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Azerbaijan Weekly Market Watch

Azerbaijan Weekly Market Watch

Galt&Taggart Publishes Report on Main Developments that Took Place in Azerbaijani Economy Last Week:

CBAR reserves up 0.1% m/m to US$ 4.0bn Central Bank’s reserves were up marginally (+0.1% m/m) in November 2016, following two months of minor declines. In annual terms, reserves are down 35.8%.

Oil exports down 13.1% m/m to 1.8mn tons in November 2016 According to SOCAR, the company exported 1.8mn tons of crude oil in November 2016 (-13.1% m/m and -6.2% y/y). In 11M16, exports were down 5.2% y/y to 18.9mn tons. SOCAR exports crude oil belonging to the company as well as to the Azerbaijan state. Monthly average price of BTC FOB Ceyhan oil was down 9.2% m/m to US$ 46.6 per barrel, while in annual terms, the price was up 3.2%

Banking sector loans down 5.7% m/m in October 2016 Banking sector loans declined further in October 2016, down 5.7% m/m to AZN 15.8bn. The decline came on the back of a 7.9% m/m contraction in FX loans, which was likely due to restrictions on FX loans to households put in place in the summer of this year. Excluding mortgage loans, household (HH) loans declined 6.5% m/m to AZN 4.2bn in October 2016. Non-performing loans (NPL) in nominal AZN terms were down 13.9% m/m in October 2016, resulting in the NPL ratio retreating to 8.7% from 9.5% in the previous month. The main contribution to the improved NPL ratio came from an 18.8% m/m decline in non-performing longterm AZN loans

Deposits of non-financial corporations up 3.7% m/m in October 2016 Deposits in the banking sector declined 2.7% m/m in October 2016 as non-financial corporations and households decreased their FX deposits in the banking system. Non-financial corporations (NFC), on the other hand increased their total deposits in the banking system by 3.7% m/m. Tripling of local currency term deposits belonging to NFCs is the main factor behind increase in total NFC deposits

Deposit dollarization down to 75.5% in October 2016 As NFCs increased their local currency savings, overall deposit dollarization declined from 81.0% in August 2016 to 75.5% in October 2016. Deposit dollarization of NFC accounts retreated to 64.4% in October, while that of households and financial corporations (FC) remained broadly flat at 81.1% and 87.4%, respectively

Oil price: Brent oil price was up 15.3% w/w to US$ 54.5/bbl (up 28.2% y/y), while WTI oil price increased 15.5% w/w to US$ 51.7/bbl (up 29.4% y/y). In AZN terms, Brent oil price was up 15.3% w/w to AZN 91.3 (up 116.4% y/y).

Exchange rate: On December 2, 2016, Central Bank’s AZN/US$ rate was 1.7339 (+0.8% w/w) and AZN/EUR rate was 1.8516 (+1.9% w/w). At Bloomberg AZN/US$ was trading at 1.7663 (+0.0% w/w) while AZN/EUR was trading at 1.8720 (+1.5% w/w).

Monetary policy rate: Monetary policy rate was unchanged at 15.0%.

Corporate Eurobonds: State Oil Company of Azerbaijan (SOCAR) Eurobond (SOIAZ 03/30) closed at 6.9% yield, trading at 100.2 (-0.5% w/w). International Bank of Azerbaijan Eurobonds (IBAZAZ 06/19) were trading at 98.8 (-0.1% w/w), yielding 6.1%.

Azerbaijan Sovereign Eurobonds (AZERBJ 03/24) closed at 99.2 (+0.7% w/w) at 4.9% yield to maturity