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Your Investment Reference

THE

LEBANON BRIEF

ISSUE 866

Week of 14-26 April, 2014

ECONOMIC RESEARCH DEPARTMENT

Rashid Karame Street, Verdun Area

P.O.Box 11-1540 Beirut, Lebanon

T (01) 747802 F (+961) 1 737414

[email protected]

www.blom.com.lb

S A L

The Lebanon Brief Table Of Contents Page 2 of 16

ISSUE 866; Week of 14-26 April, 2014

S A L

TABLE OF CONTENTSTABLE OF CONTENTSTABLE OF CONTENTSTABLE OF CONTENTS

FINANCIAL MARKETSFINANCIAL MARKETSFINANCIAL MARKETSFINANCIAL MARKETS 3333

Equity Market 3

Foreign Exchange Market 5

Money & Treasury Bills Market 5

Eurobond Market 6

ECONOMIC AND FINANCIAL NEWSECONOMIC AND FINANCIAL NEWSECONOMIC AND FINANCIAL NEWSECONOMIC AND FINANCIAL NEWS 7777

BDL’s Total Assets Edge up to $80.64B by Mid-April 7

Lebanon’s Commercial Banks Assets Stood at $166.01B by February 7

Lebanon’s Balance of Payments Records a Surplus of $162.4M by February 8

Annual Inflation Stands at 2% in March 8

Revenues of Port of Beirut Aggregate to $51.53M in the First Quarter 9

Number of Tourists Plummeted to 229,252 during the First Quarter 9

Average Daily Hotel Room Rate Hits a 7-Year Low 10

Registered New Cars Picked up by 5.4% y-o-y in Q1 10

Construction Area Authorized by Permits Reached 3.37M sqm in Q1 11

CORPORATE DEVELOPMENTSCORPORATE DEVELOPMENTSCORPORATE DEVELOPMENTSCORPORATE DEVELOPMENTS 12121212

BLOM Bank Calls for General Assembly 12

Byblos Bank Hosts General Assembly 12

BLC Bank Calls for General Assembly 13

Ciments Blancs Calls for a General Assembly 13

FOCUS IN BRIEFFOCUS IN BRIEFFOCUS IN BRIEFFOCUS IN BRIEF 14141414

Lebanon’s Monetary Survey 2013 14

This report is published for information purposes only. The information herein has been compiled from, or based upon sources we believe to be

reliable, but we do not guarantee or accept responsibility for its completeness or accuracy. This document should not be construed as a

solicitation to take part in any investment, or as constituting any representation or warranty on our part. The consequences of any action taken

on the basis of information contained herein are solely the responsibility of the recipient.

The Lebanon Brief Page 3 of 16


S A L

FINANCIAL MARKETSFINANCIAL MARKETSFINANCIAL MARKETSFINANCIAL MARKETS

Equity Market

Stock Market

25/04/2014 11/04/2014 % Change

BLOM Stock Index* 1,206.50 1,206.75 -0.02%

Average Traded Volume 108,658 74,000 46.84%

Average Traded Value 914,973 590,164 55.04% *22 January 1996 = 1000

The Beirut Stock Exchange (BSE) showed mixed

performance over the past two weeks to close in red

on Friday, partly triggered by the failure of the

Lebanese parliament to elect a new president.

However, the BLOM Stock Index (BSI) showed a

marginal decrease of 0.02% to 1,206.50 points,

tightening its year to date gain to 4.90%.

The daily average volume and value of trades

revealed respective rises from 74,000 shares and

$590,164 recorded 2 weeks ago, to 108,658 shares

and $914,973 this week. The market capitalization

over the same period narrowed $2.02M to $9.69B.

On a comparative scale, the BSI failed to outperform

some of its regional peers in the previous 2 weeks.

The S&P AFE40 increased 3.20% to 73.93 points and

the S&P Pan Arab Composite LargeMidCap Index

rose by 3.04% to 153.97 points. In addition, the

Morgan Stanley (MSCI) emerging index gained

0.43% on a 2-week basis to close on Friday at

1,004.46 points.

Within the Arab bourses, Dubai and Qatar stock

exchanges posted the highest 2-week gains as they

respectively improved by 10.18% and 8.10%. In

contrast, the Kuwaiti and Tunisian bourses showed

the worst performance with respective slips of

1.64% and 1.04%.

The banking sector kept on dominating the BSE’s

trading activity during the past eleven sessions,

grasping 50.75% of total traded value. The real

estate sector’s contribution was slightly below that

of financial stocks at 49.19%. Meanwhile, the

industrial sector took the remaining 0.06%.

In the banking sector, BLOM listed and GDR shares

edged down by 0.11% and 3.06% to $9.00 and

$9.20, respectively. As for Audi shares, both listed

and GDRs declined by 0.49% and 3.13% to close at

$6.10 and $6.20, respectively. Additionally, Bank of

Beirut listed shares shed by 0.05% to $18.99, while

Byblos common shares showed a 1.20% progress to

$1.69.

Banking Sector

Mkt 25/04/2014 11/04/2014 %Change

BLOM (GDR) BSE $9.20 $9.49 -3.06%

BLOM Listed BSE $9.00 $9.01 -0.11%

BLOM (GDR) LSE $9.30 $9.06 2.71%

Audi (GDR) BSE $6.20 $6.40 -3.13%

Audi Listed BSE $6.10 $6.13 -0.49%

Audi (GDR) LSE $6.20 $6.30 -1.59%

Byblos (C) BSE $1.69 $1.67 1.20%

Byblos (GDR) LSE $73.00 $73.00 0.00%

Bank of Beirut (C) BSE $18.99 $19.00 -0.05%

BLC (C) BSE $1.85 $1.85 0.00%

Fransabank (B) OTC $28.00 $28.00 0.00%

BEMO (C) BSE $1.82 $1.82 0.00%

Mkt

25/04/2014

11/04/2014

% Change

Banks’ Preferred Shares Index *

105.81 105.92 -0.10%

BEMO Preferred 2006 BSE $100.00 $100.00 0.00%

Audi Pref. E BSE $100.00 $102.50 -2.44%

Audi Pref. F BSE $100.00 $100.00 0.00%

Audi Pref. G BSE $100.00 $99.00 1.01%

Audi Pref. H BSE $100.30 $100.00 0.30%

Byblos Preferred 08 BSE $101.50 $101.50 0.00%

Byblos Preferred 09 BSE $103.10 $103.10 0.00%

Bank of Beirut Pref. E BSE $27.00 $27.00 0.00%

Bank of Beirut Pref. I BSE $26.40 $26.40 0.00%

Bank of Beirut Pref. H BSE $26.84 $26.84 0.00%

BLOM Preferred 2011 BSE $10.18 $10.19 -0.10%

BLC Pref C BSE $100.50 $100.50 0.00%

Bemo Preferred 2013 BSE $100.00 $100.00 0.00%

* 25 August 2006 = 100

1050

1100

1150

1200

1250

Apr-13 Jul-13 Oct-13 Jan-14 Apr-14

BLOM Stock Index HI: 1,233.70

LO: 1104.42



S A L

Real Estate

Mkt 25/04/2014 11/04/2014 %Change

Solidere (A) BSE $12.92 $12.85 0.54%

Solidere (B) BSE $12.97 $12.85 0.93%

Solidere (GDR) LSE $12.90 $12.84 0.47%

BLOM Preferred Shares Index (BPSI) lost 0.10% to

105.81 points triggered by a two week declines of

the preferred shares of Audi class “E” and those of

BLOM Bank class 2011. The former fell 2.44% to

$100.00, while the latter declined by 0.10% to

$10.18. Yet, Audi preferred shares class “G” and “H”

added 1.01% and 0.30% to $100.00 and $100.30,

respectively.

Manufacturing Sector

Mkt 25/04/2014 11/04/2014 %Change

HOLCIM Liban BSE $14.82 $13.57 9.21%

Ciments Blancs (B) BSE $3.50 $3.50 0.00%

Ciments Blancs (N) BSE $2.75 $2.75 0.00%

On the London Stock Exchange (LSE), the Global

Depository Receipts (GDR) of BLOM Bank and

Solidere rose by 2.71% and 0.47% to close at $9.30

and $12.90, respectively. Meanwhile, Audi Bank

GDRs inched down by 1.59% over the past 2 weeks

to close at $6.20.

Funds

Mkt 25/04/2014 11/04/2014 % Change

BLOM Cedars Balanced

Fund Tranche “A” ----- $7,140.28 $7,120.09 0.28%


Fund Tranche “B” ----- $5,180.16 $5,165.51 0.28%


Fund Tranche “C” ----- $5,423.09 $5,407.76 0.28%

BLOM Bond Fund ----- $9,568.62 $9,568.62 0.00%

Real estate shares improved during the past two

weeks. Solidere “A” shares rose by 0.54% to

$12.92, while Solidere “B” closed at $12.97, up by

0.93% from its previous closing 2 weeks ago.

Within the industrial sector, HOLCIM shares edged up by 9.21% on a 2 week basis to close on Friday at $14.82.

Looking ahead, the coming political developments

concerning the second round of presidential

elections and the financing of the salary scale

controversial will remain the barometer of the BSE’s

performance. However, the BLOM Stock Index may

improve in the coming weeks amid expectations of

banks’ robust first-quarter financial results.

Retail Sector

Mkt

25/04/2014

11/04/2014

% Change

RYMCO BSE $3.50 $3.50 0.00%

ABC (New) OTC $33.00 $33.00 0.00%

Tourism Sector

Mkt 25/04/2014 11/04/2014 % Change

Casino Du Liban OTC $425.00 $425.00 0.00%

SGHL OTC $7.00 $7.00 0.00%



S A L

Foreign Exchange Market

Lebanese Forex Market

25/4/2014 11/4/2014 % Change

Dollar / LP 1,512.50 1,509.00 0.23%

Euro / LP 2,085.93 2,093.16 -0.35%

Swiss Franc / LP 1,710.54 1,720.50 -0.58%

Yen / LP 14.75 14.82 -0.47%

Sterling / LP 2,534.41 2,527.78 0.26%

NEER Index** 130.62 130.07 0.42%

*Close of GMT 09:00+2 **Nominal Effective Exchange Rate; Base Year Jan 2006=100

**The unadjusted weighted average value of a country’s currency relative to all major

currencies being traded within a pool of currencies.

Higher demand for the dollar was registered over the past two

weeks, as shown by the Lebanese pound’s peg against the

dollar, going from $/LP 1507-1511 with a mid-price of $/LP

1509 to $/LP 1510.5-1514.5 with a mid-price of $/LP 1512.5.

Foreign assets (excluding gold) at the Central Bank stood at

$36.3B by March compared to $36.22B by February.

Meanwhile, the dollarization rate of private sector deposits

stood at 66.1% in December compared to 65.7% a month

earlier.

Nominal Effective Exchange Rate (NEER)

The euro shaved off its gains against the dollar, especially after

Mario Draghi’s statement alluding to further monetary stimulus

actions. Firm equities, a stronger dollar as well as Turkey and

Russia cutting their Gold holdings led to a 1.67% drop in the

metal’s price to $1,300.76/ounce compared to its value of

$1,322.85/ounce two weeks ago.

By Friday April 25, 2014, 12:30 pm Beirut time, the Euro lost

0.35% to reach €/$ 1.3837. As for the dollar-pegged LP, it

appreciated to €/LP 2,085.93 from a previous €/LP 2,093.16.

The Nominal effective exchange Rate (NEER) registered a

0.42% upturn over the cited period to 130.62 points, while its

year-to-date gain stood at 25.83%.

Money & Treasury Bills Market

Money Market Rates

Treasury Yields

25/04/2014 11/04/2014 Change bps

3-M TB yield 4.44% 4.44% 0

6-M TB yield 4.99% 4.99% 0

12-M TB yield 5.35% 5.35% 0

24-M TB coupon 5.84% 5.84% 0

36-M TB coupon 6.50% 6.50% 0

60-M TB coupon 6.74% 6.74% 0

25/04/2014 11/04/2014 Change bps

Overnight Interbank 2.75 2.75 0

BDL 45-day CD 3.57 3.57 0

BDL 60-day CD 3.85 3.85 0

During the week ending April 3, 2014, broad Money M3

increased by LP 232B ($154M), to reach LP 169,423B

($112.39B). M3 growth rate reached 6.15% year-on-year and

1.11% on a year-to-date basis. As for M1, it expanded by LP

349B ($231M) due to the increase of demand deposits by

LBP 43B ($28.52M) and of money in circulation by LBP 306

($202.99).

Total deposits (excluding demand deposits) retreated by LP

117B ($77M), given the $89M drop in deposits denominated

in foreign currencies and the LP 17B rise in term and saving

deposits in domestic currency. Over the above mentioned

period, the broad money dollarization went from a previous

58.94% to 58.78%. According to the Central Bank, the

overnight interbank rate stood at 2.75% at the end of

February 2014.

In the TBs auction held on April, 10th 2014, the Ministry of

Finance raised LP104.16B ($69.09M) through the issuance of

3 Months (M) and 6M treasury bills along with 5 Year (Y)

notes. The highest demand was witnessed on the 3M bills,

capturing 47.53% of total subscriptions, while the 6M bills

and 5Y notes captured respective shares of 26.63% and

25.84%. The 3M and 6M bills yielded 4.44% and 4.99%

respectively, while the average coupon rate for the 5Y notes

stood at 6.74%. Maturing T-bills exceeded new subscriptions

by LP 7B ($4M).

99

104

109

114

119

124

129

134

Apr-13 Jul-13 Oct-13 Jan-14 Apr-14



S A L

Eurobond Market

Eurobonds Index and Yield 24/04/2014 10/04/2014 Change Year to Date

BLOM Bond Index (BBI)* 106.470 106.420 0.05% 0.78%

Weighted Yield** 5.48% 5.51% -3 46

Weighted Spread*** 379 396 -17 -51

*Base Year 2000 = 100; includes US$ sovereign bonds traded on the OTC market

** The change is in basis points ***Against US Treasuries (in basis points)

Eurobonds Lebanese Government

Maturity - Coupon 24/04/2014

Price*

10/04/2014

Price*

Change

%

24/04/2014

Yield

10/04/2014

Yield

Change bps

2015, Jan - 5.875% 101.82 101.83 -0.01% 3.31% 3.42% -11

2015, Aug - 8.500% 106.24 106.20 0.03% 3.48% 3.65% -17

2016, Jan - 8.500% 107.81 107.70 0.11% 3.80% 3.96% -16

2016, May - 11.625% 114.68 114.76 -0.06% 4.07% 4.16% -9

2017, Mar - 9.000% 111.42 111.48 -0.06% 4.74% 4.77% -3

2018, Jun - 5.150% 100.19 100.18 0.01% 5.10% 5.10% 0

2020, Mar - 6.375% 102.96 102.98 -0.02% 5.77% 5.77% 0

2021, Apr - 8.250% 112.58 112.55 0.03% 6.01% 6.03% -1

2022, Oct - 6.100% 98.89 98.82 0.07% 6.27% 6.28% -1

2023, Jan - 6.00% 97.58 97.41 0.18% 6.36% 6.39% -2

2024, Dec - 7.000% 103.55 103.49 0.06% 6.53% 6.54% -1

2026, Nov - 6.600% 99.44 99.37 0.07% 6.67% 6.67% -1

2027, Nov - 6.75% 100.09 99.89 0.19% 6.74% 6.76% -2

*Bloomberg Data

The Lebanese Eurobonds market showed positive performance in the past 2 weeks despite the failure of the Lebanese

parliament in electing a new president over the first round. The BLOM Bond Index (BBI) posted a 0.05% progress to 106.47

points, widening its year to date gain to 0.78%. The BBI outperformed the JP Morgan emerging markets’ bond index that

inched down by 0.36% on a 2-week basis to stand at 657.64 points. As for yields on the Lebanese Eurobonds, the 5Y yield

slipped by 2 basis points (bps) to 5.32% while the 10Y yield increased by 2 bps to 6.54%.

In the US, positive data kept investors away of Treasuries in the previous two weeks with U.S. consumer confidence index

improving in April. 5Y and 10Y yields increased 15 bps and 5 bps to settle at 1.74% and 2.70%, respectively. Therefore, the

5Y and 10Y spreads between the Lebanese Eurobonds and U.S benchmarks tightened by 17 bps and 3 bps to 358 bps and

384 bps, respectively.

Lebanon’s credit default swaps for 5 years (CDS) were last quoted at 345-375 bps, narrowing from the previous range of

345-375 bps recorded 2 weeks ago. In regional economies, 5 year CDS quotes in Saudi Arabia steadied at 50-55 bps, while

that of Dubai broadened by an average of 3 bps over the past 2 weeks to settle at 163-173 bps. As for emerging markets,

the 5Y insurance premiums against state-debt default in Turkey closed at 203-208 bps compared to 197-200 bps, while

Brazil’s 5Y CDS closed at 152-154 bps compared to the previous 2 weeks’ quote of 157-159 bps.

4.50%

5.00%

5.50%

6.00%

6.50%

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

Weighted Effective Yield of Eurobonds



S A L

EEEECONOMIC AND FINANCONOMIC AND FINANCONOMIC AND FINANCONOMIC AND FINANCIAL NEWS CIAL NEWS CIAL NEWS CIAL NEWS

BDL’s total Assets by Mid-April

(In $B)

Source: BDL

Total Assets at Commercial Banks

(In $B)

Source: BDL

BDL’s Total Assets Edge up to $80.64B by Mid-April

According to the Central Bank’s (BDL) balance sheet, total

assets posted a 0.3% monthly downtick to settle at $80.64B by

mid-April. This was mainly due to the respective monthly

declines in gold reserves and foreign assets that offset the

monthly upticks in loans to the local financial sector and BDL’s

securities portfolio. In details, gold reserves slipped by a

monthly 4.9% to $12.02B, while foreign assets inched down

from $36.38B in Mid-March to $36.35B by Mid-April 2014. The

central bank’s securities portfolio and loans to the local financial

sector increased by 0.5% and 4.0% in month-ago terms to

reach $12.49B and $3.09B, respectively. On the liabilities side,

financial sector deposits increased from $59.38B in mid-March

to $60.01B in mid-April.

Lebanon’s Commercial Banks Assets Stood at

$166.01B by February

Total consolidated assets of commercial banks hit $166.01B by

February 2014, a 0.72% growth since year start, and a progress

of 7.8% year-on-year (y-o-y). Claims on the private sector, which

constituted 29% of total assets, edged up by 0.01% from the

beginning of the year to $47.4B. The dollarization of private

sector loans fell marginally from 76.54% to 76.03%.

However, the foreign currency loans grew by 2.2% since year-

start to reach $11.36B while that of local currency rose at a

slower pace from $30.39B by December 2013 to $30.42B in the

first two months of 2014. During this period, Lebanese

commercial banks’ holdings of government securities also

augmented by 1.07% to reach $38.07B. In fact, treasury bills in

local currency escalated by 2.4% y-t-d to settle at $20.50B

while Eurobonds lessened by 0.5% to $17.53B.

As for liabilities, resident private sector deposits grew by 0.7%

since year start to $108.46B. Specifically, deposits

denominated in domestic currency broadened by 1.5% to

$43.42B, outpacing the 0.1% rise in private sector deposits in

foreign currency to $65.04B. Whereas non-resident private

sector deposits, they shrank by 4.3% y-t-d to $27.25B.

Accordingly, the dollarization rate of private sector deposits

slightly fell from 66.13% to 65.55% during the same period.

2009 2010 2011 2012 2013 2014

44.07

56.8664.7

73.73 76.5580.64

84.18

95.11

118.27

130.06

144.11153.97

166.01



S A L

Balance of Payments Up to February

(In $M)

Source: BDL

Regional Breakdown of March’s Inflation

Base Year: Dec. 2013

Source: CAS

Lebanon’s Balance of Payments Records a Surplus

of $162.4M by February

Lebanon’s Balance of Payments (BoP) revealed a surplus of

$162.4M in the first two months of 2014, compared to a growth

of $290.8M in the same period last year. Up until February, Net

Foreign Assets (NFA) of the Central Bank (BDL) rose by

$1,175.3M, while that of commercial banks regressed by

$1,012.9M. In February alone Lebanon’s BoP recorded a

surplus of $193.7M, compared to a deficit of $31.3M a month

earlier. This was partly due to the narrowing trade deficit from

$1.63M in January 2014 to $1.48M in February this year. NFAs

of BDL grew by $572.6M, compared to a $602.7M growth in

January, while NFAs of commercial banks declined by

$378.9M, subsequent to a $634M shrinkage in the prior month.

Annual Inflation Stands at 2% in March

After switching the reference month from December 2007 to

December 2013, the Central Administration of Statistics (CAS)

released March’s consumer price index (CPI). The latter stood

at 101.8, up by 2.0% y-o-y from March 2013. 10 out of the 13

sub-indices increased, 2 decreased while the remaining

“Communication” sub-index remained unchanged from March

2013’s level. “Food and non-alcoholic beverages” sub-index,

which accounts for 20.6% of the CPI, inched up by an

annualized 4.5% in March this year. Prices of “Housing, Water,

Electricity, gas and other fuels” saw respective yearly increases

of 0.1% in housing and 4.8% in water, electricity, gas and other

fuels. The “Alcoholic beverages and tobacco” sub-index that

accounts for 1.6% of the CPI, increased by 17.4% y-o-y to

105.8 points.

In contrast, the “Clothing and footwear” component of the CPI

recorded a 7.8% yearly drop to 105.6 points as retailers used

aggressive marketing strategies through sales and promotions

to revitalize the weakening sector. Moreover, “Transportation”

sub-index posted a 6.1% y-o-y downtick partly due to the

declining international oil prices.

On another note, CAS is currently providing a regional

breakdown for the CPI among the main 6 Lebanese districts:

Beirut, Mount Lebanon, North of Lebanon, Bekaa, South of

Lebanon and Nabatiyeh. In March, North of Lebanon witnessed

the heaviest increase in prices at 2.1% from December’s level,

while Beirut’s monthly inflation was the slowest at 1.1%.

283.50

664.40 714.20

-668.80

-423.90

290.80

162.40

1.8%

1.1%

1.5%

2.1%

1.3% 1.3%

1.5%



S A L

Port of Beirut Total Revenues in Q1

(In $M)

Source: PoB

Number of Tourists in Q1

Source: Ministry of Tourism

Revenues of Port of Beirut Aggregate to $51.53M in

the First Quarter

Port of Beirut (PoB) revenues grew by 3.23% since last year;

totaling $51.53M through the 1st quarter of 2014 as the

ongoing Syrian upheavals transferred shipping activity in favor

of PoB after closing Syria’s main ports. Total container activity

including transshipment expanded by 9.6% from last year, to

reach 290,584 twenty-foot equivalent units (TEU). Container

activity excluding transshipment jumped to 182,188 TEU,

compared to its previous year value of 168,308 TEU.

Transshipment alone amplified by 11.94% year-on-year (y-o-y)

to 108,396 TEU. Remarkably, CMA CGM’s transshipment

volume boosted up by 45.21% y-o-y to 46,752 TEU, while that

of MSC edged up by a yearly 1.12% to 57,855 TEU. The total

volume of merchandise (imported and exported) edged up by a

yearly 11.58% to 2.14M tons. The biggest y-o-y rise was that in

the number of imported cars, which amounted to 24,128 cars, a

16.8% increase. However, and up until March 2014, the

number of vessels that docked at the country’s main port went

down by 2.49% to reach 509 vessels.

Number of Tourists Plummeted to 229,252 during

the First Quarter

Poor political and security conditions in Lebanon and the region

kept on weighing over tourism activity in 2014. Hence,

according to the Ministry of Tourism, the number of incomers

during the first quarter of 2014 plummeted to 229,252, a 16.5%

plunge from the same period last year. Arab tourists,

constituting 34.8% of the total, displayed the largest year-on-

year (y-o-y) decline of 19.4%, to settle at 79,670 by March 2014.

Compared to last year, the number of tourists from the UAE,

Saudi Arabia, and Kuwait deteriorated by 56.1%, 52.3%, and

51.9% respectively. However, the number of Iraqi incomers,

that grasped 40% of total Arab tourists, increased by 6.0%,

being the sole increase in the number of Arab visitors.

European Visitors, accounting for 33% of the total, slid by

17.4% y-o-y, reaching 74,887. The number of incomers from

France and the United Kingdom dropped by 12.2% and 20.7%

to 20,057 and 8,585 tourists, respectively. Italians were the only

European tourists to register an increase of 8.6%, since last

year. As for the number of American travelers, accounting for

the third largest share of the total, they reached 33,007 in the

first three months of 2014, compared to 36,040 in the same

period last year. The number of African tourists also went down

by 15.3% since last year, settling at 11,274. In March alone, the

number of tourists diminished by 21.5% y-o-y. Although

compared to last year, the number of tourists worsened, it had

improved by 15.9% since February. This was mainly due to the

formation of the long awaited Cabinet that took place by Mid-

February along with the latter’s security plan in Tripoli that

partially stabilized some of the region’s tensions.

39.0337.47

39.73

49.9251.53

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

America Arab Countries Europe Others



S A L

Average Room Rate and Rooms Yield

Source: E&Y Hotel Benchmark Survey

Total Cars Registrations in Q1

Source: AIA

Average Daily Hotel Room Rate Hits a 7-Year Low

The Lebanese hospitality sector continued to regress in the first

two months of 2014 due to the country’s political instability and

the aggravating situation in the neighboring Syria. According to

Ernst and Young’s monthly survey, hotels’ occupancy rate

retreated by 16 percentage points (pp) to settle at 39%,

compared to 55% during the same period last year. The

Lebanese occupancy rate declined the most out of all surveyed

Middle East countries by February, followed by Kuwait’s 13 pp

decrease to 50%. Muscat showed the highest occupancy rate

of 89%, followed by 88% in each of Makkah and Dubai.

However, Makkah experienced the highest upsurge of 13 pp

from last year’s level, while Dubai’s occupancy rate shed 1 pp.

Revenue per available room (RevPAR) in Beirut fell by 33% y-o-y

to reach $63, the steepest fall among the listed countries.

Ghardaqa and Cairo scored the lowest respective RevPARs in

the Middle East at $18 and $22. Moreover, the Average Daily

Rate in Beirut dropped 5.2% from $169 by February 2013 to

$161 this year. Ghardaqa’s hotels charged a $27 rate, the

lowest average daily rate among the listed countries. While the

highest rate, $340, was charged by Kuwait.

Registered New Cars Picked up by 5.4% y-o-y in Q1

According to figures released by the Association of Car

Importers in Lebanon (AIA), registration of new passenger and

commercial cars posted a 5.4% growth in the first quarter of

2014 to reach 8,358 vehicles compared to 7,928 during the

same period last year. In fact, the number of registered new

passenger vehicles increased by 4.2% y-o-y to 7,796 while that

of commercial cars edged up by 26.6% y-o-y to 562. The latter's

progress could be explained by the improving sentiment

amongst private sector commercial agents especially after the

formation of the long awaited Cabinet formation in Mid-

February. However, the majority of vehicles sold were generally

small engine fuel efficient automobiles with low price tags,

while luxury cars represented less than 5% of total new car

sales. Asian cars grasped the majority of total sold cars with

Korean vehicles posting a 43.5% share and Japanese vehicles

contributing to 31.95% of the total. Yet, Japanese cars were

the most popular cars in Q1 2014 rising from 1,693 to 2,491

cars, while Korean cars lost some of their luster with the

number of registered cars dipping by a yearly 6.09% to 3,391

cars by March 2014. As for the car sales breakdown by brand,

Kia topped the list holding a 23.41% share of the total, followed

by Hyundai (20.09%), Toyota (12.02%) and Nissan (11.21%).

According to their market share, the top five distributors in

Lebanon were respectively: NATCO SAL (21.8%), Century

Motor Co (19.3%), BUMC (12.5%), RYMCO (12.0%) and

Bassoul Heneine (7.9%).

0

50

100

150

200

250

300

350

Average Room Rate ($) Rooms Yield ($)

6,833 6,780 6,925

7,970 7,928 8,358

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Cars Number (LA) Cars Growth Rate (RA, In %)



S A L

Yearly Number of Construction Permits in Q1

Source: Orders of Engineers in Beirut and the North

Construction Area Authorized by Permits Reached

3.37M sqm in Q1

Construction activity continues uphill by March 2014 with the

number of construction permits surging up by a yearly 16.4% to

4,348 in the first quarter of the year, compared to 3,736 in

2013. This was mainly due to investors’ optimism concerning

2014, as permits are usually issued at least six months after

applications are filled. With respect to the construction area

authorized by permits (CAP), it registered a 19.6% year-on-year

(y-o-y) rise by March 2014 to reach 3.37M sqm. In March alone,

the number of permits reached 1,662, a 33.6% y-o-y escalation

from the previous year’s level. This growth may be somewhat

attributed to the soft home-loan program launched by the

Central Bank, end of 2013. In parallel, the CAP grew by 16.1%

to 1.15M sqm. Noteworthy that Mount Lebanon preserved the

highest construction concentration with 727 permits or 43.7%

of the total, while the smallest share of 5.5% was in Beirut with

only 91 permits. Besides, the average area per transaction

contracted from 797.41 sqm/permit to 693.13 sqm/permit in

March this year, which could signify a possible shift in

investors’ tendency towards smaller plots for their projects.

2,853

3,662

4,522

4,028 3,736

4,348

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Number of Construction Permits (LA)

Growth Rate of Construction Permits (RA, In %)



S A L

CCCCORPORATE ORPORATE ORPORATE ORPORATE

DDDDEVELOPMENTSEVELOPMENTSEVELOPMENTSEVELOPMENTS

Annual Performance of BLOM Preferred 2011

Source: Beirut Stock Exchange, Blominvest Research department

Annual Performance of Byblos Bank shares


BLOM Bank Calls for General Assembly

BLOM Bank board of directors invited all holders of its

preferred 2011 shares for an ordinary general assembly that will

be held at the bank’s headquarters in Verdun, Beirut on May 9,

2014 at 12 pm. The meeting’s agenda will include hearing of

the ordinary general assembly’s decision that took place on the

9th of April, regarding the distribution of dividends to the

shareholders of BLOM preferred class 2011 for the year 2013.

Byblos Bank Hosts General Assembly

Byblos Bank is hosting its annual General Assembly meeting at

the Bank’s Headquarters in Ashrafieh, Elias Sarkis Avenue, at

11:30 AM on Friday 9th of May. The discussion will mainly

encompass the report of the auditors and the board of directors

for 2013, the approval and allocation of 2013’s financial

statements, the discharge of the Chairman and Board members

from their duties as well as the election of a new Board of

Directors. Shareholders will be able to review the related

documents and reports 16 days ahead of the meeting at the

bank’s headquarters during working hours. Likewise, the Bank

invited its preferred shares’ holders to attend a similar annual

ordinary general assembly at 11:00 AM of the same day.

$10.00

$10.05

$10.10

$10.15

$10.20

$10.25

$1.30

$1.35

$1.40

$1.45

$1.50

$1.55

$1.60

$1.65

$1.70

$1.75

$99

$100

$101

$102

$103

$104

$105

$106

Byblos Preferred 08 Byblos Preferred 09

Byblos Common



S A L

$98

$100

$102

$104

$106

$98

$100

$102

$104

$106

$108

BLC Pref B BLC Pref A

Annual Performance of BLC A and B Shares


Annual Performance of Ciments Blancs Shares


BLC Bank Calls for General Assembly

BLC Bank board of directors invited its shareholders for an

ordinary general assembly that will be held at the bank’s

headquarters on May 15, 2014 at 10 am. The meeting’s agenda

will include hearings of the board’s report and the auditors’

findings, approval of the financial statements of end 2013,

clearing the chairman and boards’ administrative duties for the

financial year 2013, and agreement on the remunerations of the

bank’s chairman and board for the year 2014.

Ciments Blancs Calls for a General Assembly

Ciments Blancs board of directors invited its shareholders for

an ordinary general assembly that will be held at HOLCIM’s

Offices, in Antelias, on June 18, 2014 at 10 am. The meeting’s

agenda will include hearings of the board’s report and the

auditors’ findings, approval of the financial statements of end

2013 and clearing the chairman and boards’ administrative

duties for the financial year 2013. The assembly also aims to

elect a new board of directors and to distribute dividends.

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$2.40

$2.60

$2.80

$3.00

$3.20

$3.40

$3.60

$3.80

$4.00

CB(N) CB(B)



S A L

FOCUS IN BRIEFFOCUS IN BRIEFFOCUS IN BRIEFFOCUS IN BRIEF

Lebanon’s Monetary Survey 2013

Monetary Indicators (In $B)

2012 2013 % Chg.

Net Foreign Assets -1.5 -1.1 -27%

BDL 0.58 1.8 210%

Commercial Banks -2.1 -2.9 38%

Net Claims on Public Sector 36.22 39.51 9%

Claims on Private Sector 39.6 43.75 10%

Other Items Net -4.79 -4.03 -16%

Net Domestic Assets 71.03 79.23 12%

M3 104.01 111.16 7%

Non-Resident Deposits 24.09 28.48 18%

Broad Money M5 128.1 139.64 9%

Currency in Circulation 2.41 2.64 10%

Deposits in LBP 43.98 46.13 5%

Deposits in FX 81.02 90.08 11%

Share of FX deposits in total private sector deposits 64.82% 66.13% -

Source: Banque du Liban

Promoting economic growth and financial stability appear on nearly every central bank’s monetary policy agenda. With these broad themes in mind, the particularities of each economy are what set monetary policies apart. In advanced economies, namely the euro area, Japan, the United Kingdom and the US, fighting the worst recession since the 1930s compelled the major central banks to resort to what the International Monetary Fund (IMF) dubbed as “MP-Plus”, a combination of exceptionally low interest rates and unconventional policy measures. In Lebanon, the central bank or Banque du Liban (BDL)’s policy remained true to the objectives it has set upon itself: Boosting Economic Growth, Preserving Exchange rate stability and maintaining the soundness of the financial system. 2013 was a challenging year for monetary authorities as it marked the third year of economic slowdown in Lebanon. Syrian spillovers, security incidents and political turmoil negatively impacted consumption, investment, trade, tourism and public finances. The BLOM Purchasing Managers’ Index (PMI) readings are a testament that the private sector has had a challenging year, remaining below the 50 mark separating economic expansion from recession for most of the survey period on account of low levels of output and new orders. In the face of the rough economic climate, the BDL sought to boost economic growth through a $1.46B package in 2013. 2013’s package, offering credit facilities to commercial banks at a cost of 1% interest, contributed around 1.5% to real GDP growth. The central bank also addressed the untapped sources of economic growth, providing interest free credit facilities for banks wishing to participate in the equity capital of startups, accelerators and venture capital firms. However, after BDL’s subsidized loans grew by 28% in 2011, their growth was halted in 2012 and 2013, falling by 25.3% and 22.3%, respectively and calling for another $800M stimulus bundle for the year 2014. The Central Bank managed to maintain exchange rate stability throughout the year despite a negative balance of payments. The latter was in the red for the third consecutive year, recording a deficit of deficit of $1,128.7M in 2013 compared to a deficit of $1,536.9M in 2012 while the Lebanese pound’s peg to the US Dollar remained around stable a midpoint parity of 1,507.5. For the past 15 years or so, and through interventions on the foreign exchange market, the BDL succeeded in



S A L

cementing confidence in the Lebanese pound as shown by the drop in the dollarization rate of private deposits and loans from 76% and 84% in 2006 to 66.1% and 76.5% in 2013. In the future, the central bank will remain capable of preserving the exchange rate stability and shielding the economy against any potential shock via its ample international reserves (excluding gold) of $35.3B in 2013 and covering 20 months of imports. A prolonged state of economic slowdown, a widening fiscal deficit in addition to the likelihood of interest rates starting to increase in the first quarter of next year, might induce upward pressure on the cost of refinancing public debt. In 2013, the total fiscal deficit grew by 8% or $294.53M to reach $4.22B in 2013 with the primary deficit worsening from $110.12M in 2012 to $$239.47M. The strained government finances led to the 9% increase in net claims on the public sector, going from $36.22B in 2012 to $39.51B in 2013. It is important to note that Lebanese interest rates are also governed by the internal circumstances of the country be it on the political or economic front. The spread between the yield on the Lebanese Eurobonds maturing in 5 years and its US Treasury comparable, reflecting the risk premium, has historically been conditioned by the series of events that occurred in Lebanon. The spread dipped to a low of 165 basis points (bps) in the first half of 2006 with Lebanese yields decreasing on account of a booming economy and hefty capital inflows. The spread also surged to 1,200 bps after fears of the repercussions of the 9/11 attacks on Lebanon steered investors away from the Lebanese Eurobonds market. Given the low interest rate environment and in spite of the tough economic backdrop, broad money M3 grew by 7% to reach $111.16B and M5 which includes non-resident deposits advanced by 9% totaling $139.64B. In fact, the banking system has proved to be resilient in the face of internal and external hurdles, supported by a loyal depositor base. Over the past year, LBP and USD denominated deposits grew by 5% and 11% to $46.13B and $90.08B, respectively. The widespread Lebanese diaspora and depositors in Arab markets fleeing the unstable environment are the main factors behind the upturn in deposits. The robustness of the banking sector is also corroborated by the 10% annual increase in claims on the private sector from $39.6B in 2012 to $43.75B in 2013. Although money supply grew over the past year, inflation was on a downward trend. Inflation has been steadily dropping over the past 6 years, after climbing to 9.33% in 2007 due to hefty reconstruction spending following the 2006 war; it fell to 1.1% in 2013. The subdued inflation rate mirrors the weak levels of demand and consumption especially for the “clothing and footwear” component of the CPI basket, where prices slid by 7.9% in 2013 as retailers were compelled to offer appealing prices to revive a stagnating demand. Drawing from a recent paper by Federal Reserve economist Michael T. Kiley, subdued inflation is one of the outcomes of high unemployment. This somewhat applies to Lebanon’s case. According to the World Bank, Lebanese unemployment stands at a high 11% in 2010, mostly affecting those under 35 years of age, and is especially worrying amongst youth (34%) and women (18%). However more data and statistics regarding the Lebanese labor market are essential for future considerations in monetary policy. If analyses reveal that unemployment is structural, then the monetary policy will have little or no effect on the labor market. On the other hand, if a stagnating economy is behind unemployment, then monetary policy can indeed improve labor market conditions by boosting demand and spurring economic growth.

The Lebanon Brief

Page 16 of 14

Your Investment Reference

S A L

Research Department:

Lana Saadeh [email protected]

Riwa Daou [email protected]

Mirna Chami [email protected]

Maya Mantach [email protected]

Marwan Mikhael [email protected]

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