BLOMINVEST BANK S.A.L.

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1 BLOMINVEST BANK S.A.L. Economic Research Department The Lebanon Brief can be accessed via Internet at the following web address:

2 EQUITY MARKET Financial Markets Stock Market 25/1/02 18/1/02 % Change BLOM Stock Index (1.07%) Total Volume Traded 75, ,296 (70.66%) Total Value Traded 384,496 $545,304 (29.49%) 22 January 1996 = /24 /2001 8/7/2001 8/21 /2001 9/4/2001 BLOM STOCK INDEX Six Month Evolution Hi /18 /2001 Lo /2/ /16 / /30/ /13/ /27/ /11/ /25/2001 The BLOM Stock Index (BSI) had a bumpy ride this week, all on the back of Solidere, dropping 1.07% to on turnover of 75,775 shares, with Friday s session closing on nil volume. The bourse market capitalization stood at $1.26bn as of January 25, Banking Sector Mkt 25/1/02 18/1/02 % Change BLOM (GDR) BSE $ $ % BLOM (GDR) LSE $ $ (0.78%) Audi (C) BSE $ $ % Audi (GDR) LSE $ $ % Byblos (C) BSE $1.563 $ % Bank of Beirut (C) BSE $7.563 $ % BLC (C) BSE $5.000 $5.313 (5.89%) BLC (GDR) Lux $0.825 $ % Fransabank (B) OTC $3.250 $ % BEMO (C) BSE $3.500 $ % Banks stocks were in the spotlight this week as five-out-of-six traded on the bourse at a time when banks reporting season kicked off. Bank of Beirut was the first to release its unaudited results for 2001, reporting a 0.5% increase in profits to $19.3m, but without having any impact on the price as it stayed steady at $7.563 on volume of 9,000 shares. BLOM GDR closed locally unchanged at $19.25 as 6,996 shares changed hands, while Audi C maintained its price of $12 on tiny volume of 960 shares. Byblos C dropped to $1.5 on Tuesday before recovering its last week s close of $1.563 with 5,600 shares traded. The only loser was BLC C, dropping 5.89% to $5 as only 200 shares were exchanged on a single session. Internationally, Banks GDRs ended mixed this week, with Audi appreciating 1.05% to $12, while BLOM lost 0.78% to $19 and BLC closed unmoved at $ /8/2002 1/22 /2002 BLOMINVEST Bank S.A.L. 1

3 Real Estate Mkt 25/1/02 18/1/02 % Change Solidere (A) BSE $4.500 $4.625 (2.70%) Solidere (B) BSE $5.000 $5.125 (2.44%) Solidere (GDR) LSE $4.425 $4.45 (0.56%) Activity in Solidere reflected the generally subdued atmosphere in the market, as minimal 32,019 shares were traded on three sessions. Solidere shares were in a bit of a trough this week, with class A dropping 2.7% to close at $4.5 and class B losing 2.44% to end at $5. On the international front, the company s GDR retreated 0.56% to close at $ Manufacturing Sector Mkt 25/1/02 18/1/02 % Change HOLCIM Liban BSE $0.438 $ % Ciments Blancs (B) BSE $1.844 $ % Ciments Blancs (N) BSE $2.250 $ % Eternit* BSE Uniceramic (A) BSE $1.313 $ % Uniceramic (C) BSE $2.188 $ % * Trade on Eternit was suspended on January 21 st, 1999 until further notice. HOLCIM Liban repeated its usual performance of being the only industrial stock traded, appreciating 7.88% to $0.438 on volume of 21,000 shares. Mkt 25/1/02 18/1/02 % Change Funds Lebanon Holdings BSE $4.500 $ % Retail Sector RYMCO BSE $2.000 $ % Bou Khalil BSE $1.688 $ % ABC OTC $ $ % Tourism Sector Casino Du Liban OTC $ $ % SGHL OTC $ $ % Financial Markets BLOMINVEST Bank S.A.L. 2

4 FOREIGN EXCHANGE MARKET Financial Markets Foreign Exchange Market 25/1/02 18/1/02 % Change LP / Dollar 1, , % Dollar / Euro % DM / Dollar % Yen / Dollar % French Franc / Dollar % Swiss Franc / Dollar % Dollar / Sterling % The local foreign exchange market remained calm this week as the US dollar witnessed some selling pressure till Wednesday, and then cooled down amid the assassination of ex-minister Elie Hobeika. Interbank trading saw the local currency steady at around LP1, ,514.25, with the Central Bank staying firmly on the sidelines as demand for the US dollar during the last two trading sessions was comfortably absorbed by commercial banks. MONEY MARKET Money Market Rates 25/1/02 18/1/02 b.p. Change Interbank Average 7.30% 7.21% 9 BDL 45-day CD 9.50% 9.50% 0.00% BDL 60-day CD 10.25% 10.25% 0.00% BDL 182-day CD 11.50% 11.50% 0.00% BDL 364-day CD 11.90% 11.90% 0.00% Treasury Yields 25/1/02 18/1/02 b.p. Change 3-M TB yield 11.18% 11.18% 0.00% 6-M TB yield 12.12% 12.12% 0.00% 12-M TB yield 13.43% 13.43% 0.00% 24-M TB yield 14.14% 14.14% 0.00% day-to-day rate TB purchases fell markedly at the January 17 auction, shedding 29.5% to land at LP460bn ($305m) with maturing bills losing 28% to LP308bn ($204m), causing a surplus of subscriptions over maturities of LP135bn ($90m). Banks appetite for TBs is becoming more pronounced, even though secondary market rates are adhering to primary rates following the downward shift of the yield curve that resulted from the suspension of swap operations by the Central Bank. A limited rebalancing of banks portfolios took place at the January 17 auction, with the share of the 24-M regaining 19 percentage points from the week before to settle at 33%,while the weight of 12-M TBs fell to 15.5%. Short-term TBs (3-M and 6-M) saw their combined share of total subscriptions dropping to 50.5% from 69.6% previously. The Central Bank sold LP10bn ($6.6m) worth of certificates of deposit this week, divided equally between 45-day and 60-day maturing CDs. BLOMINVEST Bank S.A.L. 3

5 EUROBOND MARKET Reuters Lebanese Government Bond Index 25/1/02 18/1/02 % Change Reuters Bond Index (0.32%) Lebanese Government Eurobonds in USD Maturity-Coupon 25/1/02 Weekly Yield Change % % % 7.48% % % 8.13% % % 7.18% % % 9.02% % % 9.80% % (1.02%) 9.74% % % 9.34% % (1.38%) 10.27% % % 10.28% % (2.04%) 11.00% % (2.04%) 11.03% % % 11.48% Lebanese Government Eurobonds in Other Currencies Maturity-Coupon 25/1/02 Weekly Yield Change % % (DM) % 3.67% % (Euro) % 8.85% % (Euro) % 9.40% Trading in Lebanese debt instruments returned to their characteristic calm, with some activity witnessed on short-term sovereign bonds maturing between 2003 and 2004 amid a widening in yield spreads with US Treasuries. Attention in the Eurobond market was also focused on rumours about the intention of the government to issue a new eurobond, as the 2002 draft budget called for the issuance of up to $3bn in new foreign-currency denominated papers this year. The government issued about $2.6bn worth of eurobonds last year compared to $1.4bn in 2000, confirming its status as the leading sovereign issuer in the MENA region. On the US front, the yield on 10-year Treasury papers increased to 5.07% amid an extended week of sell-off as investors concluded that the Federal Reserve had ended a year-long course of cutting interest rates with the economy showing signs of a rebound. Issuer Lebanese Corporate Eurobonds Maturity- Coupon 25/1/02 Weekly Change % Yield Mediterranée % % 0.14% Libano-Francaise % % 2.68% Byblos Bank % % 3.39% Credit Libanais % % 3.90% Mediterranée % % 5.97% Fransabank % % 5.14% Credit Libanais % % 6.85% BoB % % 3.31% Méditerranée % % 7.93% Mediterranée % % 8.55% Mediterranée % % 9.12% BLOM % % 8.67% Ciments Libanais % (0.12%) 9.65% Audi % % 8.16% Audi % % 10.20% Offer prices are stated Financial Markets BLOMINVEST Bank S.A.L. 4

6 Budget Deficit Down to 38% of Spending in December 2001 Economic Statistics (In millions of USD) Dec. 01 Nov. 01 % Change Dec. 00 Revenue $ $ % Expenditure* $ $ % Interest $ $ (6.17%) Deficit $ $ (22.01%) * Including debt servicing Figures released by the Ministry of Finance for the month of December revealed a relatively low deficit ratio of 38% of expenditures compared to 80% in December The deficit-tospending ratio resulted from a 56.7% rise in revenues coupled with an increase of 13.27% in expenditures as the budget registered a primary surplus of $26.7m in December. The increase in government revenue was attributed to the settlement of tax collections before year-end. For the whole of 2001, government revenues and expenditures equalled $3,1bn and $5,9bn (of which $2,9bn was in debt servicing) respectively, resulting in a deficit of $2,8bn. Revenues totalled $3bn and spending amounted to $6,9bn ($2,8bn accounted for interest payment on the debt) in 2000 for a deficit of $3,9bn. The deficit-tospending ratio in 2001 equalled 47.52%, below the expected government's target of 50.8% for 2001 and lower than the 56.4% recorded in It is to mention that the government forecasted a 40% deficit-to-spending ratio in its 2002 budget amid the implementation of the VAT. Subsidised Loans Reached $308m Up to November 2001 Total loans subsidised by the Central Bank reached $307.6m in the first 11 months of 2001, a rise of $262m from 2000 figures. The loans are part of an interest-subsidy program launched in 1997 for projects in tourism, agriculture, industry and information technology. Total subsidies for the loans granted in the first 11 months of last year amounted to $73m. It is to mention that the government subsidises 7% of interest on loans of up to LP5bn ($3.32m) and 5% on loans ranging between LP5bn and LP15bn ($9.95m). Millions of USD $160 $120 $80 $40 $0 $182 $44 Subsidized Loans up to Nov. '01 Total Loans Subsidy $111 $25 $11 $2 $4 $1 Industry Tourism Agriculture Technology Sector BLOMINVEST Bank S.A.L. 5

7 Imports of Industrial Machinery Up 26% in November 2001 Imports of industrial machinery amounted to $10.3m in November 2001 rising by 26% from the previous month and by around 54% from November Imports of industrial machinery amounted to $96.2m in the first 11 months of 2001, up 10.3% from the corresponding period last year. The geographic distribution of these imports came as follows: 19% Geographic Distribution of Impo Europe East Asia North America Arab Countries Others 7% 1% 6% 68% Economic Statistics BLOMINVEST Bank S.A.L. 6

8 Weekly Developments Latest EIU Report on Lebanon In its latest report on Lebanon, the Economic Intelligence Unit (EIU) declared that the implementation of the value-added tax (VA T) will lead to inflation but that it will reduce at the same time the budget deficit, even though the latter will remain one of the highest in the world. The EIU said that the revised deficit figures will amount to $3.05bn by the end of 2001 with a budget to spending ratio of 49.8%. The report expected growth to be somewhat lower than 1% in 2002, similar to last year s rate. As for public debt, the publication highlighted that Lebanon s debt-to-gdp ratio, which amounts to 156%, is the fourth highest ratio in the world after Nicaragua, Zambia and Malawi. The report also noted that the fall in US interest rates has allowed the Central Bank to increase its foreign currency reserves since September On the political front, the EIU warned that the current disagreements between the ruling troika is negatively affecting the performance of the government and harming the economy. Cabinet Fills Five Public Posts After weeks of disagreements, the Cabinet finally appointed Mohammed Karaki as director-general of the National Social Security Fund (NSSF). Karaki, 37, is an economy professor at the Lebanese University. Mohammed Issa took the post of Director-general of the Foreign Ministry and Nasri Lahoud was named head of the Appeals Court. Finally, Rida Saade was appointed as the general coordinator for education, while Elias Khoury became the general coordinator for health, agricultural and social affairs. IAA World Congress to be Held in Beirut The 38 th biennial International Advertising Association (IAA) confirmed that it will hold its congress in Beirut next May as originally planned at the IAA s 1999 general assembly in Paris. The Lebanese IAA chapter, founded in 1961 by the top 25 local advertising firms, stated that the conference would confirm Lebanon s leading role in advertising and media. More than 250 participants including the world s most important advertisers have already registered for the conference, which is expected to host between 1,200 and 1,500 delegates. Nissan CEO Carlos Ghosn and Richard Branson, founder of Virgin megastores will be among several important figures to speak at the conference. Central Bureau for Administrative Information to Go Online The Central Bureau for Administrative Information was inaugurated this week after being digitized. The Bureau is intended to cut bureaucratic hassles and make a number of governmental procedures simpler, such as renewing Lebanese passports, land ownership and issuance of other licenses. The Bureau s website, which has an Arabicenabled script, would include information on administrative procedures and would be updated daily. About 80 information technology projects are currently underway, some of which are near completion and include the digitization of the Commercial Register and the modernization of the Lebanese embassies abroad with respective links to the Ministry of Foreign Affairs website. BLOMINVEST Bank S.A.L. 7

9 BoB Posts 2001 Profits Bank of Beirut S.A.L. (BoB) released its unaudited results for 2001 showing net income rising by 0.5% to $19.3m. Interest income from treasury bills decreased 10% to $69m, helping reduce net interest income by 3.5% to $38.5m. The bank s assets stood at $2.19bn at the end of 2001, up 6.1% from end-2000, while customer deposits were 5.5% higher than a year before at $1.67bn. Outstanding loans totalled $569.4m at the end of last year, a 7.1% increase on end At the same time, Tier One capital was down 5.6% to $116.9m. BLF and Banque Saradar Fail to Merge A joint statement released this week by Banque Libano-Francaise (BLF) and Banque Saradar indicated that the merger talks between the two banks have failed. No reasons were put forth, but market talks revealed that the disagreement was mainly over the valuation of Saradar s assets. Had the merger succeeded, the assets of the combined banks were expected to exceed $5.2bn and deposits to reach $4.2bn. BLF has 28 operating branches while Saradar owns eight. It is to mention that both the National Bank of Canada and the International Finance Corporation own 15% and 10% of Saradar respectively, while Credit Agricole Indosuez owns 51% of BLF. Corporate News BLOMINVEST Bank S.A.L. 8

10 BLOMINVEST Bank S.A.L. Rachid Karameh Street Verdun P.O.Box: Riad El Solh Beirut BLOM Bldg. - 2nd Floor Tel: , Fax: balom@balom.com.lb 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. BLOMINVEST Bank S.A.L. 9

BANQUE D'AFFAIRES DU LIBAN ET D'OUTRE-MER SAL

Monday 4 October Saturday 9 October, 1999 Issue N o 167 BANQUE D'AFFAIRES DU LIBAN ET D'OUTRE-MER SAL Economic Research Department The Lebanon Brief can be accessed via Internet at the following web address: