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Your Investment Reference
THE
LEBANON BRIEF
ISSUE 936
Week of 14-19 September, 2015
ECONOMIC RESEARCH DEPARTMENT
BLOMINVEST Bank Headquarters
Bab Idriss, Beirut, Lebanon
T (01) 991 784/2 F (+961) 1 991 732
www.blom.com.lb
S A L
ISSUE 936 Week of 14-19 September, 2015
S A L
TABLE OF CONTENT
FINANCIAL MARKETS 3
Equity Market 3
Foreign Exchange Market 5
Money & Treasury Bills Markets 5
Eurobond Market 6
ECONOMIC AND FINANCIAL NEWS 7
BDL’s Total Assets Stood at $91.36B by Mid-September 7
Lebanon Registered a $1.32B Deficit on its Balance of Payments by July 8
Public Sector Wages Increased to $497.51M by February 2015 9
Port of Saida Regain Some Trading Activity 10
€15M Aid Package to Lebanon from the European Union Targeting Socio-Economic Development 11
CORPORATE DEVELOPMENTS 12
EIP Invests in the Lebanese Market for the First Time 12
FOCUS IN BRIEF 13
Lebanese Car Importers: Coping with the Lebanese’s Tighter Wallets 13
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 19
ISSUE 936 Week of 14-19 September, 2015
S A L
FINANCIAL MARKETS
Equity Market
Stock Market
18/09/2015 11/09/2015 % Change
BLOM Stock Index* 1,150.12 1,134.83 1.35%
Average Traded Volume 44,794 60,078 -25.44%
Average Traded Value 517,660 837,015 -38.15%
*22 January 1996 = 1000
The Lebanese bourse recuperated last week’s loss,
in spite of the political developments over the
week. Accordingly, the BLOM Stock Index (BSI)
gained 1.35%, increasing from its 2-year low, at
1,134.83, to 1,150.12. Nevertheless, the volume of
traded shares decreased over the week, as the
average traded volume and value went down from
60,078 shares worth $837,015 to 44,794 shares
worth $517,660. As for the market capitalization, it
widened by $128.68M to $9.68B.
Globally, the BSI was only outperformed by the
Morgan Stanley Emerging Markets Index (MSCI)
which added 2.90%. In contrast, the S&P Pan Arab
Composite Large-Mid-Cap Index and the S&P AFE
40 Index recorded respective weekly losses of
2.16% and 1.86%.
Besides Lebanon, Egypt’s stock market and Dubai’s
financial market were the only gainers in the region,
increasing by 3.24% and 0.11% respectively.
Egypt’s stock exchange rise came ahead of its
central bank’s monthly meeting that will determine
its interest rate policy.
On the other hand, the bourses of Qatar, Saudi
Arabia, and Abu Dhabi were the worst performers,
dropping by 3.66%, 2.92% and 1.29%, respectively,
over the week. Most gulf equity markets fell as
volatile oil gave up early gains and slid on weak
Japanese data. Concerns about a major Saudi
Arabian construction firm also weighed on the
Saudi stock exchange.
Back to the Beirut Stock Exchange, the banking
sector captured 60.80% of the total traded value
during the week while the real estate sector
grasped the remaining 39.20%. In the banking
sector, the listed shares of BLOM and that of Audi
gained 0.32% and 3.24% to end the week at $9.43
and $5.74, respectively. Byblos listed shares were
the only shares to close in the red, dropping 0.61%
to $1.62. Similarly, the BLOM Preferred Shares
Index (BPSI) gained a weekly 0.01% to settle at
104.97. This was on the back of Bank Audi
preferred shares class “H” which increased by
0.10% to settle at $100.70. In the real-estate sector,
Solidere shares recovered in the face of protestors
and sit-ins on Wednesday that halted the business
activity in Solidere. Its “A” and “B” shares inched up
by 3.93% and 5.87% to $10.57 and $10.83,
respectively.
Banking Sector
Mkt 18/09/2015 11/09/2015 % Change
BLOM (GDR) BSE $9.70 $9.70 0.00%
BLOM Listed BSE $9.43 $9.40 0.32%
BLOM (GDR) LSE $9.70 $9.72 -0.21%
Audi (GDR) BSE $6.00 $6.00 0.00%
Audi Listed BSE $5.74 $5.56 3.24%
Audi (GDR) LSE $6.00 $5.90 1.69%
Byblos (C) BSE $1.62 $1.63 -0.61%
Byblos (GDR) LSE $75.00 $75.00 0.00%
Bank of Beirut (C) BSE $18.40 $18.40 0.00%
BLC (C) BSE $1.70 $1.70 0.00%
Fransabank (B) OTC $27.00 $27.00 0.00%
BEMO (C) BSE $1.90 $1.90 0.00%
Mkt 18/09/2015 11/09/2015 % Change
Banks’ Preferred
Shares Index *
104.97 104.96 0.01%
Audi Pref. E BSE $102.20 $102.20 0.00%
Audi Pref. F BSE $100.60 $100.60 0.00%
Audi Pref. G BSE $100.60 $100.60 0.00%
Audi Pref. H BSE $100.70 $100.60 0.10%
Byblos Preferred 08 BSE $100.70 $100.70 0.00%
Byblos Preferred 09 BSE $100.70 $100.70 0.00%
Bank of Beirut Pref. E BSE $25.80 $25.80 0.00%
Bank of Beirut Pref. I BSE $25.75 $25.75 0.00%
Bank of Beirut Pref. H BSE $25.75 $25.75 0.00%
BLOM Preferred 2011 BSE $10.10 $10.10 0.00%
BEMO Preferred 2013 BSE $100.50 $100.50 0.00%
* 25 August 2006 = 100
1140
1160
1180
1200
1220
1240
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15
BLOM Stock Index
HI: 1,236.40
LO: 1,134.83
The Lebanon Brief Page 4 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Real Estate
Mkt 18/09/2015 11/09/2015 % Change
Solidere (A) BSE $10.57 $10.17 3.93%
Solidere (B) BSE $10.83 $10.23 5.87%
Solidere (GDR) LSE $10.15 $10.45 -2.87%
On the London Stock Exchange, Solidere’s and
BLOM GDR shares lost 2.87% and 0.21% to
settle at respective quotes of $10.15 and $9.70.
In contrast, Audi GDR gained 1.69% to settle at
$6.00 at the end of the week.
The Lebanese Bourse is expected to continue its
sideway path, affected by the country’s
economic and political developments.
Manufacturing Sector
Mkt 18/09/2015 11/09/2015 % Change
HOLCIM Liban BSE $15.00 $15.00 0.00%
Ciments Blancs (B) BSE $3.50 $3.50 0.00%
Ciments Blancs (N) BSE $3.10 $3.10 0.00%
Funds
Mkt 10/09/2015 03/09/2015 % Change
BLOM Cedars Balanced
Fund Tranche “A” ----- $7,485.11 $7,469.89 0.20%
BLOM Cedars Balanced
Fund Tranche “B”
----- $4,940.17 $4,929.28 0.22%
BLOM Cedars Balanced
Fund Tranche “C”
----- $5,684.99 $5,673.43 0.20%
BLOM Bond Fund ----- $9,484.65 $9,484.65 0.00%
Retail Sector
Mkt 18/09/2015 11/09/2015 % Change
RYMCO BSE $3.23 $3.23 0.00%
ABC (New) OTC $27.00 $27.00 0.00%
Tourism Sector
Mkt 18/09/2015 11/09/2015 % Change
Casino Du Liban OTC $323.00 $323.00 0.00%
SGHL OTC $7.00 $7.00 0.00%
The Lebanon Brief Page 5 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Foreign Exchange Market
Lebanese Forex Market
18/09/2015 11/09/2015 %Change
Dollar / LP 1,510.00 1,509.00 0.07%
Euro / LP 1,725.94 1,702.27 1.39%
Swiss Franc / LP 1,574.25 1,548.54 1.66%
Yen / LP 12.64 12.51 1.04%
Sterling / LP 2,356.37 2,326.37 1.29%
NEER Index** 166.07 167.11 -0.62%
*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. The NEER represents the
approximate relative price a consumer will pay for an imported good.
Demand for the Lebanese Pound in the Lebanese Forex
market weakened versus the Dollar during the week with
the exchange rate moving within the peg range from $/LP
1,507–1,511 with a mid-price of $/LP 1,509 to $/LP 1,508–
1,512 with a mid-price of $/LP 1,510. Foreign assets
(excluding gold) at the Central Bank dropped by a monthly
0.57% to reach $38.59B at the end of August. As for the
dollarization rate of private sector deposits, it slid from
65.71% in December 2014 to 65.08% by June.
Nominal Effective Exchange Rate (NEER)
The euro appreciated by 1.39% against the dollar to €/$
1.1449 following less that encouraging U.S. consumer
price index (CPI) data which led to speculation that the Fed
won’t hike interest rates this month, rather in December. In
fact, the Central Bank of the United States decided against
raising interest rates, on September 17th, until the turn of
the year, as both criteria for the hike weren’t met. In
specifics, despite the reached goal of 5% unemployment
rate by August, the 2% inflation rate wasn’t achieved.
Actually the CPI declined by 0.1% in August after a 0.1%
increase in July. The price of gold augmented by a weekly
2.77% to reach $1,136.68/once at 12:30 pm Beirut time.
By Friday 18th of September, 2015, 11:30 pm Beirut time,
the dollar-pegged LP depreciated against the euro going
from €/LP 1,702.27 to €/LP 1,725.94. The Nominal effective
exchange Rate (NEER) shed a weekly 0.62% to 166.07
points, narrowing its year-to-date gains to 12.73%.
Money & Treasury Bills Markets
Money Market Rates
Treasury Yields
17/09/2015 10/09/2015 Change bps
3-M TB yield 4.39% 4.39% 0
6-M TB yield 4.87% 4.87% 0
12-M TB yield 5.08% 5.08% 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
17/09/2015 10/09/2015 Change bps
Overnight Interbank 3.00% 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 September 3, 2015, broad Money M3
increased by LP 413B ($274.05M), to reach LP 182,965B
($121.37B) posting a 4.93% yearly growth and a 3.14% y-t-d
uptick. Similarly, M1 expanded by LP 467B ($309.55M) over
the week, due to the ascent in demand deposits by LP 150B
($99.50) and the LP 317B ($210.28M) increase in money in
circulation.
Total deposits (excluding demand deposits) decreased by LP
54B ($35.50M), over the week, given the $147M contraction
in deposits denominated in foreign currencies offsetting the
LP 168B expansion in term and saving deposits in LP. Over
the above mentioned period, the broad money dollarization
rate experienced a down tick from 58.18% on August 27, to
57.92% on September 3.
In the TBs auction held on the 10th of September 2015, the
Ministry of Finance raised LP 211B ($139.68M), through the
issuance of bills and notes maturing in 3M, 1Y and 5Y. The
highest demand was achieved on the 5Y notes, which
grasped 86.09% share of total subscriptions, while the 1Y
and 3M bills captured the remaining 9.25% and 4.66%,
respectively. The 3M and 1Y bills respectively yielded 4.39%
and 5.08%, while the coupon rate on the 5Y notes stood at
6.74%.
129
132
135
138
141
144
147
150
153
156
159
162
165
168
Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15
The Lebanon Brief Page 6 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Eurobond Market
Eurobonds Index and Yield
17/09/2015 10/09/2015 Change Year to Date
BLOM Bond Index (BBI)* 105.690 105.716 -0.02% -0.37%
Weighted Yield** 5.75% 5.75% 0 73
Weighted Spread*** 425 420 5 -5
*Base Year 2000 = 100; includes US$ sovereign bonds traded on the OTC market
** The change is in basis points ***Against US Treasuries (in basis points)
Lebanese Government Eurobonds
Maturity - Coupon
17/09/2015
Price*
10/09/2015
Price*
Weekly
Change%
17/09/2015
Yield
10/09/2015
Yield
Weekly
Change bps
2016, Nov - 4.750% 100.59 100.6 -0.01% 4.20% 4.20% 0
2017, Mar - 9.000% 106.25 106.15 0.09% 4.66% 4.78% -12
2017, Oct - 5.000% 100.38 100.38 0.00% 4.80% 4.80% 0
2018, Jun - 5.150% 100.38 100.5 -0.12% 5.00% 4.95% 5
2018, Nov - 5.150% 100 100.25 -0.25% 5.15% 5.06% 9
2019, Apr - 5.500% 100.75 100.75 0.00% 5.27% 5.27% 0
2020, Mar - 6.375% 103 102.75 0.24% 5.61% 5.67% -7
2020, Apr - 5.800% 100.63 100.25 0.38% 5.64% 5.74% -10
2021, Apr - 8.250% 110.88 110.75 0.12% 5.93% 5.96% -3
2022, Oct - 6.100% 100.38 100.7 -0.32% 6.03% 5.98% 6
2023, Jan - 6.000% 99.5 99.85 -0.35% 6.08% 6.02% 6
2024, Dec - 7.000% 105.13 105.6 -0.45% 6.26% 6.19% 6
2025, Jun - 6.250% 99.38 99.75 -0.37% 6.29% 6.23% 5
2026, Nov - 6.600% 100.85 100.75 0.10% 6.49% 6.50% -1
2027, Nov - 6.750% 101.63 101.5 0.13% 6.55% 6.57% -2
Mid Prices ; BLOMINVEST bank
The BLOM Bond Index (BBI), which tracks the performance of the Lebanese Eurobonds, lost a slight 0.02%, over the week, to
105.69 points. The BBI lagged behind the JP Morgan Emerging Markets’ Bond Index that gained a weekly 0.65% to 674.03 points.
The yield on the Lebanese Eurobonds maturing in 5Y lost 3 basis points (bps) to 5.84%, while the 10Y yield rose from 6.31% to
6.35%.
In the US, treasuries rallied, after the Federal Reserves decided to keep interest rates low for a longer period. Hence, the 5Y and
10Y yields dropped 5 bps and 2 bps to 1.50% and 2.21%, respectively. Consequently, the spread between the yields on the 5Y and
10Y Lebanese Eurobonds and their US comparable widened from 432 bps to 434 bps and from 408 bps to 414 bps, respectively.
Lebanon’s 5Y Credit Default Swaps (CDS) narrowed to 379-406 bps from last week’s 386-411 bps. The 5Y CDS quotes of Saudi
Arabia and of Dubai widened from 45-55 bps and 175-185 bps to 81-90 bps and 180-194 bps, respectively. As for Turkey and Brazil,
their 5Y CDS quotes narrowed from 290-292 bps and 388-393 bps to 264-267 bps and 376-381 bps, respectively.
4.50%
5.00%
5.50%
6.00%
Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15
Weighted Effective Yield of Eurobonds
The Lebanon Brief Page 7 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
ECONOMIC AND FINANCIAL NEWS
BDL’s Total Assets by Mid-September ($B)
Source: BDL
BDL’s Total Assets Stood at $91.36B by Mid-
September
Lebanon’s Central Bank’s (BdL) revealed a 0.55% monthly growth
by Mid-September in its total assets to $91.36B compared to a
lower amount of $90.86B by August 15. In addition, a 6.60%
growth in total assets from $85.70B has also been registered from
the beginning of the year.
Foreign assets, which grasped 42.34% of total assets, went up by
0.51% month-on-month to $38.68B by Mid-September. In contrast,
gold (11.15% of total assets) declined by 1.12% from last month to
$10.19B on the back of the 1.53% fall in international gold prices,
over the same period. In contrast, securities’ portfolio (18.24% of
total assets) improved 0.51%, from August 15, to $16.66B by Mid-
September, while loans to the financial sector (5.19% of total
assets) augmented by 2.27% m-o-m to $4.74B.
On the liabilities side, financial sector deposits grew by 1.72% m-o-
m to $73.851B, taking 80.84% of total liabilities by September 15,
while public sector deposits (6.01% of total liabilities) declined by
10.72% to $5.49B, over the same period.
58.51
73.08
77.2 78.02
85.26
91.36
2010 2011 2012 2013 2014 2015
The Lebanon Brief Page 8 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Balance of Payments Up to July (In $ M)
Source: Banque du Liban
Lebanon Registered a $1.32B Deficit on its Balance of
Payments by July
Despite the improving tourism activity, and the contracting trade
deficit, Lebanon’s Balance of Payment (BoP) remained in the red for
the first 7 months of 2015, recording a deficit of $1.32B, compared
to a surplus of $131M, in the same period last year.
This was mainly due to the decline in capital inflows and Foreign
Direct Investment (FDIs) as a result of the ongoing regional and
domestic developments. In fact, Net Foreign Assets (NFA) of the
Central Bank (BDL) grew by $1.87B until July, while that of the
commercial banks fell by $3.18B, over the same period.
In July alone, Lebanon’s Balance of Payments (BoP) recorded a
mere surplus, for the third month of the year, of $2.4M. In details,
Net Foreign Assets (NFA) of the Central Bank (BDL) grew by
$37.5M in July, while that of the commercial banks fell by $35M
from the prior month.
154.6
1611.2
1246
2307.2
-307.3
-1342.7
-957.2
131
-1316.9
2007 2008 2009 2010 2011 2012 2013 2014 2015
The Lebanon Brief Page 9 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Breakdown of Basic Salaries and Total Public
Sector Wages by February ($M)
Basic Salaries Total
2014 2015 2014 2015
Military
Personnel
229.52
237.4
287.2
349.59
Army
142.62
150.5
166.5
236.15
Internal
Security
Forces
67.66
67.00
92.87
85.57
General
Security
Forces
15.26
15.92
22.55
22.55
State Security
Forces
3.98
4.64
5.31
5.97
Education
Personnel
84.91
76.95
92.21
84.25
Civil
Personnel , of
which
37.15
40.46
49.75
53.07
Employees
Cooperative - -
9.29
6.63
Customs
Salaries - -
3.98
3.98
Total
352.24
354.8
442.4
497.51
Source: MoF
Public Sector Wages Increased to $497.51M by
February 2015
According to the Ministry of Finance (MoF), “Salaries, Wages and
Related Benefits”, which mainly include the cost of basic salaries,
allowances and indemnities paid to employees of the public sector,
expanded by 12.44% by February 2015 to $497.51M compared to
$442.45M in 2014. In fact, public sector wages mainly increased on
the back of allowances to the public sector rather than an increase
in basic salaries.
Salaries and wages, which constitute the largest component of the
government primary expenditures, saw its share rise from 29% by
February 2014 to 35% by February 2015.
Basic salaries, which owned up to 71.33% of “Salaries, Wages and
Related Benefits”, augmented by a small 0.75% year on year (y-o-y)
to $354.89M in the first 2 months of 2015. This was mainly driven
by the respective rises of 3.47% in salaries of “Military personnel”
(66.92% of total basic salaries) and 1.27% in Salaries of “Civil
Personnel” (11.40% of total salaries), totaling $237.48M and
$40.46M. However, it was partly offset by the 9.37% decrease in
salaries for “Education Personnel” (21.68% of total salaries) to
$77M.
“Allowances” surged yearly from $48.42M to $103.48M by February
mainly due to the increase, by more than double, in allowances for
the “military personnel” to $102.82M. “Indemnities” also went up
by 6.06% annually to $23.22M, over the same period.
The Lebanon Brief Page 10 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Imports Tonnage Relating to Lebanon’s Main
Custom Offices
Source: Customs
Port of Saida Regain Some Trading Activity
Customs activity was negative over the first seven months of 2015
recording yearly drops of 13.6% and 1.9% in terms of value and
volume of transferred goods. However, the steep decline in the
value of goods could be explained by the ongoing deterioration of
oil prices and the depreciation of the euro.
The breakdown of transferred goods revealed that maritime
shipment was the main route for Lebanon’s trade activity. Port of
Beirut is still transmitting the highest part of goods as it took a
share of 66.7% and was followed by the Port of Tripoli (21.3%) and
the Port of Saida (9.2%).
Five out of nine custom offices revealed higher volumes of
transported goods by July, 2015 compared to the same period in
2014 despite the decline of overall goods from 8.84M tons by July
2014 to 8.67M tons.
Despite that, PoB saw 7.9% yearly fall in goods’ volume to reach
5.8M tons worth $10.98B partly due the labor strikes and the slow
domestic demand. In contrast, tonnage of transferred goods
improved in each of the ports of Saida and Tripoli by respective
67.7% and 3.5% to 1.9M tons and 794,432 tons. In fact, the
relatively improving security situation in Tripoli and Saida might
have boosted trading activity at the cities’ ports, noting that Saida’s
Port revealed the largest yearly upturn.
Custom office of Masnaa, which used to be one of Lebanon’s
busiest custom offices, saw the tonnage of trafficked goods
slashing in half by July 2015 following a 52.6% y-o-y slump to
72,386 tons. This is most probably due to the constant conflict at
the Lebanese/Syrian border. In details, traded goods at the
mentioned gate, which is also the main land route to Jordan and
GCC countries, fell mainly due to Syrian rebels taking control of the
Jordanian Nasib border crossing (between Syria and Jordan) in Q1.
Separately, the imported volume through the Rafik Hariri
International Airport (RHIA) remained relatively stagnant at 34,149
tons by July 2015 compared to 34,182 tons by July 2014.
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
Total Port Of
Beirut
Tripoli Saida Masnaa
Traded Goods in 2014 Traded Goods in 2015
The Lebanon Brief Page 11 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Selected EU Aid Package Since 2014
Date Amount
(in $M)
Project
June 11,
2014
7.7 Phase III Jeita Spring Preject
July 11,
2015
8.8 Improving Institutional Capacity
of Lebanese Security
August
26, 2015
1.28 Rehabilitation and Expansion of
Water Supply
Septemb
er 17,
2015
16.5 Mine Relief and Housing
Improvement
Source: National News Agency
€15M Aid Package to Lebanon from the European
Union Targeting Socio-Economic Development
According to the National News Agency (NNA), the first 2015 aid
package from the European Union (EU), totaled €15M ($16.5M) to
support Lebanon’s socio-economic developments.
In details, €10M ($11M) will go to the support of Lebanon’s Mine
Action Strategy (MAS) through two programs, which assist in the
extraction of mines from areas that were affected during the
Lebanese/Israeli war, entitled “Supporting Lebanon Inclusive” and
“Sustainable Socio-Economic Development through Mine Action”.
The €10M package will be implemented by the following four Non-
Governmental Organizations (NGOs): DanChruchAid (Denmark),
Handicap International (France), Mines Advisory Group (United
Kingdom) and Norwegians People Aid (Norway). Since 2006, EU’s
involvement in demining relief funds has reached €28M ($30.8M).
The other €5M ($5.5M) will target the rehabilitation of rundown
Palestinian shelters. Worth mentioning, following the previous
successful program which renovated 1,286 homes, this new
program will satisfy the needs of around 400 families in 11 camps
in the country.
The Lebanon Brief Page 12 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
CORPORATE DEVELOPMENTS
Backyard Hazmieh Project
Capital $9M
Built-up
Area 7,800 sqm
Developer Venture Group
Designers
Bernard Mallat Architects, Walid Zeidan
Architects
Source: Venture Capital Website
EIP Invests in the Lebanese Market for the First Time
Emerging Investment Partners (EIP) announced its first investment
in the Lebanese market, through the acquisition of a majority stake
in a large real-estate project, Backyard Hazmieh.
The total capital required for the project is $9M excluding the costs
of each outlet’s interior design, of which EIP is securing half the
amount or $4.5M.
Backyard Hazmieh, an exclusive hospitality and lifestyle project, is
owned and developed by Venture Group, the same company that
developed Uruguay Street, Downtown. It is scheduled to open its
doors in November, 2015.
The project consists of 15 restaurants, 5 pubs, office spaces, and
other amenities such as a high-end gym and well-designed kids
playgrounds, in a landscaped architecture.
The complex is being built on a 7,800 sqm plot. It has a total built-up
area of 4,056 spm, of which 2,108 sqm of interior space and 1,948
sqm of terraces. It includes a floor for the restaurants and offices
and 2 underground parking levels.
The list of potential tenants encompasses Lina’s, Margherita
Pizzeria, Roadster, Starbucks, and Urbanista.
The Lebanon Brief Page 13 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
FOCUS IN BRIEF
Lebanese Car Importers: Coping with the Lebanese’s Tighter Wallets
According to the Association of Car Importers in Lebanon, the downward trend in new car registrations extended
to the first half of 2015 (H1 2015). The total number of new registered cars totaled 19,171 in H1 2015, down by 2%
from 19,555 registered in the same period of 2014. The downturn was seen in both the number of new passenger
and commercial vehicles which dropped by a yearly 2% and 4% to reach 18,047 and 1,124, respectively.
The slump is still tightly linked to the poor overall economic backdrop and the recent restriction on retail loans. The
slower economic growth, has weighed on consumers’ purchasing power and durable goods demand. More
pressure has been added on the car purchaser since a tighter lid was imposed on all retail loan conditions, more
particularly compelling a 25% down payment on car loans. Already back in 2014, consumers were adapting their
choices to a smaller budget and choosing small cars with price tags below $15,000. Therefore more strain has
now been added on the consumers with small budgets.
Registration of New Passenger Cars by Country of Origin H1 2014 Registration of New Passenger Cars by Country of Origin H1 2015
Source: Association of Car Importers in Lebanon
44%
33%
18%
4% 3%
Korean Cars
Japanese Cars
European Cars
American Cars
Chinese Cars
39%
36%
20%
5% 1%
Japanese Cars
Korean Cars
European Cars
American Cars
Chinese Cars
The Lebanon Brief Page 14 of 19
ISSUE 936 Week of 14-19 September, 2015
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Japanese Cars Snatched Number one From Korean Cars
The price factor is the motor behind car purchase decisions and this is why the exchange rate is determining
which car nationality is the Lebanese’s top favorite. The average value of the yen against the dollar depreciated by
17% from 102.47 in H1 2014 to 120.3 in H1 2015. This depreciation allowed for Japanese cars to record the
biggest registration number of 6,963, increasing by 16.20% year-on-year.
New Registration of Passenger Japanese Cars by Brand in H1 2015
Source: Association of Car Importers in Lebanon
The highest number of new car registrations in the Japanese cars’ category was recorded by Toyotas. According
to the Association of Car Importers in Lebanon, 3,113 new Toyotas were registered in H1 2015, up by a yearly
47.54%.
Higher Toyota registrations earned BUMC, the importer of these cars to Lebanon, a larger market share in H1
2015. After ranking fourth amongst Lebanese car importers in H1 2014 with a market share of 11.88%, BUMC
climbed to the second spot on the car market with a 17.22% market share in H1 2015.
As for the registration of Nissan passenger cars, it was less pronounced in the first six months of 2015. The
number of registered new Nissans dropped by 21.27% year-on-year to 1,891 in H1 2015. In fact, this affected
Rymco’s market share which dropped from 13.47% in H1 2014 to 11.20% in H1 2015. The drop in Nissan
registration might be due to the fact that the brand did not fully reflect the depreciation in the yen in its prices.
Meanwhile, the number of registered new Infiniti cars, also imported to Lebanon by Rymco, rose from 69 in H1
2014 to 99 in H1 2015.
3,113
1,891
607
539
283 195
125 99 83 28 Toyota
Nissan
Suzuki
Mitsubishi
Mazda
Honda
Subaru
Infiniti
Daihatsu
Lexus
The Lebanon Brief Page 15 of 19
ISSUE 936 Week of 14-19 September, 2015
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Korean Cars Witnessed Lower Registrations in H1 2015
The registration of Korean cars recorded a double-digit decrease in the first six months of 2015. According to the
AIA, 6,422 Korean cars were registered in H1 2015, down by 19.97% from 8,024 in the same period of 2014. In
fact, due to the depreciation of the yen, the price of Japanese cars became closer to the price of Korean cars,
which scaled Korean cars back to second position and propelled Japanese cars to first position on the market.
Kia remains the top Korean car in Lebanon, closely followed by Hyundai. However in H1 2015, the number of
registered Kias in Lebanon dropped by a yearly 21.91% to 3,471 and the number of registered Hyundais fell by a
yearly 17.33% to 2,942. Although with the launching of new Hyundai models later in the year, Hyundai sales are
expected to pick up.
These drops were reflected in lower market shares for the distributors of these brands in Lebanon. Natco, Kia’s
distributor, which remained number one in Lebanon, saw its market share drop from 22.73% in H1 2014 to
18.11% in H1 2015. As for Century Motor Co, distributor of Hyundai in Lebanon, it saw its market share fall from
18.74% in H1 2014 to 15.68% in H1 2015.
European Cars Benefitted from the Weaker Euro
New Registration of Passenger European Cars by Brand in H1 2015
Like for Japanese cars, the exchange rate played a big role in the performance of European cars in Lebanon. The
euro depreciated against the dollar from an average of 1.37 in H1 2014 to an average of 1.12 in H1 2015. This was
then reflected in the 10.07% increase in the number of registered European cars to 3,607 in H1 2015.
635
494
407
354
328
272
200
188
129 83 81 68
Renault BMW Mercedes Audi
Land Rover Volkswagen Dacia Porsche
Mini Volvo Seat Citroen
The Lebanon Brief Page 16 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Although the general trend on the market is steered towards small price-tag cars, the depreciation of the euro,
which was transmitted to consumers through lower European car prices, boosted the registration of high-end
European cars. The number of registered BMWs rose from 248 in H1 2014 to 494 in H1 2015, the number of
registered Mercedes rose by 11.51% to 407, the number of registered Audis increased by 9.94% to 354, the
number of registered Land Rovers grew by 13.49% to 328. Interestingly enough, the number of registered Porsche
grew by a yearly 44.62% to 188 which points to the fact that the luxury segment of the market is going strong.
Renault registered the highest number of registrations in H1 2015 with 635 cars. When compared to H1 2014, the
number of registered Renaults would have dropped by 0.47%. Volkswagen, Dacia and Citroen also registered
downturns of 14.20%, 3.85% and 9.33% to 272, 200 and 68, respectively.
American Cars Had a Good Start for 2015
New Registration of Passenger American Cars by Brand in H1 2015
American cars also kick-started 2015 on a good-note with the total registrations rising by 12.73% year-on-year to
930. Chevrolet topped the list with 498 new registered cars up by a yearly 17.73% while Ford witnessed a minor
1.07% uptick to 189. GMC and Dodge recorded double-digit increases of 14% and 18.75% to 57 and 19,
respectively. Meanwhile, Jeep and Chrysler recorded falls of 13.73% and 40% to 88 and 3, respectively.
498
189
88
76
57 19 3
Chevrolet Ford Jeep Cadillac GMC Dodge Chrysler
The Lebanon Brief Page 17 of 19
ISSUE 936 Week of 14-19 September, 2015
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Chinese Cars Still Failing to Gain Appeal on the Lebanese Market
Source: Association of Car Importers in Lebanon
The registration of Chinese cars was already low in 2014 and it dropped further in 2015. According to the AIA, only
125 Chinese cars were registered in H1 2015 as compared to 270 in H1 2014.Downturns were registered across all
Chinese brands. Notably, the registration of Geelys dropped by a yearly 66.67%, BYD by 67.14%, JAC by 38.89%,
Chery by 34.48% and DFSK by 25%.
Overall, the trend towards new small cars has extended into the first half of 2015. The upturns that were registered
by European and Japanese cars were made possible by favorable exchange rates while American cars benefitted
from the distributors’ marketing efforts and new competitive and affordable models.
The improvement in the registration of Japanese, European and American brands reflected in higher car imports
registered at the Ministry of Finance. The value of car imports grew by 16% year-on-year to $588.72M in H1 2015
and the volume of imported cars grew from 33,524 in H1 2014 to 37,259 in H1 2015. Accordingly, the excise tax
collected on cars grew by 13% year-on-year to $147.95M in H1 2015. With higher car imports came higher
gasoline excise which increased by a yearly 21% to $200.47M. It is worth mentioning that due to lower oil prices,
the value of gasoline imports dropped by a yearly 31% to $574.24M while the volume of gasoline imports grew by
a yearly 9% to 1,206 mln liters in H1 2015.
The Ministry of Finance also collects VAT revenues (10%) on both gasoline imports and car imports. The VAT
revenues collected on the value of gasoline imports declined from $83.65M in H1 2014 to $57.44M in H1 2015. As
for VAT revenues collected on the value of car imports, they grew from $50.61M in H1 2014 to $58.86M in H1
2015.
Lebanese car importers had to make concessions and count on several services they offer in order to remain
profitable. Car distributors are still counting on marketing efforts to boost their sales as well as special packages
and deals with low interest rates, longer guarantee periods, easier installment and payment plans. Car distributors
are therefore accepting lower profit margins and are pouring efforts into improving stock turnover, especially since
the value of car stocks drops rapidly.
37
23
22
19
9
9
5 1
Geely
BYD
JAC
Chery
DFSK
BAIC YINXIANG
Brillance
JMC
The Lebanon Brief Page 18 of 19
ISSUE 936 Week of 14-19 September, 2015
S A L
Car Importer Brand H1
2014
Car Importer H1 2015
NATCO Kia 22.73% NATCO 18.11%
Century Motor Co Hyundai 18.74% BUMC 17.22%
Rymco Nissan,
GMC,
Infiniti,
Lotus,
Renault
Trucks, UD
Trucks
13.47% Century
Motor Co
15.68%
BUMC Toyota,
Lexus
11.88% Rymco 11.20%
Bassoul Heneine Alfa
Romeo,
BMW,
Dacia, Mini,
Renault,
Rolls
Royce,
Renault
Commercial
7.17% Bassoul
Heneine
8.74%
Source: Association of Car Importers in Lebanon
The Lebanon Brief
Page 19 of 19
Your Investment Reference
S A L
Research Department:
Wael Khoury [email protected]
Lana Saadeh [email protected]
Riwa Daou [email protected]
Mirna Chami [email protected]
Marwan Mikhael [email protected]