Issue No. 620

November 2 – November 9, 2018

LLEEBBAANNOONN NEWS

ECONOMIC INSIGHTS

> LEBANON RANKS 10TH IN THE MENA REGION IN EXTERNAL DEBT

RETURNS YTD OCTOBER 2018 1

> OCCUPANCY RATE IN LEBANON’S HOSPITALITY SECTOR AT 72.3% IN

SEPTEMBER 2018 2

> BUDGET DEFICIT WIDENS TO $3.04 BILLION BY JUNE 2018 3

> MOODY’S PUBLISHES GLOBAL SOVEREIGN OUTLOOK 4

CORPORATE NEWS

> FITCH AFFIRMS LONG-TERM IDRS FOR BANK AUDI AND BYBLOS BANK

AT “B-” 5

> ODEABANK A.Ş. POSTS NET PROFITS OF TRY 163.81 MILLION BY

SEPTEMBER 2018 6

MONETARY PERFORMANCE

> MONETARY AGGREGATES 7

> MONEY MARKETS 7

LEBANESE EQUITIES

> LEBANESE EQUITIES & CREDIT LIBANAIS INDICES 8

LEBANON'S ECONOMIC & FINANCIAL SECTOR INDICATORS 10

LEBANON'S RATINGS 11

LEBANON RANKS 10TH IN THE MENA

REGION IN EXTERNAL DEBT RETURNS YTD

OCTOBER 2018

The cumulative return on Lebanon’s

external sovereign debt stood at a

negative 5.16% by the end of the ten-

month period ended October 2018,

poising it to occupy the 10th position

among 13 MENA countries included in

Merrill Lynch’s external debt EM sovereign

bond index.

OCCUPANCY RATE IN LEBANON’S

HOSPITALITY SECTOR AT 72.3% IN

SEPTEMBER 2018

Ernst & Young published its “Middle East

Hotel Benchmark Survey Report”,

conveying a 2.1 percentage-point annual

drop in the average occupancy rate in

Beirut’s hospitality sector to 72.3%

during the month of September 2018.

BUDGET DEFICIT WIDENS TO $3.04

BILLION BY JUNE 2018

Lebanon’s fiscal deficit (Budgetary &

Treasury) widened to $3,036 million in

the first half of 2018, up from $908

million during that same period last year.

MOODY’S PUBLISHES GLOBAL

SOVEREIGN OUTLOOK

Moody’s Investors Service noted that

liquidity risk in Lebanon is diluted by the

fact that the share of foreign currency

debt of the country’s total debt remains

limited.

FITCH AFFIRMS LONG-TERM IDRS FOR

BANK AUDI AND BYBLOS BANK AT “B-”

Fitch Ratings affirmed the long-term

Issuer Default Rating (IDR) of Bank Audi

and Byblos Bank at “B-” with a “Stable”

outlook.

TABLE OF CONTENTS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231

"ABL" Association of Banks in Lebanon "BDL" Banque Du Liban "BOP" Balance of Payment "BSE" Beirut Stock Exchange "CLASI" Credit Libanais Aggregate Stock Index

"CLFI" Credit Libanais Financial Sector Stock Index

"CLCI" Credit Libanais Construction Sector Stock Index "CPI" Consumer Price Index “EIU” Economist Intelligence Unit “EOY” End of Year "GDRs" Global Depositary Receipts "GDP" Gross Domestic Product "IMF" The International Monetary Fund "LBP" The Lebanese Pound "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

"MENA" Middle East and North Africa

"MOF" The Lebanese Ministry of Finance

"Moody's" Moody's Investors Service "P/E" Price to Earnings Multiple "P/BV" Price to Book Multiple "PPI" Producer Price Index

"TEU" Twenty-Foot-Equivalent Unit

"USD" The United States Dollar "Y-O-Y" Year-on-Year "YTD" Year to Date "YTD Price Performance" Yield to Date Price Appreciation

“LE

“

SYNOPSIS OF TERMS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231

LEBANON RANKS 10TH IN THE MENA REGION IN EXTERNAL DEBT RETURNS YTD OCTOBER 2018

According to the monthly “High Yield & Emerging Market Profiles” report published by Merrill Lynch, the return on Lebanon’s external debt stood at 3.49% during the month of October 2018, compared to a negative 1.07%

in September, with the cumulative return on the external sovereign debt reaching a negative 5.16% by the

end of the ten-month period ended October 2018. This poises Lebanon to occupy the 10th position among 13 MENA countries included in the external debt EM sovereign bond index in terms of total return. Bahrain topped the list with a total return of 1.70%, followed by Qatar (1.08%), Iraq (0.07%), Kuwait (-0.90%), and UAE (-0.91%), only to name a few, with crisis-stricken Turkey bottoming the list with a negative return of 9.67%. It is worth highlighting that these returns are not risk-adjusted, which explains the fact that countries offering high sovereign yields have high Option Adjusted Spreads (OAS) as sketched in the table below, lowering as such the risk adjusted returns.

When factoring in all emerging economies in the Merrill Lynch index, however, the Bahamas emerged as the best performer with a sovereign return of 2.48%, while Zambia suffered the worst return performance (-31.84%) .Lebanon’s excess return reached a negative 3.57% by October 2018, the fourth lowest among

surveyed MENA countries, noting that it recorded the highest OAS of 698 basis points (bps) in the region and the fifth highest OAS amongst all emerging economies in the index. The OAS on Lebanon’s External Sovereign debt came markedly lower than the 770 bps level reported in

September 2018 in light of a rising hope in the formation of a new government during the covered month. Consequently, the weight assigned to Lebanon in Merrill Lynch’s Emerging Markets’ external debt index

increased to 2.65% in October 2018 up from 2.36% in the previous month, as captured in the following analysis:

LEBANON NEWS

Weekly Market Watch

SOURCE: MERRILL LYNCH, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 1

Month of

September

2018

Month of

October

2018

YTD

September

2018

YTD

October

2018

Returns (%) -1.07 3.49 -8.35 -5.16

Excess Return (%) -0.30 3.68 -6.95 -3.57

Option Adjusted Spreads (bps) 770 698 - -

Lebanon's Weight in the Index (%) 2.36 2.65 - -

Source: M errill Lynch, Credit Libanais Economic Research Unit

Lebanon's Sovereign External Debt

Country Returns (%) MENA Rank OAS (bps)Excess

Return (%)MENA Rank

Bahrain 1.70 1 356 3.72 2

Qatar 1.08 2 109 4.31 1

Iraq 0.07 3 467 1.13 5

Kuwait -0.90 4 75 1.21 4

U.A.E. -0.91 5 99 1.82 3

Morocco -1.63 6 160 -0.28 8

Oman -2.25 7 306 0.60 7

Saudi Arabia -2.72 8 138 1.05 6

Jordan -4.12 9 423 -0.75 9

Lebanon -5.16 10 698 -3.57 11

Egypt -5.46 11 466 -3.26 10

Tunisia -7.06 12 633 -6.56 12

Turkey -9.67 13 439 -7.22 13

Source: M errill Lynch, Credit Libanais Economic Research Unit

Total Return on Sovereign External Debt in MENA Countries YTD October 2018

OCCUPANCY RATE IN LEBANON’S HOSPITALITY SECTOR AT 72.3% IN SEPTEMBER 2018

Ernst & Young (EY) published its “Middle East Hotel Benchmark Survey Report” on the performance of 4 and 5 star hotels in the Middle East region, conveying a 2.1 percentage-point annual drop in the average occupancy

rate in Beirut’s hospitality sector to 72.3% during the month of September 2018. The average room rate also

fell by 7.9% y-o-y to $184, with the average room yield plunging by 10.5% to $133.

The following chart captures the monthly evolution in the occupancy rate in Beirut’s 4 and 5 star hotels over the September 2017 - September 2018 period:

On a regional basis, Beirut recorded the 3rd highest (63.6%) average occupancy rate among covered Middle Eastern capitals during the first nine months of the current year. Abu Dhabi outperformed its regional peers, recording the highest average occupancy rate of 75.8% by September, followed by Cairo (70.8%), among others. In a related note, Kuwait City’s 4 and 5 star hotels charged the highest average room rate ($190),

right ahead of their likes in Beirut ($187) and Riyadh ($171), only to name a few.

LEBANON NEWS

Weekly Market Watch

SOURCE: ERNST & YOUNG, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2

Sep-2017 Sep-2018 Change

Hotel Occupancy Rate (%) 74.4 72.3 -2.1 pctg points

Average Room Rate (USD) 200 184 -7.9%

Rooms Yield (USD) 149 133 -10.5%

Performance of Beirut's Hospitality Sector During the Month of

Source: Ernst & Young, Credit Libanais Economic Research Unit

74%

68%

54%

54%

49%

61%

64%

69%

51%

61%

73%

73% 72%

40%

50%

60%

70%

80%

Monthly Evolution of Hotel Occupancy in Beirut

Source: Ernst & Young, Credit Libanais Economic Research Unit

Country - Capital Sep-2017 Sep-2018Change in

% Pts

Sep-

2017

Sep-

2018% Change Sep-2017 Sep-2018

%

Change

Bahrain - Manama 50.5 50.2 -0.3 183 164 -10.3% 92 82 -10.8%

Egypt - Cairo City 64.8 70.8 6.0 96 103 7.1% 63 73 17.0%

Jordan - Amman 55.0 58.5 3.4 148 144 -2.8% 81 84 3.2%

Kuwait - Kuwait City 57.0 56.1 -0.9 188 190 1.2% 107 107 -0.4%

Lebanon - Beirut 65.4 63.6 -1.8 186 187 0.6% 122 119 -2.1%

Oman - Muscat 68.7 54.0 -14.7 157 138 -12.1% 108 75 -30.9%

Qatar - Doha 60.9 57.6 -3.3 149 126 -15.6% 91 73 -20.1%

Saudi Arabia - Riyadh 51.0 53.1 2.1 183 171 -6.5% 93 91 -2.5%

United Arab Emirates - Abu Dhabi 77.3 75.8 -1.5 100 95 -5.1% 77 72 -7.0%

Middle East Hotel Benchmark Survey During the Period Ended

Hotel Occupancy Rates (%) Average Room Rates (USD) Room Yields (USD)

Source: Ernst & Young - Middle East Hotel Benchmark Survey, Credit Libanais Economic Research Unit

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Abu Dhabi

Cairo

Beirut

Amman

Doha

Kuwait City

Muscat

Riyadh

Manama

75.8%

70.8%

63.6%

58.5%

57.6%

56.1%

54.0%

53.1%

50.2%

Hotel Occupancy Rate in the Middle East Region up to

September 2018

Source: Ernst & Young, Credit Libanais Economic Research Unit

0 50 100 150 200

Kuwait City

Beirut

Riyadh

Manama

Amman

Muscat

Doha

Cairo

Abu Dhabi

190

187

171

164

144

138

126

103

95

Average Room Rate in the Middle East up to September 2018

(USD)

Source: Ernst & Young, Credit Libanais Economic Research Unit

BUDGET DEFICIT WIDENS TO $3.04 BILLION BY JUNE 2018

Lebanon’s fiscal deficit (Budgetary & Treasury) widened to $3,036 million in the first half of 2018, up from

$908 million during that same period last year. Moreover, the primary balance (Budget & Treasury) registered

a deficit of around $155 million, in comparison with a surplus of $1,630 million in H1-2017. In detail, government revenues (Budget & Treasury) fell by 1.97% y-o-y to $5.94 billion, mainly owing to some 3.24% drop in tax revenues to just below $4.57 billion. More specifically, miscellaneous tax revenues plunged by 8.14% on an annual basis to $2.66 billion, while VAT-related revenues soared by 9.71% to just above $1.24 billion. Non-tax revenues plummeted by 16.93% y-o-y to $860.26 million, with telecom revenues sinking by 26.09% to $318.30 million. On the other hand, government expenditures (Budget & Treasury) (including debt

service) rallied by 28.84% annually to nearly $8.98 billion by June 2018. In fact, general expenditures rose by a sharp 33.65% to $5.21 billion, accompanied by a 66.66% hike in treasury expenditures to $884.39 million, a 31.33% surge in budget expenditures over the previous years to over $1.01 billion, and a 32.76% expansion in transfers to Electricité Du Liban (EDL) to around $738.44 million as oil prices sustained their upturn. Furthermore, debt service continued to weigh heavily on the government’s finances and grew by 13.53% y-o-y to $2,881 million, from $2,537 million a year earlier. Consequently, the deficit to total expenditures’ ratio

increased markedly to 33.82% in the first half of 2018, from 13.03% in H1-2017.

LEBANON NEWS

Weekly Market Watch

SOURCE: THE LEBANESE MINISTRY OF FINANCE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3

Public Finance Y-O-Y

(USD Million) Jun-2017 Jun-2018 % Change

Revenues 6,060 5,941 -1.97%

Expenditures (Including Debt Servicing) 6,968 8,977 28.84%

Debt Servicing 2,537 2,881 13.53%

Total Deficit (908) (3,036) 234.54%

Total Primary Surplus/ (Deficit) 1,630 (155) -109.53%

Deficit / Total Expenditures 13.03% 33.82%

For the Six-Month Period Ending

Source: The Lebanese M inistry of Finance, Credit Libanais Economic Research Unit

6,060 5,941

6,968

8,977

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

Jun-2017 Jun-2018

USD Million

Cumulative Budget Deficit

Revenues Expenditures (Including Debt Servicing) Total Deficit

Tax Revenues

(76.91%)

•Misc. Tax Revenues (44.83%)

•Customs Revenues (11.17%)

•VAT Revenues (20.91%)

Non-Tax Revenues

(14.48%)

Treasury Receipts

(8.61%)

•Guarantees (0.65%)

•Municipalities (1.59%)

•Deposits (0.67%)

•Other (5.70%)

Breakdownof

Government Revenues

General Exp.

(58.06%)

•Electricité Du Liban (8.23%)

•Budget Exp. Prev. Years (11.28%)

•Other (38.55%)

Debt Service and Foreign

Debt Repayment

(32.09%)

•Interest Payment (31.00%)

•Foreign Debt Principal Repayment (1.09%)

Treasury Exp.

(5.70%)

•Guarantees (0.43%)

•Municipalities (1.05%)

•Deposits (0.45%)

•Other (3.77%)

Breakdown of Government Expenditures

MOODY’S PUBLISHES GLOBAL SOVEREIGN OUTLOOK

Moody’s Investors Service, the international rating agency, published this week a “Sovereigns – Global” report

titled “2019 outlook still stable, but slowing growth signals increasingly diverging prospects” in which it

spotted the light on the factors that should shape sovereign credit prospects around the world during the upcoming 12 to 18 months. In detail, the report unveiled a swelling uncertainty surrounding long-term economic and financial stability, which is being fueled by the growing political tensions across the globe, including the deadlock in many MENA countries and the policy and trade measures recently undertaken by the United States. Uncertainty is also being triggered by the prevailing fundamental weaknesses witnessed in

many emerging and frontier markets, which range from frail economic growth to elevated public and private debt levels, in addition to the “febrile” international capital markets. The agency further cited a set of country-specific political challenges that have been adding pressure on political risk around the world, of which the current government void and “policy paralysis” in Lebanon. More on the local front, Moody’s classified Lebanon among countries facing market pressures and having twin fiscal and external deficits. Concurrently, the agency considered that Lebanon’s credit profile is among those that will be mostly affected by increasing funding costs given its high public debt burden, frail debt affordability, and smaller fiscal buffers. In the same

vein, it appeared among the sovereigns that are the “most vulnerable to widening risk premia” and those having registered the largest hike in spreads. On a more positive note, however, the report noted that liquidity risk in Lebanon is diluted by the fact that the share of foreign currency debt of the country’s total debt remains limited.

LEBANON NEWS

Weekly Market Watch

SOURCE: MOODY’S INVESTORS SERVICE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4

Weekly Market Watch

SOURCE: FITCH RATINGS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 5

FITCH AFFIRMS LONG-TERM IDRS FOR BANK AUDI AND BYBLOS BANK AT “B-”

Fitch Ratings, the international rating agency, affirmed on November 06, 2018 the long-term Issuer Default Rating (IDR) of two Lebanese banks, namely Bank Audi and Byblos Bank, at “B-” with a “Stable” outlook. The

agency also maintained the banks’ viability rating (VR) at “b-” and kept their short-term IDR, support rating, and support rating floor unchanged at “B”, “5”, and “CCC” respectively. In detail, the agency spotted the light on the concerned banks’ “intrinsic creditworthiness” yet underlined their high exposure to the government and the Lebanese Central Bank and the weak environment in which they operate. Fitch further commented on both banks’ “weak” capital ratios in the light of their sovereign exposure. On a positive note, the IDR and VR of both banks are supported by their leading domestic franchise (Bank Audi being the leading bank and Byblos Bank being the third largest bank in the country), solid liquidity, resilient and well-diversified deposit base and

loan portfolio, and competent management. Furthermore, the rating agency praised Bank Audi’s international diversification, highlighting that its foreign operations account for circa 30% of Audi Group’s assets, yet pinpointed Byblos Bank’s shrinking foreign operations amid the prevailing political and security unrest in certain countries in which the bank has established a foothold such as Syria and Sudan. Fitch commented that any future downgrade of the sovereign, a deterioration in depositors’ confidence, or a weakening of the concerned banks’ asset quality may result in a downgrade of both banks’ ratings. On the

other hand, any possible upgrade of the banks’ ratings is conditional upon a sizeable contraction in their sovereign debt exposure relative to their capital, an event that is deemed highly unlikely to materialize in the

near future according to Fitch.

CORPORATE NEWS

Bank Rating Class Rating Outlook

Long-Term IDR B- Stable

Short-Term IDR B -

Viability Rating b- -

Support Rating 5 -

Support Rating Floor CCC -

Long-Term IDR B- Stable

Short-Term IDR B -

Viability Rating b- -

Support Rating 5 -

Support Rating Floor CCC -

Bank Audi

Byblos Bank

Source: Fitch Ratings, Credit Libanais Economic Research Unit

ODEABANK A.Ş. POSTS NET PROFITS OF TRY 163.81 MILLION BY SEPTEMBER 2018

Bank Audi’s fully-owned Turkish subsidiary “Odeabank A.Ş.” published its audited financial statements, conveying a 28.87% annual drop in net after tax profits to TRY 163.81 million (around $27.09 million) as at

the end of the first nine months of 2018, down from TRY 230.30 million (around $64.73 million) a year before. In details, net interest income plunged by 15.24% y-o-y to TRY 904.68 million (around $149.63 million), with net commission & fee income sinking by 31.49% to TRY 89.18 million (around $14.75 million). On the other hand, the bank registered net trading gains of TRY 70.40 million ($11.64 million) compared to a loss of TRY 31.15 million (around $8. 75 million) by end of September 2017. The bank increased its provisions for loan

losses by 29.62% y-o-y to TRY 416.66 million ($68.91 million) while trimming its other operating expenses by 42.95% to TRY 320.79 million (around $53.06 million). On the balance sheet front, the consolidated assets of

Odeabank A.Ş. widened by 11.86% during the first nine months of the current year to TRY 37.03 billion (around $6.12 billion) on the back of the 162.32% rally in cash, balances with Central Banks, and financial assets accounts to TRY 12.93 billion (around $2.14 billion) at end of September 2018 outweighing the shy 0.14% drop in loans and receivables to TRY 22.60 billion (around $3.74 billion). On the funding side, customer deposits fell by 2.91% YTD September 2018 to TRY 23.22 billion (around $3.84 billion), with the ratio of net

loans to customer deposits consequently firming at 97.35%. On the capitalization front, Odeabank’s shareholders’ equity rose by 4.81% to just below TRY 3.94 billion (around $651.47 million). It is worth noting that when factoring the depreciation of the Turkish Lira against the US Dollar, growth in selected balance sheet and income statement parameters would settle in much lower grounds and may read negative in some

instances.

Weekly Market Watch

SOURCE: BSE, BANK AUDI, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 6

CORPORATE NEWS

0

50

100

150

200

250

YTD September 2017 YTD September 2018

230.30

163.81

Mil

lio

ns o

f T

RY

Evolution of Odeabank's Profitability

In Millions of TRYAs at End of

2017

As at End of

September

2018

% Change

Key Balance Sheet Figures

Total Assets 33,104.38 37,031.07 11.86%

Loans and Receivables 22,631.51 22,598.97 -0.14%

Customer Deposits 23,910.39 23,215.23 -2.91%

Shareholders' Equity 3,758.13 3,938.86 4.81%

Liquidity Ratios (%)

Net Loans to Customer Deposits 94.65% 97.35%

In Millions of TRYYTD September

2017

YTD

September

2018

Y-O-Y %

Change

Key P&L Figures

Net Interest Income 1,067.32 904.68 -15.24%

Net Commission and Fee Income 130.18 89.18 -31.49%

Net Trading Profit/(Loss) (31.15) 70.40 -326.03%

Other Operating Income 11.33 24.00 111.87%

Provision for Loan Losses 321.44 416.66 29.62%

Other Operating Expenses 562.34 320.79 -42.95%

Net Operating Profit/(Loss) 293.91 209.96 -28.56%

Net Profits/(Loss) 230.30 163.81 -28.87%

Odeabank A.Ş.

Source: BSE, Bank Audi, Credit Libanais Economic Research Unit

MONETARY AGGREGATES

All monetary aggregates ended the week of October 25, 2018 on a negative note. More specifically, the overall

money supply, “M4”, plunged by LBP 419.14 billion on a weekly basis, yet rose by 0.89% on an annual basis to LBP 222,149 billion, noting that the non-banking sector’s Treasury bills portfolio fell by LBP 18 billion during the concerned week.

In parallel, Lebanese-Pound denominated deposits and currency in circulation, “M1”, narrowed by LBP 331.23 billion week-on-week to LBP 10,414 billion on the back of some LBP 170 billion contraction in demand deposits, coupled with a LBP 161 billion drop in money in circulation. On a yearly basis, however, “M1” increased by 1.13%. Local currency term deposits, “M2”, plummeted by LBP 440.04 billion on a weekly basis and by 6.61% year-on-year to settle at LBP 77,653 billion.

Consequently, private sector term and saving deposits denominated in LBP (“M2-M1”) receded by LBP 108.81 billion (0.16%) to LBP 67,240 billion during the week of October 25, while deposits denominated in foreign currencies (“M3-M2”) improved by a shy LBP 38.90 billion (0.03%) to reach LBP 133,288 billion.

MONEY MARKETS

The November 1 Treasury bill auction raised LBP 136.081 billion ($90.269 million), compared to LBP 273.95 billion ($181.274 million) in the auction of the previous week.

The majority of subscriptions was concentrated in the five-year (55.14%) to maturity T-bonds, followed by the one-year (41.16%) and three-month (3.70%) tenure Treasury securities.

Consequently, the weighted average yield on Lebanese Pound Treasury bills stood at 6.08% in the auction of

November 1. The yields on the three-month, one-year, and five-year to maturity Treasury securities remained flat at 4.44%, 5.35%, and 6.74% respectively.

Weekly Market Watch

SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 7

CORPORATE NEWS

MONETARY PERFORMANCE

Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 120 Months

Treasury Yield 4.44% 4.99% 5.35% 5.84% 6.50% 6.74% 7.08% 7.46%

3 Months

6 Months

12 Months

24 Months

36 Months

60 Months

84 Months

120 Months

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%

0 1 2 3 4 5 6 7 8 9

On the Run Yield Curve

Lebanese

Treasury

Bills

Yield (%)

Face Value

(in billions

of LBP)

% of Total

Face Value

3 Months 4.44% 5.031 3.70%

12 Months 5.35% 56.010 41.16%

60 Months 6.74% 75.040 55.14%

Total 136.081 100.00%

Source: Reuters, Credit Libanais Economic Research Unit

November 1, 2018

Mone y Supply

LBP Billion

M1 10,745 10,414 - 3.08%

M2 78,094 77,653 - 0.56%

M3 211,342 210,941 - 0.19%

M4 222,568 222,149 - 0.19%

M2 - M1 6 7 ,3 4 9 6 7 ,2 4 0 - 0 .16 %

M3 - M2 13 3 ,2 4 9 13 3 ,2 8 8 0 .0 3 %

Oc tobe r 18 , 2 0 18 Oc tobe r 2 5 , 2 0 18 % Cha nge

Source: Banque Du Liban, Credit Libanais Economic Research Unit 150,000

200,000

250,000

October 18,

2018

October 25,

2018

222,568 222,149

211,342 210,941

Money Supply - LBP Billion -

M4 M3

Source: BDL, Credit Libanais Economic Research Unit

LEBANESE EQUITIES

Trading activity on the Beirut Stock Exchange recoiled back into its abyss this week after last

week’s rebound, which was sparked by an exceptionally large block trade on Bank Audi listed shares back then. In detail, the number of shares changing hands plunged to 951,407 shares, compared to 7,926,454 shares in the previous week, with traded value sinking to $11.53 million,

from $40.23 million a week before. Trades were mainly concentrated in real estate stocks, which accounted for 58.41% of weekly traded volume.

The average daily trading volume dwindled to 190,281 shares this week, from 1,585,291 shares

last week. Similarly, the average daily trading value narrowed to just below $2.31 million, from nearly $8.05 million a week before.

Three heavy market-cap weighted gainers and five losers were screened throughout the week, lifting the BSE’s market capitalization up by 0.41% week-

on-week to about $9.74 billion and the Credit Libanais Aggregate Stock Index (“CLASI”) higher by 0.49% to 937.61. In the real estate sector, trades mainly consisted of Holcim (Liban) shares (45.99% of weekly traded volume), the price of which rose by 0.61% to

$16.60. On the other hand, the price of Solidere “A” fell by 1.91% on a weekly basis to $6.66, with that of Solidere “B” shedding 2.82% to $6.54. Consequently, the Credit Libanais Construction Sector Stock Index (“CLCI”) ended its week 1.60%

lower at 411.83.

In the banking sector, BLOM Bank listed shares amassed the highest concentration of trades (31.88% of total traded volume) on a thin turnover ratio of 0.14%. The Credit Libanais Financial Sector Stock Index (“CLFI”) ended Friday’s session 0.95% higher week-on-week at 1,273.01. This comes as a

result of the 2.51% increase in the price of Bank Audi listed shares to $4.90 and the 5.21% hike in the price of Bank Audi GDRs to $5.25, which together outweighed the 1.41% contraction in the price of Byblos Bank listed shares to $1.40 and the 0.22% drop in the price of BLOM Bank listed shares to $9.25.

LEBANESE EQUITIES

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 8

Credit Libanais Week of Week of Weekly YTD

Indices 2-Nov-18 9-Nov-18 % Change % Change

Credit Libanais Aggregate

Stock Index <.CLASI>933.03 937.61 0.49% -13.85%

Credit Libanais Financial Sector

Stock Index <.CLFI>1,261.02 1,273.01 0.95% -14.63%

Credit Libanais Construction

Sector Stock Index <.CLCI>418.53 411.83 -1.60% -10.35%

.CLASI Credit Libanais Aggregate Stock Index

Value Daily % Chng Daily Net Chng

937.61 1.186% 10.99

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

1,133.98 4-Apr-18 907.48 26-Sep-18

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

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

Friday, November 09, 2018

900

950

1,000

1,050

1,100

1,150

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Credit Libanais Aggregate Stock IndexWeekly Performance

CLASI

CLASI 0.49%

1,200

1,300

1,400

1,500

1,600

09-N

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Credit Libanais Financial Sector Stock IndexWeekly Performance

CLFI

CLFI 0.95%

350

390

430

470

510

09-N

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Credit Libanais Construction Sector Stock IndexWeekly Performance

CLCI

CLCI 1.60%

The market-cap weighted average price to book value (P/BV) multiple of listed stocks ended its week higher at 0.711x based on the closing prices of Friday’s session.

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 9

LEBANESE EQUITIES

P/E P/BV

Solidere A $6.66 -1.91% 33,066 3.48% $219,334 1.90% 100,000,000 666,000 0.58 -16.85% - - -

Solidere B $6.54 -2.82% 85,082 8.94% $557,733 4.84% 65,000,000 425,100 0.57 -18.05% - - -

BLC Bank $0.93 0.00% - - - - 71,033,333 66,061 5.17 0.51 0.00% - - -

BLC Bank Preferred Class "C" $100.00 0.00% - - - - 350,000 35,000 n.a n.a 0.00% 6.75% 6.08% 6.08%

BLC Bank Preferred Class "D" $94.00 0.00% - - - - 750,000 70,500 n.a n.a -6.00% 7.18% 6.46% 0.46%

BLC Bank Preferred Class "E" $94.00 0.00% - - - - 263,510 24,770 n.a n.a -6.00% - - -

Bank Audi - Listed Shares $4.90 2.51% 1,000 0.11% $4,900 0.04% 399,749,204 1,958,771 3.86 0.61 -14.78% 11.22% 10.10% -4.68%

Bank Audi GDR $5.25 5.21% 33,989 3.57% $166,054 1.44% 119,924,761 629,605 4.13 0.66 -10.10% 10.48% 9.43% -0.67%

Bank Audi Preferred "H" $87.00 -0.57% 238 0.03% $20,830 0.18% 750,000 65,250 n.a n.a -13.52% 7.47% 6.72% -6.79%

Bank Audi Preferred "I" $89.90 0.00% - - - - 2,500,000 224,750 n.a n.a -10.06% 7.79% 7.01% -3.05%

Bank Audi Preferred "J" $90.00 0.00% - - - - 2,750,000 247,500 n.a n.a -9.95% 4.44% 4.00% -5.95%

Bank Of Beirut - Listed Shares $18.80 0.00% 4,269 0.45% $80,257 0.70% 20,796,417 390,973 8.83 1.06 0.00% 4.06% 3.65% 3.65%

Bank Of Beirut Priority Shares 2014 $21.00 0.00% - - - - 4,762,000 100,002 9.86 1.18 0.00% 7.63% 7.27% 7.27%

Bank Of Beirut Preferred "H" $25.00 0.00% 1,000 0.11% $25,000 0.22% 5,400,000 135,000 n.a n.a -3.47% 7.00% 6.30% 2.83%

Bank Of Beirut Preferred "I" $24.95 0.00% - - - - 5,000,000 124,750 n.a n.a -2.16% 6.76% 6.09% 3.93%

Bank Of Beirut Preferred "J" $25.00 0.00% - - - - 3,000,000 75,000 n.a n.a -2.53% 6.50% 5.85% 3.32%

Bank Of Beirut Preferred "K" $25.00 0.00% - - - - 4,000,000 100,000 n.a n.a -1.38% 6.50% 5.85% 4.47%

Byblos Bank - Listed Shares $1.40 -1.41% 24,000 2.52% $33,626 0.29% 565,515,040 791,721 5.83 0.54 -12.50% 10.05% 9.04% -3.46%

Byblos Bank Preferred Class 2008 $71.00 0.00% - - - - 2,000,000 142,000 n.a n.a -30.12% 11.27% 10.14% -19.98%

Byblos Bank Preferred Class 2009 $72.00 0.00% - - - - 2,000,000 144,000 n.a n.a -28.71% 11.11% 10.00% -18.71%

Byblos Bank GDR $75.00 0.00% - - - - 1,309,078 98,181 6.25 0.58 -3.47% 9.38% 8.44% 4.96%

BEMO Bank - Listed Shares $1.56 0.00% - - - - 51,400,000 80,184 6.00 0.70 20.00% 4.25% 3.83% 23.83%

BEMO Bank Preferred Class 2013 $96.50 0.00% - - - - 350,000 33,775 n.a n.a -6.58% 7.25% 6.53% -0.05%

BLOM Bank GDR $10.00 0.00% 27,899 2.93% $278,222 2.41% 73,896,010 738,960 4.59 0.73 -21.26% 11.28% 10.15% -11.11%

BLOM Bank Listed Shares $9.25 -0.22% 303,320 31.88% $2,885,366 25.01% 215,000,000 1,988,750 4.24 0.67 -20.53% 12.19% 10.97% -9.56%

RYMCO Class "B" $3.28 0.00% - - - - 10,920,000 35,818 18.22 1.57 0.92% 1.68% 1.51% 2.43%

Holcim Liban $16.60 0.61% 437,544 45.99% $7,263,301 62.97% 19,516,040 323,966 7.48 1.84 14.80% 17.18% 15.46% 30.26%

Ciments Blancs Nominal $2.55 0.00% - - - - 9,000,000 22,950 5.20 1.21 13.33% 19.25% 17.33% 30.66%

Total Listed

Shares

YTD Total

Net Return

YTD

Price

Perf.

Market

Capitalisation

($000)

BEIRUT STOCK EXCHANGEWeekly

Value Traded

Lebanese Equities

Note: n.a stands for not applicable

Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

Net

Dividend

Yield

ClosingWeekly

%Change

Weekly

Volume

Traded

% of Weekly

Volume Traded

% of

Weekly

Value

Traded

Gross

Dividend

Yield

Previous Last % Change

Value Traded ($) 40,231,061 11,534,623 -71.33%

Volume Traded 7,926,454 951,407 -88.00%

Average Daily Trading Value ($) 8,046,212 2,306,925 -71.33%

Average Daily Trading Volume 1,585,291 190,281 -88.00%

Market Cap - BSE ($) 9,699,569,899 9,739,336,544 0.41%

Weighted Average P/BV 0.707 0.711 0.50%

Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

Activity Analysis

Source: BSE, Credit Libanais Economic Research Unit

0.705

0.706

0.707

0.708

0.709

0.710

0.711

November 2, 2018 November 9, 2018

0.707

0.711

Evolution of Beirut Bourse Comparable Benchmarks

P/BV

Weekly Market Watch

SOURCE: CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10

LEBANON’S MAIN INDICATORS

2 0 11 2 0 12 2 0 13 2 0 14 2 0 15 2 0 16 2 0 17 2 0 18

MACROECONOMIC INDICATORS

GDP (Current Prices) ($ Billion) 40.08 44.05 46.47 48.53 49.91 51.48 54.18* 56.71*

Real GDP Growth Rate 0.92% 2.80% 2.65% 1.97% 0.24% 1.74% 1.50%* 1.00%*

GDP per Capita (Current Prices) ($) 9,144 9,954 10,502* 10,966* 11,279* 11,524* 12,013* 12,454*

Foreign Direct Investment Inflows ($ Billion) 3.14 3.11 2.66 2.91 2.35 2.61 2.63

FDI/GDP Ratio 7.84% 7.06% 5.72% 6.08% 4.75% 5.26% 5.11%

INDUSTRY

Industrial Exports ($ Million) 3,530 3,567 3,384 3,150 2,956 2,527 2,474 1,464 (3)

Import of Industrial Machinery ($ Million) 239 288 300 269 234 236 257 169 (3)

TOURISM

Total Number of Tourists 1,655,051 1,365,845 1,274,362 1,354,647 1,517,927 1,688,357 1,856,795 1,505,745 (5)

Growth in Tax- Free Spending 10% - 6% 4% 8% 2% - 9% 5% 5% (5)

REAL ESTATE

Value of Real Estate Transactions ($ Million) 8,841 9,175 8,708 8,952 8,006 8,482 9,954 5,841 (5)

Number of Real Estate Sales Transactions 82,984 74,569 69,198 70,721 63,386 64,248 73,541 43,263 (5)

Construction Permits (000 sqm) 13,890 12,362 10,527 11,159 10,294 9,935 9,271 5,587 (5)

Cement Delivery (000 Tons) 5,550 5,309 5,831 5,517 5,043 5,265 5,149 3,197 (4)

TRANSPORTATION

Beirut Port: Freight Activity (000 Tons) 6,677 7,225 8,268 8,281 7,240 8,737 8,629 5,945 (5)

Beirut Airport: Number of Passengers (Million) 5.65 5.96 6.26 6.57 8.22 7.61 8.24 6.85 (5)

FOREIGN TRADE

Imports ($ Million) 20,158 21,280 21,228 20,494 18,069 18,705 23,130 13,718 (4)

Exports ($ Million) 4,265 4,483 3,936 3,313 2,952 2,977 2,844 1,985 (4)

Trade Balance ($ Million) (15,893) (16,797) (17,292) (17,181) (15,117) (15,729) (20,287) (11,733) (4)

BALANCE OF PAYMENTS

Net Foreign Assets at the Financial Sector ($ Million) (1,996) (1,537) (1,127) (1,407) (3,354) 1,238 (157) (1,311) (5)

Foreign Assets at BDL ($ Billion) 32.24 35.74 35.29 37.86 37.09 40.71 41.99 43.15 (7)

Gold Reserves at BDL ($ Billion) 14.40 15.31 11.10 10.95 9.85 10.71 11.96 11.24 (7)

PUBLIC FINANCE

Government Expenditures ($ Million) 11,675 13,321 13,640 13,952 13,528 14,867 15,381 8,977 (2)

Government Revenues ($ Million) 9,333 9,396 9,420 10,879 9,576 9,923 11,625 5,941 (2)

Budget Primary Defic it / Surplus ($ Million) 1,662 (110) (240) 1,307 724 21 1,428 (155) (2)

Total Defic it ($ Million) (2,342) (3,925) (4,220) (3,073) (3,952) (4,944) (3,756) (3,036) (2)

Defic it / GDP Ratio 5.84% 8.91% 9.08% 6.33% 7.92% 9.60% 6.93%

Debt Service / GDP Ratio 9.99% 8.22% 8.16% 9.03% 9.38% 9.64% 9.57%

Net Public Debt ($ Billion) 46.35 49.12 53.18 57.30 61.54 65.42 69.32 72.86 (4)

Gross Public Debt/GDP Ratio 133.89% 131.49% 137.95% 139.16% 142.18% 150.95%* 152.85%* 157.26%*

MONETARY AGGREGATES & INFLATION

M4 ($ Billion) 103.50 110.00 117.41 124.53 131.17 139.20 145.16 147.36 (6)

(M2- M1) ($ Billion) 35.82 39.32 40.56 43.27 46.25 47.95 45.45 44.60 (6)

Monetization Level (M2/GDP Ratio) 99.32% 99.56% 98.00% 100.18% 104.31% 105.75% 96.63%

Change in CPI (%) 4.27% 4.68% 2.05% - 1.66% - 3.40% 3.14% 5.01% 6.53% (5)

BANKING SYSTEM

Number of Commercial Banks 54 54 56 55 53 50 49 65 (1)

Number of Branches 948 962 985 1,020 1,039 1,056 1,065 1,068 (1)

Total Assets ($ Million) 140,576 151,883 164,821 175,697 185,989 204,311 219,856 241,117 (5)

Total Deposits ($ Million) 117,703 127,657 139,166 147,637 154,951 166,446 172,965 178,200 (5)

Loans to the Private Sector ($ Million) 39,375 43,452 47,381 50,899 54,224 57,180 60,318 59,422 (5)**

Customer Loans/ Deposits 33.45% 34.04% 34.05% 34.48% 34.99% 34.35% 34.87% 33.35% (5)**

Dollarization Rate 65.92% 64.82% 66.14% 65.71% 64.88% 65.82% 68.72% 69.14% (5)

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) As at End of M arch, 2018, (2) As at End of June, 2018, (3) As at End of July, 2018, (4) As at End of August, 2018, (5) As at End of September, 2018, (6) As at October 25, 2018, (7) As at End of October, 2018

Recap of Lebanon's Major Indicators

* Figures Reflect IM F Estimates

** Year 2018 loan figures reflect BDL's reclassification of some balance sheet items to meet IFRS9 requirements.

LEBANON’S RATINGS

Weekly Market Watch

SOURCE: S&P GLOBAL RATINGS, MOODY’S, FITCH RATINGS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 11

Rating Agency Tenor Rating

Long- Term B-

Short- Te rm B

Moody's Investors Service Long- Term B3

Long- Term B-

Short- Te rm B

Source: S&P Global Ratings, M oody's Investors Service, Fitch Ratings, Credit Libanais Economic Research Unit

Stable

Stable

Stable

Republic Of Lebanon Sovereign Ratings

Outlook

Standard & Poor's Globa l

Ra tings

Fitch Ra tings

Rated Banks

Long Term

Foreign

Currency

Outlook Long

Term

IDR

Outlook Long-Term

Counterparty

Credit Rating

Short-Term

Counterparty

Credit Rating

Outlook

Bank Audi B3 Stable B- Stable B- C Stable

BLOM Bank B3 Stable - - B- - Stable

Byblos Bank B3 Stable B- Stable - - -

BankMed - - - - B- C Stable

Moody's Investors Service Fitch Ratings

Source: M oody's Investors Service, Fitch Ratings, S&P Global Ratings, Credit Libanais Economic Research Unit

S&P Global Ratings

Lebanese Banks' Latest Ratings

CONTACTS

RESEARCH

Fadlo I. Choueiri, CFA

fchoueiri@cl.com.lb

961-1-608 000 EXT: 1280

Jad Abi Haidar, CFA jabihaidar@cl.com.lb 961-1-608 000 EXT. 1283

Joelle Samaha jsamaha@cl.com.lb 961-1-608 000 EXT. 1281

Mayda Zaarour mzaarour@cl.com.lb 961-1-608 000 EXT. 1282

Nagham Abdel Ahad nabdelahad@cl.com.lb 961-1-608 000 EXT. 1284

Marc Moukarzel mmoukarzel@cl.com.lb 961-1-608 000 EXT. 1286

MONEY MARKETS DESK

Robert Araman

raraman@cl.com.lb

961-1-608 000 EXT. 0760

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any contract or commitment whatsoever. Reasonable care has been taken to ensure that the facts stated herein are accurate and the estimates, opinions and expectations contained herein are fair and reliable.

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231 12