THE LEBANON BRIEF - mofcom.gov.cnimages.mofcom.gov.cn/lb/201306/20130606174602416.pdf · The Lebanon Brief Page 5 of 14 ISSUE 822; Week of 28 -01 June 2013 SAL Foreign Exchange Market

Your Investment Reference

THE

LEBANON BRIEF

ISSUE 822

Week of 28 May – 01 June, 2013

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 14

ISSUE 822; Week of 28 -01 June 2013

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

BoP Registers $44.3M Surplus in April 2013 7

Trade Deficit Expands to $5.76B Up to April 2013 7

Construction Area Narrows to 4.13M sqm up to April While Number of Permits Increases 8

World Bank: Lebanon’s Bank Z-Score Stood at 35.1% in 2010 9

2012 Apartments worth $400M Remain unsold 9

IMF Projects Lebanon’s Real GDP Growth at 2% in 2013 10

CORPORATE DEVELOPMENTSCORPORATE DEVELOPMENTSCORPORATE DEVELOPMENTSCORPORATE DEVELOPMENTS 11111111

BLOM Bank Reaps “Best Bank in Lebanon for 2013” Award by Euromoney 11

BLC Bank’s Assets at $4.99B in March 11

RYMCO Hosts Ordinary General Assembly Meeting 12

FOCUS IN BRIEFFOCUS IN BRIEFFOCUS IN BRIEFFOCUS IN BRIEF 13131313

This Time Is Different 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 14


S A L

FINANCIAL MARKETSFINANCIAL MARKETSFINANCIAL MARKETSFINANCIAL MARKETS

Equity Market

Stock Market

31/5/2013 24/5/2013 % Change

BLOM Stock Index* 1,186.64 1,210.00 -1.93%

Average Traded Volume 133,420 191,872 -30.46%

Average Traded Value 1,022,283 1,975,851 -48.26% *22 January 1996 = 1000

Activity on the Beirut Stock Exchange mimicked the

sentiments of investors that were in turn governed

by the adverse local and regional developments of

the Syrian turmoil, the cabinet formation, the

disagreement about a new parliamentary law and

the prospect of extending the current parliament’s

mandate. The BLOM Stock Index (BSI), Lebanon’s

leading index, retreated 1.93% on a weekly basis to

an 18-week low of 1,186.64 points as most active

stocks ended the week on a negative note. Hence,

the BSI narrowed its year-to-date performance to

1.5%. The average daily traded volume reached

133,420 shares valued at $1.02M compared to

191,872 shares worth $1.98M recorded last week.

With respect to the market capitalization, it fell by a

weekly $181.66M to $9.23B.

On a comparative scale, the Lebanese benchmark

underperformed the MSCI Emerging index that fell

0.96% to 1,016.02 points. The BSI also failed to beat

the S&P AFE40 and the S&P Pan Arab Composite

LargeMidCap index that edged up by 1.21% and

1.17% to 58.57 points and 118.50 points,

respectively.

On the regional scene, the BSE was the worst

performer in the past week, tracked by the

Jordanian bourse that dropped by 0.42%. However,

Dubai Stock Market recorded the best performance

among its regional peers this week as it surged by a

weekly 2.65%.

The banking sector dominated the trading activity

on the BSE this week, seizing 68.83% of the total

value traded, whereas the real estate stocks made

up 30.26% and the industrial sector took the

remaining 0.90%.

Banking stocks mostly declined this week with

BLOM GDR and Listed shares dropping by 0.56%

and 1.07% to close at $8.85 and $8.31, respectively.

Audi and Byblos common shares also edged down

by 3.51% and 2.52% to close at $6.32 and $1.55,

respectively. As for the BLOM preferred shares

index (BPSI), it inched 0.07% up to 104.25 points,

supported by Bank of Beirut Preferred stocks class

“H” that rose 0.79% to stand at $25.40. The

preferred shares of Byblos class 09 witnessed a

weekly 0.10% decrease to reach $101.00.

Banking Sector

Mkt 31/5/2013 24/5/2013 %Change

BLOM (GDR) BSE $8.85 $8.90 -0.56%

BLOM Listed BSE $8.31 $8.40 -1.07%

BLOM (GDR) LSE $8.80 $8.99 -2.11%

Audi (GDR) BSE $6.83 $6.83 0.00%

Audi Listed BSE $6.32 $6.55 -3.51%

Audi (GDR) LSE $6.80 $7.00 -2.86%

Byblos (C) BSE $1.55 $1.59 -2.52%

Byblos (GDR) LSE $70.00 $70.00 0.00%

Bank of Beirut (C) BSE $19.00 $19.00 0.00%

BLC (C) BSE $1.95 $1.95 0.00%

Fransabank (B) OTC $28.00 $28.00 0.00%

BEMO (C) BSE $1.84 $1.84 0.00%

Mkt 31/5/2013 24/5/2013 % Change

Banks’ Preferred

Shares Index *

104.25 104.18 0.07%

BEMO Preferred 2006 BSE $100.00 $100.00 0.00%

Audi Pref. E BSE $101.00 $101.00 0.00%

Audi Pref. F BSE $100.00 $100.00 0.00%

Byblos Preferred 08 BSE $100.00 $100.00 0.00%

Byblos Preferred 09 BSE $101.00 $101.10 -0.10%

Bank of Beirut Pref. E BSE $25.50 $25.50 0.00%

Bank of Beirut Pref. I BSE $25.40 $25.40 0.00%

Bank of Beirut Pref. H BSE $25.40 $25.20 0.79%

BLOM Preferred 2011 BSE $10.07 $10.07 0.00%

* 25 August 2006 = 100

1050

1100

1150

1200

1250

May-12 Aug-12 Nov-12 Feb-13 May-13

BLOM Stock Index HI: 1,227.46

LO: 1104.42



S A L

Real Estate

Mkt 31/5/2013 24/5/2013 % Change

Solidere (A) BSE $12.50 $12.92 -3.25%

Solidere (B) BSE $12.50 $12.84 -2.65%

Solidere (GDR) LSE $12.15 $12.75 -4.71%

In the real estate sector, both Solidere shares “A”

and “B” declined by a respective 3.25% and

2.65% to converge at the same price of $12.50.

Manufacturing Sector

Mkt 31/5/2013 24/5/2013 % Change

HOLCIM Liban BSE $15.35 $16.50 -6.97%

Ciments Blancs (B) BSE $3.23 $3.23 0.00%

Ciments Blancs (N) BSE $3.24 $3.24 0.00%

On the London Stock Exchange, the GDRs of

BLOM, Audi and Solidere lost a weekly 2.11%,

2.86% and 4.71% to close at $8.80, $6.80 and

$12.15, respectively.

Funds

Mkt 31/5/2013 24/5/2013 % Change

BLOM Cedars Balanced

Fund Tranche “A” ----- $7,009.57 $7,032.50 -0.33%


Fund Tranche “B” ----- $5,108.69 $5,127.07 -0.36%


Fund Tranche “C” ----- $5,323.81 $5,341.23 -0.33%

BLOM Bond Fund ----- $9,738.32 $9,738.32 0.00%

As for the manufacturing sector, HOLCIM Liban

dropped 6.97% on a weekly basis to end the

week at $15.35, despite the respective daily

increases of 2.29% and 1.05% on Thursday and

Friday that partially offset Monday’s 10.00% fall.

Retail Sector

Mkt 31/5/2013 24/5/2013 % Change

RYMCO BSE $3.04 $3.04 0.00%

ABC (New) OTC $33.00 $33.00 0.00%

In brief, the Beirut Stock Exchange underwent an

expected pattern of trading activity amid

domestic and regional instability. Going forward,

activity on the Beirut Stock Exchange is likely to

remain volatile given the political uncertainty

prevailing in the country as investors remain

skeptical about the future prospects of resolving

the cabinet formation dilemma and the

consequences of the 17 months extension of the

current parliament’s mandate that was approved

on Friday.

Tourism Sector

Mkt 31/5/2013 24/5/2013 % Change

Casino Du Liban OTC $490.00 $490.00 0.00%

SGHL OTC $7.00 $7.00 0.00%



S A L

Foreign Exchange Market

Lebanese Forex Market

31/5/2013 24/5/2013 %Change

Dollar / LP 1511.00 1512.50 -0.10%

Euro / LP 1961.86 1956.58 0.27%

Swiss Franc / LP 1581.68 1562.34 1.24%

Yen / LP 15.02 14.81 1.42%

Sterling / LP 2295.62 2278.74 0.74%

NEER Index** 1511.00 1512.50 -0.10% *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.

Demand on the US dollar slightly eased during the week since

the range at which banks exchanged the currency went from

$/LP 1,510.5 - $/LP 1,514.5 with a mid-price of $/LP 1,512.5 to

$/LP 1,509- $/LP 1,513 with a mid-price of $/LP 1,511. Foreign

assets (excluding gold) at the Central Bank stood at $37.29B as

of end April 2013, 5.5% more than end of March’s $35.33B.

Meanwhile, the dollarization rate of private sector deposits

stood at 65.06% in April compared to 65.17% in March.

Nominal Effective Exchange Rate (NEER)

Over the past week, the euro registered minor gains against

the dollar. Despite US consumer purchases registering their

highest gain since 2010, slower inventory building, reduced

government spending and a larger than forecast decline in

commercial construction took their toll on the American GDP

that settled below initial estimates, registering an annualized

growth rate of 2.4% in the first quarter of the year. Meanwhile,

economists still consider the easing of GDP’s growth as mild

given that corporate earnings fell by 1.9% from the previous

three months yet remained 6.1% higher than the same period

last year. By Friday May 31st, 2013, 12:30 pm Beirut time, the

euro closed at €/$ 1.30 up by 0.27% from last week. As for the

dollar-pegged LP, it depreciated to €/LP 1,961.86 from €/LP

1,956.58 recorded on Friday May 24th. The Nominal effective

exchange rate (NEER) slipped by 0.32% over the cited period

to 113.60 points, while its y-t-d performance stood at 9.43%.

Money & Treasury Bills Market

Money Market Rates

Treasury Yields

31/5/2013 24/5/2013 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

31/5/2013 24/5/2013 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 May 16th, broad Money M3 retracted

by LP183B ($122M), to reach LP 160,748B ($106.63B). M3’s

growth rate reached 6.77% on a year-on-year basis and

1.79% from end of December 2012. As for M1, it contracted

by LP245B ($162M) since currency in circulation decreased

by LP179B ($118.74M) and demand deposits fell by LP 66 B

($43.78M).Total deposits (excluding demand deposits)

registered a LPB61.76B ($40.97M) expansion, justifiable by

the LP110B increase of term and saving deposits in LP and

the $32M drop in deposits denominated in foreign currencies.

During the period 9-16 May, broad money dollarization rate

rose by 4 bps to reach 58.63% compared to its previous level

of 58.60%. According to The Central Bank, the overnight

interbank rate stood at 2.75% by the end of March 2013.

In the TBs auction held on May 23rd, the Ministry of Finance

raised LP88.44B ($58.67M) through the issuance of Treasury

Bills. The highest demand was witnessed on the 6M bill

capturing 77% of total subscriptions, while the 3M and 5Y

papers accounted for 16% and 7%, respectively. During the

auction, the average discount rate for the 3 and 6 months

notes stood at 4.39% and 4.87% while the average coupon

rate for the 5Y notes registered 6.74%. New subscriptions

exceeded maturing T-bills by LP40.97B ($27.17M).

99

101

103

105

107

109

111

113

115

May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13



S A L

Eurobond Market

Eurobonds Index and Yield 30/5/2013 23/5/2013 Change Year to Date

BLOM Bond Index (BBI)* 106.430 106.720 -0.27% -2.41%

Weighted Yield** 5.63% 5.57% 6 61

Weighted Spread*** 459 464 -5 29

*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

30/5/2013

Price*

/23 5/2013

Price*

Weekly

Change%

30/5/2013

Yield

23/5/2013

Yield

Weekly

Change bps

2014, Apr - 7.375% 103.35 103.51 -0.15% 3.43% 3.34% 9

2014, May - 9.000% 104.75 104.95 -0.19% 3.71% 3.60% 11

2015, Jan - 5.875% 102.38 102.56 -0.17% 4.34% 4.24% 9

2015, Aug - 8.500% 108.24 108.51 -0.25% 4.49% 4.40% 9

2016, Jan - 8.500% 109.03 109.17 -0.13% 4.81% 4.78% 3

2016, May - 11.625% 118.25 118.62 -0.31% 4.90% 4.81% 8

2017, Mar - 9.000% 112.62 113.02 -0.35% 5.29% 5.20% 9

2018, Nov - 5.150% 98.34 98.51 -0.17% 5.51% 5.47% 4

2020, Mar - 6.375% 101.38 102.09 -0.69% 6.12% 5.99% 13

2021, Apr - 8.250% 111.24 111.87 -0.56% 6.41% 6.31% 9

2022, Oct - 6.100% 98.23 98.49 -0.26% 6.35% 6.32% 4

2023, Jan - 6.00% 97.12 97.41 -0.30% 6.40% 6.36% 4

2024, Dec - 7.000% 104.50 104.38 0.12% 6.44% 6.46% -2

2026, Nov - 6.600% 98.67 99.16 -0.49% 6.75% 6.70% 6

2027, Nov - 6.75% 98.95 99.17 -0.22% 6.87% 6.84% 2

*Bloomberg Data

Local holders showed little interest in purchasing government debt this week in an attempt to maintain their high liquidity

ratios, due to an international declining trend and a deteriorating political environment. Accordingly, the BLOM Bond Index

(BBI) dropped 0.27% to a 13-week low of 106.43 points, and the lowest level since December 2012. The BBI fell at a slower

pace than the JP Morgan emerging markets’ bond index that lost 1.97% to 651.30 points reflecting a thinner demand for

bonds in the emerging markets. The yields on holding Lebanese sovereign debt in foreign currency showed a shift in

investors’ interest revealing a move towards shorter term notes as the 5Y yields lost 6 basis points (bps) to stand at 5.22%,

while the 10Y yield gained 4 bps to reach 6.40%.

In the US, investors stayed away of bonds market driven by the assumptions of Federal Reserve cutting its bond purchases

in the near future. Accordingly, the 5Y and 10Y US benchmark Treasury notes and bonds yields rose, by a weekly 10 bps

and 11 bps to stand at 1.01% and 2.13%, respectively. Their respective spreads with the 5Y and 10Y Lebanese Eurobond

yields narrowed by 16 bps and 7 bps to settle at 421 bps and 427 bps, respectively.

Lebanon’s credit default swap for 5 years (CDS) was last trading at 420-449 bps; lower than last week’s closing at 427-447

bps. In regional markets, Saudi Arabia and Dubai’s CDS quotes contracted this week to 64-70 bps and 201-211 bps

compared to 65-73 bps and 208-220 bps, respectively. As for emerging economies, insurance premiums against state-debt

default in Brazil and Turkey closed with respective quotes of 141-144 bps and 132-134 bps compared to last week’s

respective quotes of 132-134 bps and 120-124 bps.

4.30%

4.80%

5.30%

5.80%

May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13

Weighted Effective Yield of Eurobonds



S A L

EEEECONOMIC AND FINANCICONOMIC AND FINANCICONOMIC AND FINANCICONOMIC AND FINANCIAL NEWS AL NEWS AL NEWS AL NEWS

Balance of Payments

In April (In $M)

Source: BDL

Lebanon’s Trade Deficit

Up to April (In $B)

Source: Customs

BoP Registers $44.3M Surplus in April 2013

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

$44.3M in April this year compared to a deficit of $542.9M

recorded in the same month last year. Net foreign assets (NFA)

of the Central Bank (BdL) increased over the month by $660.7M,

while the commercial banks NFAs retreated by $616.4M. In

total, a monthly excess of $44.3M was registered as depositors

repatriate their money from crisis-hit Cyprus. However, it was

still not enough to offset the considerable outflow of NFAs in

February and March, resulting in a total negative balance of

$17.9M during the first four months of 2013. In March,

Lebanon’s net foreign assets had decreased $353.0M,

influenced by the setback in the domestic political environment

and the resignation of the country’s cabinet.

Trade Deficit Expands to $5.76B Up to April 2013

Lebanon’s trade deficit recorded $5.76B during the first four

months of the year, rising by 9.7% compared to the same

period last year according to the latest figures of the Customs

Department. When annualized, the trade deficit to GDP ratio

reached 39.1% by April 2013 compared to 37.9% in 2012. This

change was due to an 8.9% yearly increase in exports reaching

$1.60B and a 9.5% yearly increase in imports marking $7.36B. In

addition, while exports covered 21.9% of imports in the first

four months of 2012, the ratio slightly edged down to 21.8%

during the same period of 2013. In details, pearls and precious

stones, which grasped 26% of total value of exports, decreased

in value by 35% on an annual basis. Mineral products rose from

$11.88M by April 2012 to $239.20M by the end of April this

year, now accounting for 15% of total exports. Additionally,

base metals and articles of base metals also increased by 36%

y-o-y, seizing 13% of total exported products. Products of the

chemical and allied industries saw a similar trend rising 21% of

total value and constituting 7%of total exports in April 2013. The

top export destination was Syria with a share of 18% of total

exports while UAE and Saudi Arabia followed with respective

shares of 16% and 8%. As for imports, the value of mineral

products increased by 4% making up 26% of total imports. In

addition, machinery and electrical instruments came in second

place with a 13% stake and added 48% y-o-y while products of

the chemical or allied industries had a share of 9% of total

imports and rose 14% from last year’s value. In terms of imports

destinations, the U.S.A, captured the first place with a stake of

10%, tracked by Italy and China with a market share of 8%

each. Furthermore, transit revenues rose by 21.8% by April this

year to reach $145.91M compared to $119.82M during the

same period in 2012.

856.2

-198.6

-542.9

44.3

2010 2011 2012 2013

5.05.8 6.1

6.77.4

1.2 1.4 1.3 1.5 1.6

-3.9-4.4 -4.8

-5.3-5.8

2009 2010 2011 2012 2013

Imports Exports Balance of Trade



S A L

Construction Activity Up to April

Source: Order of Engineers Beirut and North

Construction Area Narrows to 4.13M sqm up to April

While Number of Permits Increases

Despite the recorded slowdown in real estate activity,

construction permits unexpectedly increased during the first

four months of 2013, slightly edging up by 0.8% from the same

period in 2012. This rise in permits resulted from the existing

time lag for developers to recognize or consider in their

projections any slowdown on the demand’s side, which is likely

to remain undermined in the next 6 to 12 months. Accordingly,

the number of permits rose from 5,595 in 2012 to 5,637 up to

April this year, noting that permits are usually issued at least six

months after an application is filed. As for the construction area

authorized by the issued permits (CAP), it narrowed by 13.2% y-

o-y to 4.13 million square meters (sqm). For the month of April

alone, the number of issued permits jumped by 21.3% to 1,901

from April 2012 and by 52.8% from the previous month. CAP in

April was at 1.31M sqm, 13.6% higher than the same month in

2012 despite the fact that developers were lately moving

towards smaller projects. Worth noting that the average area

per transaction has decreased by 6.3% y-o-y to

690.92sqm/permit in April this year, confirming investors’ shift

towards smaller plots of land for their new projects. Mount

Lebanon continued to grasp the bulk of issued permits,

accounting for 41% of the total. South Lebanon followed with

17% of the total, while the Bekaa valley and Nabatiyeh came in

third with 13% each of total permits. According to the Order of

Engineers and Architects of Tripoli, total permits in the North

region fell 2.2% by April this year to reach 678 permits

compared to 693 permits issued during the same period in

2012. Additionally, the issued permits for Tripoli alone dropped

70.4% y-o-y to reach only 37 permits during the first four

months of the year which is highly related to the continuous

political fighting and instability that characterizes the city. The

negative sentiment will keep on overshadowing the Lebanese

investment in the future amid the regional turmoil and the

domestic political standstill.

3522

4129

5009

6252

55955637

700

750

800

850

900

950

1000

1050

3000

3500

4000

4500

5000

5500

6000

6500

2008 2009 2010 2011 2012 2013

number of permits (LA)

Average Area per Permit Evolution (RA - In sqm/permit)



S A L

Selected Financial Indicators 2010

MENA Lebanon

Bank Private Credit to GDP (%) 32.3 69.2

Bank Assets to GDP (%) 64.5 143.3

Stock Market Total Value Traded to GDP (%)

20.9 3.7

Adults with accounts at a

formal financial institution to total Adults (%)

24.4 37

Lending-Deposit Spread (%) 5 2.1

Bank Z-Score 24 35.1

Source: World Bank: The Little Data Book on Financial Development

2013

Overview of 2012’s Completed Projects (Priced at

no less than $2,800 /sqm)

Number of Studied Housing Projects 65

Number of Fully Sold Projects 18

Total Number of Apartments 1,179

Number of Unsold Apartments 217

Total Area (sqm) 404,546

Source: RAMCO-Real Estate Advisers

World Bank: Lebanon’s Bank Z-Score Stood at

35.1% in 2010

The recent global economic crises have revealed the importance

of the financial system, its far-reaching effect on the economy

and policy makers’ poor understanding of it. In this line of

thought, the World Bank compiled a set of data measuring the

size of financial institutions and markets (Financial Depth), the

extent to which individuals use financial services (Financial

Access), the efficiency of financial intermediaries (Financial

Efficiency) and the stability of financial markets and institutions

(Financial Stability). The depth of financial institutions in

Lebanon exceeds that of the MENA region, measured by the

share of bank private credit to GDP and the share of bank assets

to GDP that stood at 69.2% and 143.3% in 2010 compared to

32.3% and 64.5% in the MENA area. In addition, access to

financial services in Lebanon is more developed than in the rest

of the region given that 37% of total adults hold a bank account

at a formal financial institution compared to 24.4 % across the

MENA zone. Also, the share of outstanding international debt

securities to GDP was at 3.7% in the MENA region compared to

61.6% in Lebanon. However, MENA’s average outperformed

Lebanon in terms of the share of stock market total value traded

to GDP as it registered 20.9% in 2010 compared to a thin share

of 3.7% in Lebanon. Meanwhile, as the lending-deposit spread

of MENA countries stabilized at 5.00% during the period 2005-

2010, the Lebanese spread narrowed over the same stretch

from 2.5% to 2.1% in a more competitive environment. Finally,

the Lebanese Bank z-score which compares a bank’s

capitalization and returns (buffers) with the volatility of those

returns stood at 35.1 in 2010 and compared favorably to the

MENA’s average of 24.0, hence confirming the Lebanese

banking sector’s more than adequate capitalization.

2012 Apartments worth $400M Remain unsold

A recent study conducted by RAMCO on the Beirut residential

projects completed in 2012, revealed that 18 projects (or 28%)

out of 65 residential projects with an asking sale price at or

above USD 2,800 per square meter (SQM) are completely sold

out. This selection of 65 buildings posts an overall take-up ratio

of 82%. A total of about 100 projects were completed across

Municipal Beirut in 2012 but the study retained only the 65

projects that have a sale price above USD 2,800 per SQM.

According to data collected by RAMCO’s Research Team, 217

units in buildings completed during the 2012 remain on the

market, representing a total of 71,361SQM of built-up residential

area. These translate into a listed sale value (before negotiation)

just shy of approximately USD 400M. It should be kept in mind

that projects completed in 2012 were launched between 2008

and 2009. They thus benefited from a booming residential

market. The high take-up ratio could thus be slightly inflated by

the excellent sales of the years between 2008 and 2010,

whereas transactions were notably slower in 2011 and 2012.



S A L

Selected Economic Indicators: Stark Contrast

within the MENA Region

MENA OilMENA OilMENA OilMENA Oil----Importing Importing Importing Importing

CountriesCountriesCountriesCountries

MENA OilMENA OilMENA OilMENA Oil----Exporting Exporting Exporting Exporting

CountriesCountriesCountriesCountries

2012201220122012

2013201320132013

pppp

2014201420142014

pppp 2012201220122012

2013201320132013

pppp

2014201420142014

pppp

Real GDP

(Annual Growth)

2.7 3 3.6 5.7 3.2 3.7

Current Account

Balance (% Of GDP)

-5.7 -4 -3.6 16.6 14.3 12

Overall Fiscal Balance

(% Of GDP)

-8.4 -8.1 -6.9 6.9 4.7 3.1

Inflation (Annual Growth)

9.5 9.2 9.6 12 10.5 8.8

Source: International Monetary Fund, Regional Economic Outlook, May

2013

IMF Projects Lebanon’s Real GDP Growth at 2% in

2013

The socio-political unrest witnessed in countries of the Middle

East and North Africa (MENA) region kept none of the oil-

importing countries at bay from weakened investor confidence,

elevated security concerns and declining stock market indices.

Additionally, the external position of these countries, including

Lebanon, has been subdued due to declining exports, restrained

foreign direct investment and falling tourist arrivals. Moreover,

economic decay is further aggravated in refugee-hosting

countries such as Lebanon and Jordan. According to the IMF’s

updated regional economic outlook on oil importing countries,

real GDP will grow by 3.0% in 2013, higher than the 2.7% rate in

2012 but much lower than the respective growths of 4.2% and

4.0% in 2009 and 2010. Lebanon’s GDP growth is set to post

2% in 2013 compared to 1.5% in 2012, hence lower than the

region’s average and well below 2009 and 2010’s domestic

levels of 9% and 7%. Meanwhile, inflation is not estimated to

reach 2008’s peak of 10.8% but is set to register the second

highest rate of 6.7% in 2013 to eventually drop to 2.4% in 2014.

The deficits of the fiscal and current account balance are set to

reach their highest levels since 2008, standing at 9.7% and

16.1% of GDP.



S A L

CORPORATE CORPORATE CORPORATE CORPORATE DEVELOPMENTSDEVELOPMENTSDEVELOPMENTSDEVELOPMENTS

Selected BLOM Bank’s Awards

Award From

Best Bank in Lebanon for 2012 The Banker

Best Bank in Lebanon for 2012 Banker Middle East

Best Bank in the Middle East for 2012

The New Europe

Best Local Investment Bank in Lebanon for 2012

EMEA Finance

Best Bank in Lebanon for 2013 Euromoney

Source: BLOM Bank Website

BLC’s Assets and Liabilities (In 000’s of USD)

Dec-12 March 2013 % Change

Customer's

Deposits 4,292,074 4,182,371 -3%

Net Loans &

Advances to Customers

1,775,947 1,783,162 0.41%

Total Assets 5,094,402 4,994,753 -2%

Net Profit 4,632* 8,800 90%

Shareholders’

Equity 373,965 382,848 2%

*March 2012 Figure

Source: Company Data

BLOM Bank Reaps “Best Bank in Lebanon for

2013” Award by Euromoney

BLOM Bank received the “Best Bank in Lebanon for 2013”

award from Euromoney in a ceremony held in Shangri-La

Hotel, Dubai on the 29th of May. Euromoney is one of the

most distinguished institutions that publish financial

coverage of key market developments worldwide. Mr. Saad

Azhari received the award and thanked the institution for its

confidence and appreciation of the bank’s performance and

insisted that BLOM Bank remained solid despite the

ongoing regional and local political turmoil.

BLC Bank’s Assets at $4.99B in March

The unaudited consolidated income statement of BLC Bank

revealed a net profit of $8.8M in March 2013 compared to

$4.63M earned in the same period last year. This rise in

profit is due to the 21% year-on-year increase in the bank’s

net financial revenues after impairment charge for credit

losses that stood at $31.43M in March 2013. Net financial

revenues were uplifted by respective increases of 3% and

27% in net interest income and net fee and commission

income that amounted to $26.37M and $4.75M in March. In

addition, March 2013’s staff costs and administrative

expenses reached $12.89M and $6.23M, $947,000 and

$241,000 lower than their levels in March 2012. Meanwhile,

the bank’s balance sheet unveiled total assets of $4.99B,

equivalent to a 2% year-to-date (y-t-d) reduction. In fact, the

0.41% y-t-d increase in loans and advances to customers to

$1.78B was outweighed by respective y-t-d falls of 12% and

10% in cash and central bank and deposits with banks and

financial institutions. On the liabilities’ side, customer’s

accounts at amortized cost went from $4.29B in December

2012 to $4.18B in March. Total shareholders’ equity rose by

2% y-t-d to $382.85M in March.



S A L

Performance of RYMCO’s Listed Shares

Source: Beirut Stock Exchange, Blominvest Research Department

RYMCO Hosts Ordinary General Assembly

Meeting

RYMCO’s board of directors invites its shareholders to the

annual general assembly meeting set to take place at the

company’s headquarters in Hazmieh - Chiyah Boulevard on

Friday the 28th of June at five o’clock. The meeting’s agenda

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

auditors’ findings, approval of 2012’s financial statements

and the allocation of profits, clearing the chairman and the

board from 2012’s administrative duties and electing a new

board of directors with set credentials. Regarding the

financial year of 2013, the chairman and members of the

board along with the main auditor are to be elected. Various

urgent issues will also be discussed during the meeting.

$2.00$2.10

$2.20$2.30

$2.40$2.50

$2.60$2.70

$2.80$2.90

$3.00



S A L

FFFFOCUSOCUSOCUSOCUS IN BRIEFIN BRIEFIN BRIEFIN BRIEF

This Time Is Different

Lebanon's Real GDP Growth Rate Balance Of Payments (In $B)

Source: Blominvest Research Department

Fiscal Deficit (% of GDP)

Source: BDL

Source: Ministry of Finance, Blominvest Research Department

This is the title of a book by leading economists Carmen Reinhart and Kenneth Rogoff whereby they reject the usual rhetoric

of experts “this time is different” following financial and economic crises. Each time experts claim that the old rules of

valuation no longer apply and that the new situation bears little similarity to past disasters. Throughout the book, the

authors try to prove them wrong and argue that “financial combustions are universal rites of passage for emerging and

established market nations”.

Unlike the authors of the book, we argue that in Lebanon, this time the slowdown in economic growth is different as it

could last much longer than previous declines and will constitute another test to the resiliency of the Lebanese economy.

Reasons behind the slowdown are many starting from the spillovers of the war in neighboring Syria, passing by the decision

of GCC countries to warn their citizens against coming to Lebanon, and ending with the fiscal problems and structural

issues that are strangling the economy.

This time is different because the shock does not have a limited time span. The repercussions of the war in Syria are

continuous and the war in itself does not seem to have a known end date. Hence the policies that should be adopted to

face such a large factor of uncertainty have to be different. When the war erupted in Syria, Lebanon did not have the right

infrastructure to attract Syrian investors. Wealthy Syrians owning factories and businesses in Syria were obliged to flee their

country and preferred to invest in the UAE and Turkey rather than in Lebanon. The latter was not equipped to welcome such

investments. Only banks attracted a limited amount of deposits and the real estate sector attracted some buyers.

This time is different because the tourism sector has been hardly hit by the decision of GCC countries to warn their citizens

not to visit Lebanon; and no timeframe for this decision is known. It is worth mentioning that direct and indirect

contributions of the tourism sector to GDP hover around 30 percent. Since Arab visitors are the main spenders among the

whole spectrum of tourists, the retail sector, in addition to the hotel and restaurants businesses, is feeling the impact of the

decline in Arab tourists.

2.04

3.46

7.90

3.32

-2.00 -1.54

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2007 20082009

20102011

2012

10.2%9.8%

8.5%

7.8%

5.9%

9.3%

8.40%8.60% 9.00%

7.00%

2.10%

1.00%

0%

2%

4%

6%

8%

10%



S A L

This time is different because our public debt and fiscal deficit levels do not provide any leeway for further deterioration.

Public debt is at 138% of GDP and fiscal deficit reached 9.3% of GDP at end 2012. Therefore the government does not have

the luxury to adopt an expansionary fiscal policy to boost economic growth. In this context, the government is not even able

to increase its capital expenditures to improve the faltering infrastructure following many years of restricted capital

spending.

This time is different because international interest rates are not going to stay this low forever. Once the Federal Reserve

starts increasing its interest rates, Lebanon will have to follow and the impact on the debt service won’t be negligible. The

public debt rise will accelerate and debt to GDP ratio will increase. If the government does not tackle its fiscal deficit

problem until then, the fiscal situation will deteriorate and will impact the entire economy.

On another front, the weakening infrastructure is limiting the potential growth of real GDP. Following several years of high

GDP growth, the Lebanese economy has shifted, during the past two years, from high to low gear economic growth. Real

GDP growth recorded 2% in 2011 and 1.2% in 2012 and this year will be no exception. This was partly due to the lack of

investment in infrastructure during years of high growth. Lebanon needs to upgrade its infrastructure in all sectors including

Energy and water, roads and transportation, and IT and telecommunications. Since the government does not have the

means to do all the necessary investments, several schemes should be considered such as the public private partnership,

the Build Operate Transfer, and privatization, only to name few .

Finally, the government may benefit from this low growth trend to embark on an aggressive structural reform program.

Enhancing the business environment is a priority. Of course it is well known that a perfect setting will not be able to attract

investments if security and political conditions are not stable. However needed reforms regarding laws and regulations have

to be upgraded – such as the cost and time it takes to open and close a business – in order to be ready when the situation

in the Levant region gets better. The outdated commerce law should be revamped to accompany new developments. The

judicial system has to be modernized to shorten the time needed for decisions to be taken regarding mainly business

related cases. Revamping the tax system, putting in place regulations and laws to encourage transparency and reduce

corruption is necessary as Lebanon is positioned near the bottom of the world ranking regarding transparency and

corruption.

The Lebanon Brief

Page 15 of 14

Your Investment Reference

S A L

Research Department:

Riwa Daou [email protected]

Mirna Chami [email protected]

Marwan Mikhael [email protected]

Documents

THE LEBANON BRIEF - mofcom.gov.cnimages.mofcom.gov.cn/lb/201306/20130606174602416.pdf · The Lebanon Brief Page 5 of 14 ISSUE 822; Week of 28 -01 June 2013 SAL Foreign Exchange Market