,059 78,663 96,821 108,601 117,703 127,657 139,166 145,863 (7)

Loans to the Private Sector ($ Million) 15,934 16,230 17,201 20,425 25,039 28,374 34,929 39,375 43,452 47,381 50,511 (7)

Customer Loans/ Deposits 28.54% 27.93% 27.95% 30.01% 31.83% 29.31% 32.16% 33.45% 34.04% 34.05% 34.63%

Dollarization Rate 68.78% 71.71% 75.16% 77.34% 69.57% 64.46% 63.24% 65.92% 64.82% 66.10% 65.68%

Net Profit - After Tax ($ Million) 463 580 754 962 1,215 1,429 1,838 1,743 1,620 2,246 (1)

Exchange Rate (LBP to USD) 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50

Recap of Lebanon's Major Indicators

(1) As at End o f M arch, 2014, (2) As at End of June, 2014, (3) As at End of July, 2014, (4) As at End of August, 2014, (5) As at End of September, 2014, (6) As at End of October, 2014, (7) As at End of November, 2014, (8) As at December 25, 2014

(9) As at End of December, 2014

* Figures Reflect IM F Estimates

LEBANON’S RATINGS

Weekly Market Watch

SOURCE: S&P, MOODY’S, FITCH, CAPITAL INTELLIGENCE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 19

Rating Agency Tenor Rating

Long- Te rm B-

Short- Te rm B

Moody's Inve stors Se rvic e Ltd. Long- Te rm B2

Fitc h IBCA Ltd. Long- Te rm B

Short- Te rm B

Source: M oody's Investors Service, Standard & Poor's, Fitch Ratings

Ne ga tive

Republic Of Lebanon Sovereign Ratings

Outlook

Sta ble

Ne ga tive

Standa rd & Poor's

Rated Banks

Long Term Foreign Currency

Financial Strength

Outlook Long Term Foreign Currency

Outlook Long Term IDR

Outlook Long-Term Counterparty Credit Rating

Short-Term Counterparty Credit Rating

Outlook

Bank Audi B2 E+ Negative B Stable B Stable B- C Stable

BLOM Bank B2 E+ Negative B Stable - - B- - Stable

Credit Libanais - - - B Stable - - - - -

Byblos Bank B2 E+ Negative B Stable B Stable - - -

BBAC - - - B Stable - - - - -

Fransabank - - - B Stable - - - - -

BankMed - - - - - - - B- C Stable

Capital Intelligence Moody's Investors Service Fitch Ratings

Sources: M oody's Investors Service, Capital Intelligence, Fitch Ratings, S&P Ratings

S&P Ratings

Lebanese Banks' Latest Ratings

CONTACTS

RESEARCH

Fadlo I. Choueiri, CFA

[email protected]

961-1-398 169 EXT: 1080 Jad Abi Haidar [email protected] 961-1-398 169 EXT. 1083

Joelle Samaha [email protected] 961-1-398 169 EXT. 1081 Patrick Karawani [email protected] 961-1-398 169 EXT. 1082

Joanna Gergi [email protected] 961-1-398 169 EXT. 1084

MONEY MARKETS DESK

Robert Araman

[email protected]

961-1-200 028 EXT. 116 CAPITAL MARKETS DESK

Gaith Mansour

[email protected]

961-1-322 191

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Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-398169 FAX: 01-398169 EXT. 1085 20

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