Bank Audi's Weekly Report: More Satisfaction in the Foreign Exchange Market Faced by Lower Dollar Remittance Volumes

With the close of the 2019 budget page after the adoption of the House of Representatives and the welcome of the international community, and despite the badurances of the Governor of the Bank of Lebanon that the economic situation is going to better and the pound is stable and will remain stable, the Lebanese financial markets have achieved more satisfaction in the market segments and continue to deteriorate. While the Eurobond market saw a drop in prices considering foreign investment, the stock market followed a downward trend, according to Bank Audi's weekly report. In detail, Eurobond prices were downgraded by net but shy institutional investors. This reflects an increase in the weighted average yield of 9 basis points to 10.31%, while the five-year credit risk swap margin was reduced by 5 basis points to 930 basis points. On the stock market, the price index edged down 0.6% due to lower prices for Solidere shares and some stocks in the banking sector. The low participation in Lebanese equities is illustrated by the stock turnover, which was limited to 2.5% in the first half of 2019, its lowest level compared to similar periods from the beginning of the year. decade. Finally, the foreign exchange market continued to see a decline in net cash transfer volumes to the dollar, as demand volumes increased for the pound to pay taxes.

The steps

On the money market: the interest rate started from day to day of the week by 22% for technical reasons related to the withdrawal of the social security institution of some of its deposits of the Lebanese banking sector, but has gradually decreased the interest rate to move closer to 5% at the end of the week after reinsurance. Banks. At the same time, deposits by resident banks increased by 236 billion Egyptian pounds in the week ending 11 July 2019, according to the latest monetary statistics released by the Bank of Lebanon. This growth is due to an increase of 298 billion lire (198 million dollars) of foreign currency deposits, which decreased by 62 billion lire due to the decline in savings deposits of 81 billion and the rise deposits in sight in lire to 19 billion pounds. In this context, the broad money supply (M2) recorded a weekly increase of 375 billion LB, with an increase in treasury bills by the non-banking sector of 201 billion LL and a decrease in the volume of cash negotiated to 61 billion. from LL.

On the Treasury bond market: The first results of the tenders of 25 July 2019 showed that the Banque du Liban allowed banks to subscribe fully to their offers in the year-round category (with a return of 6.50%) and in the five year category (return of 8.0%). In parallel, the results of the invitations to tender of 18 July 2019 amounted to a total of 338 billion LL, distributed between 10 billion LBP during the semester (5.85%), 215 billion LBP in the category of three years (with a yield of 7.50%) and 113 billion LBP. (With a yield of 9.0%). On the other hand, 427 billion Liberian pounds of benefits were released, resulting in a weekly deficit of 89 billion Lebanese pounds.

The reduction in the market has been more satisfying this week, especially after the adoption of the 2019 budget in the House of Representatives and the expected launch of government reforms. In this context, net remittances continued to fall in favor of the dollar and demand to read continued to take advantage of the lucrative benefits of savings deposits in lira or to pay VAT. In parallel, the Governor of the Bank of Lebanon stressed that "the reading is stable and will remain so", especially with the beginning of a new economic and financial phase, namely the adoption of the budget for 2019 and the completion of the 2020 budget, with additional financial and structural reforms.

On the stock market: The Beirut Stock Exchange saw a slight drop in prices this week, as evidenced by the 0.6% drop in the price index, due to lower prices for Solidere shares and some bank shares . Of the 7 shares traded, 4 fell, while 2 shares rose and 1 share remained stable. In detail, Solidere A and B shares fell 5.2% to $ 6.21 and $ 6.15 respectively. On the banking front, Bank Audi's ordinary shares closed down 0.3% to $ 3.85. BLOM's deposit receipts decreased 2.5% to $ 7.40. In contrast, Bank Audi's deposit receipts rose 2.3% to $ 3.95. The shares of the Audi H preference clbad of H Bank increased by 2.7% to $ 75.0. In terms of volumes, nominal exchanges were limited to $ 2.2 million this week, compared to $ 1.8 million the previous week and a weekly average of $ 3.8 million since the beginning of 2019. Solidarity shares accounted for 62.4% of activity, while bank shares rose 37.6%. % Of it.

On the eurobonds market: The bond market in the Lebanese Eurobonds recorded net inflows of capital in low volumes this week. In this context, papers with a value between 2020 and 2037 recorded a price drop of between $ 0.13 and $ 0.63. This reflects an increase in the weighted average yield of 9 basis points, from 10.22% at the end of last week to 10.31% at the end of this week. The weighted average Z-spread of the offer went from 876 basis points at the end of the previous week to 882 basis points at the end of the week, an increase of 6 basis points. Regarding the cost of debt insurance, the five-year credit risk swap margin increased from 910 to 960 basis points at the end of last week to 915 to 945 basis points at the end of the week.