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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

[email protected]

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 of 19


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



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%


Fund Tranche “B”

----- $4,940.17 $4,929.28 0.22%


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%



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



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



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



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



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.



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



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.



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.



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



S A L

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


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



S A L

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



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



S A L

Chinese Cars Still Failing to Gain Appeal on the Lebanese Market


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



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%


The Lebanon Brief

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]

mailto:[email protected]

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