Sunday, 9 July 2017

CBE raises interest rates 200 bps

TL;DR

What We’re Tracking Today

By now, you must have heard that the Central Bank’s Monetary Policy committee raised interest rates another 200 bps last Thursday. The move has caused quite a bit of consternation among the private sector, not unlike last May’s interest rate hike (we have more in the Speed Round). We will be keeping an eye on how this will impact the EGX this morning, how banks will respond, business — considering some have already started saying that CAPEX will be cut — and inflation. We are expecting word from the CBE on inflation rates for June sometime this week.

On that note, more price hikes have come after the Electricity Ministry announced last Thursday that it was raising electricity prices around 42% across the board. This coupled with fuel hikes late last month and an expected increase in metro ticket prices (more in Speed Round) is sure to see inflation grow this month. The question is, will it surpass the government’s target of a 4.5% inflation rate increase.

Supply Minister Ali El Moselhy is scheduled to discuss the cost of producing subsidized bread at a meeting today with representative from the Federation of Egyptian Chambers of Commerce’s bakeries division, Al Mal reports. There are divergent opinions on the amount the government subsidizes, with the Supply Ministry, and the bakeries divided on the issue. The three sides are also expected to discuss the price of diesel provided to bakeries, after the government moved to raise fuel prices late last month. El Moselhy had said the government would ensure the price hikes would not affect the cost of bread or other subsidized food staples.

When companies get tangled in regional political beefs: Vodafone Egypt is facing backlash domestically due to the network’s branch in Qatar took sycophancy to a whole new level by changing its name to “Glorious Tamim,” which Egyptians have perceived as the British company taking a stance against Egypt and the GCC countries, Al Arabiya reports. The company has been forced to deny that this was company policy and that this was the decision of Vodafone’s Qatar subsidiary (more in Last Night’s Talk Shows). The latter should taken a lesson from France’s Total, which has made it clear it is not taking sides in the issue, with its CEO stressing that the company’s business is not affected by the politics of the region, according to Reuters.

…Meanwhile, Egypt, Saudi Arabia, the UAE, and Bahrain vowed to step up their punitive measures against Qatar, saying that Doha’s rejection of their 13 demands is reflective of its commitment to destabilize the region, according to a joint statement carried by the Saudi Press Agency. US Secretary of State Rex Tillerson and UK Foreign Secretary Boris Johnson are currently playing shuttle diplomacy, Reuters reports.

UK’s diplomacy since Brexit has certainly gone downhill. This is what its ambassador to Cairo John Casson told Al Mal about our airports: Egypt has not yet fulfilled the necessary security procedures at airports to resume flights. He adds that there is progress and increased cooperation in intelligence between the two countries. So all the platitudes of friendship and improving ties and ending travel restrictions “soon” have yet to amount to anything more than haggis. A delegation is set to visit Egypt to follow up on airport safety measures within the next two weeks. UK tourists know better, with 1H17 seeing a 61% y-o-y increase in the number of nights spent by British tourists in Egypt, the ambassador said.

The 4th Annual Mashable Social Media Day kicked off yesterday and is running till tomorrow at the Greek Campus, according to a press release. Representatives from Facebook, Instagram, IBM Watson, Social Bakers, and Quintly are attending. Social Media Day is also providing participants with job opportunities through a partnership with Wuzzuf where they can apply for vacancies presented in an exhibition.

What We’re Tracking This Week

A delegation from Poland’s Pomeranian Special Economic Zone (PSEZ) will be in Egypt for a four-day visit to discuss establishing an industrial zone in the Suez Canal Economic Zone (SCZone), Al Shorouk reports. Delegation members are set to meet with Trade and Industry Minister Tarek Kabil and Suez Canal Economic Zone chairman Mohab Mamish. The SCZone had signed an MoU with the PSEZ in February to build the zone. Separately, a delegation of 250 Polish businessmen is set to accompany Polish President Andrzej Duda during his visit to Egypt during the second half of 2017, we had noted.

Private mobile network operators might be getting their letters this week to launch commercial 4G service operations, sources tell Al Mal. MNOs received their 4G frequencies last month and are meant to run trial operations until next month while they geographically redistribute 2G and 3G frequencies.

On The Horizon

The Executive Regulations for the recently-passed Natural Gas Act will be completed by September, Petroleum Minister Tarek El Molla told the press on Thursday, according to AMAY. The legislation, which passed the House of Representatives last Wednesday, is expected to deregulate the natural gas industry, allowing private sector participation and limiting the state’s role to that of regulator.

Enterprise+: Last Night’s Talk Shows

As expected, the CBE’s decision to hike interest rates by 200 bps last Thursday and the increase in electricity prices were the main topics of debate on the airwaves last night.

Hona Al Asema’s Lamees Al Hadidi moderated a debate on the interest rate hike between veteran economist Hany Genena and Union Capital Executive Chairman Hany Tawfik.

The CBE is moving in the right direction trying to curb inflation, said Genena in wholehearted support for the decision. He explained that for the first time the bank officially actually said that the hike was only a temporary means to an end. He advised trusting the CBE.

On the other hand, Union Capital’s Tawfik described the hike as “catastrophic.” He argued that it will deter investments and not aid in reducing inflation but actually do the opposite. Regardless of what the CBE does, inflation levels will fall to a 13-15% average by end of 2018 as the effects of the EGP float subside.

Domty Vice Chairman Mohamed El Damaty was of the same mind, saying that the unexpected move to hike interest rates will certainly add to manufacturers’ burdens and likely drive inflation levels up and sales down. The head of the Federation of Egyptian Industries’ food industries division also agreed, telling Lamees that demand for products has already dropped some 25-30% (Watch the full debate, runtime 42:41)

Lamees then moved on to talk about the issue with Vodafone’s Qatar subsidiary changed its name to “Glorious Tamim.” Vodafone Qatar is 70% owned by the Qatari royal family, Vodafone Egypt Chairman Hany Mahmoud told Lamees, explaining that the Vodafone Group, which owns a 23% minority stake in its Qatari operation, was just as surprised by the campaign as everyone else (watch, runtime 5:21).

Lamees also spoke to Suez Canal Authority chief Mohab Mamish, who said that a decision was issued earlier in the day to allow Qatari ships to cross the Suez Canal but not stop at any domestic ports (watch, runtime 4:54).

On Kol Youm, Amr Adib was all about the new power prices. Electricity Minister Mohamed Shaker told Adib that the lowest consumption tiers are still seeing subsidies 4-5x higher than the cost of production (watch, runtime 1:41), while the highest tiers are no longer being subsidized, explaining to the host that 60% of users pay no more than EGP 60 a month for power (watch, runtime 1:51).

The tariffs will decline if the EGP continues to strengthen, Shaker also noted. He also told Adib that the ministry will be switching all users to prepaid or smart meters over the coming five years, explaining that users who have already converted have cut back their consumption significantly (watch, runtime 5:08).

Meanwhile on Masaa DMC, host Eman El Hosary covered the attack against military forces in North Sinai that left at least 26 dead and injured. The State Information Service intends to issue a comprehensive statement on the attack detailing the full story in order to debunk rumors, SIS chief Diaa Rashwan said (watch, runtime: 7:49).

Speed Round

Speed Round is presented in association with

The CBE’s Monetary Policy Committee decided to raise interest rates by another 200 bps in its meeting last Thursday, marking the third such interest rate hike since the EGP float and a 700 bps increase in borrowing costs since then. The overnight deposit rate was raised to 18.75% from 16.75%, while the overnight lending rate increased 19.75% from 17.75%. The CBE’s main operation rate grew to 19.25% and the discount rate was also raised to 19.75% from 17.75%, according to a statement from the CBE.

Fuel, electricity hikes to blame: "Higher prices of hydrocarbon products effective June 29, 2017, higher value added taxes effective July 1, 2017, higher electricity prices scheduled for July 2017, as well as other potential regulated price adjustments further increase inflationary pressure," the central bank said, justifying the move. Fuel prices were raised an average 55% late last month, and the government had moved electricity prices last week. Vice Minister of Finance Ahmed Kouchouk had projected inflation would rise 3-4.5% as a result of the fuel hikes. Bloomberg notes the IMF’s hand in this and last May’s interest rate hike as well.

The measure is only temporary: The CBE added that the necessary measures will be taken to lower inflation to 13% by the end of next year, and that the bank envisages “a measured easing of the monetary stance” as soon as underlying inflation begins to slow. "We expect the interest rate decision to be a temporary measure to target inflation," Vice Minister of Finance Mohamed Maait told Reuters. "We expect inflation to fall in early 2018 and thus (we can) begin cutting interest rates." Government sources have reiterated that the move was temporary in statements to Al Masry Al Youm.

Impact on the FY2017-18 budget: This latest rate hike, and the 200 bps hike from last May, were not taken into account in the FY2017-18, which parliament passed last week, said Maait. The interest on current and future debt was calculated at EGP 381 bn, Maait tells Reuters. He expected adjustments to that figure in the light of the change in borrowing costs. Sources from the Finance Ministry tell Al Mal that the latest hike could raise the budget deficit by another EGP 30 bn. The budget, which has yet to be ratified by President Abdel Fattah El Sisi, projects a budget deficit of EGP 370 bn.

“The impact of [Thursday’s] hike would be diluted as banks are unlikely to pass it on to their deposit and savings rate,” said CI Capital’s Hany Farahat — the sole economist polled by Reuters and Bloomberg to predict the hike was coming. Banque Misr Chairman Mohamed El Etreby announced that his bank would hold interest rates on 20%-yielding deposit certificates, according to Al Masry Al Youm. Top state-owned banks will await until their Alco (assets and liabilities committees) meetings this week to determine how they will move as a result of the hike, Youm7 reports. Farahat notes that the hikes will have a very minimal impact on inflation.

Egypt’s business sector, still reeling from last May’s 200 bps hike, denounced the move. “The [latest] interest rate hikes will have a negative impact on consumer prices in the coming period,” said the head of the food industries division of the Federation of Egyptian Industries (FEI), Ashraf El Gazayerli. He tells Al Mal that raising borrowing costs will be passed on to the consumer. The interest rate increase "will have a devastating impact on industry (in general) and the pharmaceutical sector," SEDICO Pharmaceutical Company CEO Hossam Aboul El Enein tells Reuters. Top executives from Fancy Food, Spinney’s Egypt, and Universal Group also took to the pages of Al Mal to raise their concerns about the interest rate hikes. Some are projecting inflation to rise 5-7% while others are saying that the move may lead to further cuts in CAPEX.

Banking sector heads who spoke up relayed a more positive message. National Bank of Egypt President Hisham Okasha defended the move, saying it was necessary to keep inflation resulting from the price increases in fuel and electricity at bay, AMAY reports. Other banking sector executives to come out praising the move include Emirates NBD’s Deputy Managing Director Sahar El Damaty, and Suez Canal Bank president Hassan Refai.

Meanwhile, MPs of the Support Egypt Coalition are calling for an urgent party meeting to discuss the interest rate hikes and its impact on industry. They are also requesting that a special session to probe the hikes be taken, Al Shorouk reports.

CBE denies it had a hand in EGP’s appreciation: CBE Governor Tarek Amer assured President Abdel Fattah El Sisi that the CBE had no hand in the EGP’s appreciation of around 1.3% last week in a meeting on Saturday. He told the president that market forces were entirely behind the strengthening of the currency — which is proving profitable for carry traders, according to an Ittihadiya statement picked up Al Borsa. The denial comes as analysts had speculated last week that the CBE had been artificially strengthening the EGP. Amer’s denials had been preceded by another from CBE Deputy Governor Gamal Negm to MENA news agency, where he reiterated that the CBE does not control currency fluctuations. Significant foreign inflows last week contributed to the strengthening of the local currency. Negm said that inflows during last week alone, which saw a single-day record of USD 704 mn, had amounted to around USD 2 bn.

"Right now, it’s a one way bet for the pound to appreciate, but if inflation continues, the risk changes to the downside," Mohsin Khan, Washington-based senior fellow at Atlantic Council’s Rafik Hariri Center for the Middle East, tells Bloomberg’s Ahmed Namatallah and Ahmed Feteha. "More volatility in the exchange rate would be good because it would show agents that market forces are at work and that the CBE’s main focus is bringing down inflation," he added.

With bond yields reaching 21% — the highest after Argentina — EM investors continue to be attracted to the country’s debt. Inflows in t-bills drew in around USD 9 bn in foreign inflows since the EGP was floated back in November, the highest level since 2010. "If you’re an emerging market investor, you can come in and buy the world’s second-cheapest currency, offering very high yields and very low volatility,” said Renaissance Capital’s global chief economist Charles Robertson.

The Electricity Ministry raised the price of electricity by around 42% for household consumers last Thursday, according to Reuters. The move, which follows an increase to the prices of fuel last week, removes subsidies entirely for the highest-tier consumers. The new prices for household consumers per month are broken down as follows:

  • The 0-50 KW consumption bracket will pay EGP 0.13 per KW, up from EGP 0.11;
  • The 51-100 KW consumption bracket will pay EGP 0.22 per KW, up from EGP 0.19;
  • The 100-200 KW consumption bracket will pay EGP 0.22 per KW, up from EGP 0.19;
  • The 200-350 KW consumption bracket will pay EGP 0.55 per KW, up from EGP 0.45;
  • The 350-650 KW consumption bracket will pay EGP 0.75 per KW, up from EGP 0.55;
  • The 650-1,000 KW consumption bracket will pay EGP 1.25 per KW, up from EGP 0.95;
  • The 1,000+ KW consumption bracket will pay EGP 1.35 per KW, up from EGP 0.95.

The prices of electricity for industrial and commercial use were also increased across the different brackets, Al Mal reports. Heavy industries will be paying a high of EGP 0.654 per KW during peak hours and EGP 0.982 per KW in the off-peak. The monthly tariff for commercial usage changed acrossfive brackets as follows:

  • The 0-100 KW consumption bracket will pay EGP 0.45 per KW, up from EGP 0.35;
  • The 100-250 KW consumption bracket will pay EGP 0.84 per KW, up from EGP 0.69;
  • The 250-600 KW consumption bracket will pay EGP 0.96 per KW, up from EGP 0.69;
  • The 600-1,000 KW consumption bracket will pay EGP 1.35 per KW, up from EGP 0.96;
  • The 1,000+ KW consumption bracket will pay EGP 1.40 per KW, up from EGP 0.96.

The state will continue to subsidize power for another five years until 2022 rather than eliminate them by 2019 as had been originally planned “owing to the conditions related to the big increase in the exchange rate,” the minister also confirmed. This latest increase is expected to save the state around EGP 30 bn in energy subsidies, bringing the bill down to EGP 52.8 bn in the FY2017-18. Customers in the highest consumption tiers will be paying a higher price for power than its cost of production of EGP 0.97 per KW and the profit generated will be used partially to cover the subsidy for the lowest consumption bracket, Shaker had said previously.

Metro and railway ticket prices to rise by 4Q18: The price of Metro tickets will increase to a range of EGP 2-4 by 4Q18 depending on the distance traveled on each line, up from a set EGP 2 regardless of distance traveled, Transport Minister Hisham Arafat tells AMAY in an interview. The prices of railway tickets will also be rising next year, he adds, justifying the increases with the arrival of new locomotives and the implementation of upgrades that will improve service quality. These upgrades will cost the Transport Ministry more than EGP 130 bn, according to Arafat, who said that the Cairo Metro Line 3 alone is costing close to EGP 80 bn.

Last March’s doubling of metro ticket prices had was another painful blow to Egypt’s poor, writes Hamza Hindawi for the Associated Press. His piece looks at how the metro has ended up being a burden of the government alone precisely because Egypt’s rich have shun it, and major commerce at the metro stations are limited to street peddlers.

IPO WATCH – Baker McKenzie was reportedly selected as legal advisor on the listing of up to 24% of state energy company Enppi, sources tell Al Borsa. The international law firm apparently beat out four of the country’s most prominent law firms: Matouk Bassiouny, Zaki Hashem & Partners, and Zulficar & Partners. As we noted last week, a consortium led by CI Capital and includes Jefferies International Limited and Emirates NBD Capital Limited was selected as as lead managers and bookrunners of the listing. Now that the whole team has been assembled, meetings on the IPO will begin in earnest this week, the source added.

Possible delay in the IPO? These sources also told the newspaper that the IPO may take place in early 2018 once all approvals have been obtained. If true, this would mean that the government had decided to delay the IPO from the 4Q17 date announced by Investment and International Cooperation Minister Sahar Nasr last week.

INVESTMENT WATCH – Spanish companies are looking to ramp up their investments in Egypt, company representatives told Investment and International Cooperation Minister Sahar Nasr on the sidelines of the Crans Montana forum in Barcelona. Mediterrania Capital Partners is planning to increase its capital in Egypt to EUR 300 mn and will send a delegation to Egypt soon to study further investment opportunities, according to a ministry statement. Sanitary ware producer Roca is also looking to establish a new factory in 6th of October, while roller coating manufacturer GomPlast is set to establish its first project in Damietta, according to company officials. Shipping services company Salvat Logística is also eyeing establishing a logistics center in Egypt to serve its Middle East operations. A Spanish business delegation will also visit Egypt soon, President of Foment del Treball Nacional, a federation of Catalan entrepreneurs, Joaquím Gay de Montella told Nasr.

Meanwhile, the European Institute of the Mediterranean (IEMed) plans on holding a conference this year to boost investments in Egypt and increase economic trade between Egypt and the EU, IEMed’s Managing Director Josep Ferré said. The delegation will include representatives from companies in the renewable energy, car manufacturing, food, logistics, and infrastructure sectors.

Oil Ministry planning second gold exploration tender for 2017: The Oil Ministry is planning another gold exploration tender for 2017 — it’s second this year after last April’s offering. Oil Minister Tarek El Molla tells Youm7 that the ministry has prepared a list of new concessions that will be offered, adding that the ministry is ready to launch the tender. He offers no details on the whereabouts of the concessions or details on the second tender. More importantly, his statement lacks any detail on whether the new god exploration tender will follow the same production-sharing agreement, which was met with disdain and scared off Centamin, Aton Resources, and Thani Stratex, the three largest mining companies in Egypt. The winners of the last gold tender were UK’s Veritas Mining Limited, Ghassan Spain Investment, Egypt’s East Gas Company and Resolute Egypt, who will collectively invest USD 41.3 mn.

CIB was named Euromoney’s Best Bank in the Emerging Markets for 2017 at an awards ceremony in London on Tuesday, making it the first bank in Egypt, the Middle East, and Africa to take home the honor, the bank said in an emailed statement (pdf). “Posting high returns as a universal bank in [emerging] markets, where interest rates are naturally high, can be easy in the good times. To sustain it during the inevitably volatile economic and political transitions requires nimble risk management and deep local management. Often treated as a proxy for the Egyptian economy, CIB ticks both those boxes and many more,” Euromoney says of our good friends. CIB Chairman and Managing Director Hisham Ezz Al Arab said the bank’s success stems largely from “staying away from the emotional side of decision-making [and] anticipating where a problem could arise and preparing for it beforehand.”

EARNINGS WATCH- Qalaa Holdings reported a net loss after minority interest of EGP 383.5 mn in 1Q207, compared to a loss of EGP 281.7 7mn in 1Q2016, according to the company’s earnings release. While revenues grew by 22% year-on-year for the period, “bottom-line profitability was weighed down by losses at the company’s discontinued operations, namely Africa Railways and Designopolis,” the statement reads.“Management’s ultimate goal is to continue streamlining and reshaping our investments in a manner that allows us to maximize value from the prevailing macro trends,”said Qalaa Holdings Co-Founder and Managing Director Hisham El-Khazindar. “Our efforts are already bearing fruit with core platforms delivering a steady improvement in financial and operational results, and with Qalaa on a steady course to deliver sustainable profitability at the consolidated level by 2018.”

CLARIFICATION – We had run a story last week on the Military Production Ministry receiving funding offers for its USD 2 bn solar panel factory from the European Bank for Reconstruction and Development (EBRD) from an Al Borsa article which quoted statements by Military Production Minister Mohamed Al Assar. We have since been informed that the EBRD is not affiliated with the project.

23 soldiers were killed in twin car bombings at two military checkpoints in North Sinai’s Rafah on Friday, the Armed Forces said in a statement. Daesh claimed responsibility for the attack. Military forces killed 40 militants and destroyed six vehicles during a raid, according to the Armed Forces. The US State Department issued a statement condemning the attacks. Statements of condemnation also came from Saudi King Salman bin Abdulaziz. Hamas leader Ismail Haniyeh also vowed to beef up security along Egypt’s border with Gaza to ensure against security breaches in Egypt, Al Shorouk reports.

Separately, the Hasm militant group — an offshoot of Daesh — claimed responsibility for the assassination of a police officer in a drive-by shooting in Greater Cairo’s Qalyubiyah on Friday, according to the Associated Press. Two policemen were also killed and nine others injured in a roadside bomb explosions in Al-Arish yesterday, Al Masry Al Youm reports. It remains unclear who was behind the attack.

Egypt reportedly cut back on its fuel shipments to Gaza by 33-50% on Saturday after the Ramallah-based Palestinian Authority froze the bank transfers that were funding the shipments, Gaza’s power authority said, according to Maan News Agency. The move is part of the PA’s efforts to curb the warming of ties between Hamas and Egypt, which most recently saw discussions between the two sides on an agreement that would see Egypt supply the group with security equipment. The news coincided with Palestinian President Mahmoud Abbas’ arrival in Cairo last night for a meeting with President Abdel Fattah El Sisi today, Al Masry Al Youm reports.

Egyptian police have reportedly arrested 34 Uighur Chinese students, 12 of whom have been deported, while the remainder are in detention and awaiting deportation, the New York Times reports. The Uighurs are a Sunni Muslim Chinese minority living in a western region of China which has seen ethnic strife. The Chinese government has recently been ordering Uighur students studying abroad to return to China, according to Reuters. Human Rights Watch says the arrests began on 3 July, following a meeting in mid-June between senior security officials from both countries. The rights group puts the number of arrests at 62.

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The Macro Picture

Tourist arrivals to Africa are growing by 6% on average each year, according to a report by UNCTAD. “Northern Africa is the main draw for international tourists as it received almost half of total international arrivals in Africa between 2011-14,” the report states. Despite political and security challenges, Egypt led the continent in tourist arrivals with 9.9 mn visitors during the period, followed by Morocco with 9.8 mn, South Africa with 9.2 mn, and Tunisia with 6.8 mn — together accounting for more than 60% of Africa’s 2011-14 arrivals. Setbacks also failed to deter the continent’s tourism export revenues, which grew to USD 47 bn between 2011-14 from USD 41 bn between 2005-08.

Egypt in the News

Topping coverage of Egypt in the foreign press this morning is news of Egypt cutting fuel supplies to the Gaza strip after the Palestinian Authority slashed payments for the fuel. Outlets including Al Jazeera are noting accusations by Hamas officials that the move squeezes Hamas further.

In a surprising close second place are wire pickups of last Friday’s attack in Rafah, which left 23 Egyptian security personnel dead. Foreign outlets, including The Atlantic, are calling the attack the deadliest in the Sinai peninsula in over two years. They also note that this appears to be a return in Daesh’s strategy to attack security after it shifted focus to attack Coptic Christians.

Egypt’s USD 1.2 mn contract with the New York City-based PR firm Weber Shandwick is raising some red flags about Cairo and D.C’s warming ties, Avi Asher-Schapiro writes in The Atlantic. The campaign, Egypt Forward, is meant to emphasize the importance of the Egypt’s s role in the Middle East as the champion of counter terror and highlight the strategic nature of its partnership with the US.“Weber’s contract with the Egyptians is not, in itself, unconventional,” Asher-Schapiro says. It’s rather the firm’s decision to do business with a foreign-intelligence service with a stained human rights record. Not only are there concerns about spending of US taxpayers’ revenues, but critics of the agreement have spotted factual mistakes in Weber’s campaign.

Suez Canal expansion gets heat as main reason behind jellyfish invasion: The latest expansion of the Suez Canal is getting a lot of heat, as experts say that it might be the “primary cause” of the jellyfish invasion that arrived to the shores of the North Coast’s beaches this summer, the Associated Press says. “Other ecosystem stressors have allowed them to thrive and become a plague,” Plymouth University marine biologist Jason Hall-Spencer tells the newswire, but the larger waterway is what let them through in the first place.

President Abdel Fattah El Sisi’s decision to allow fans to attend three international soccer matches is meant to act as a pressure valve for “mounting discontent” on the street, James Dorsey writes for the International Policy Digest.

On Deadline

There is more to lose than win after the CBE’s decision to hike interest rates, Abbas El Tarabily writes in a Nasserist, anti-capitalist piece for AMAY. While the government is likely to warmly receive the move, as it will lure more funds into the banking system, it fails to consider the fact that higher rates mean higher investment costs, unemployment rates, and increased product prices, not to mention, hampered exports. The only winners, says Tarabily, “are the lazy businessmen looking for safe and easy returns on their investments.” We wonder why we bother with this section sometimes.

Worth Watching

Egypt will be restoring Alexandria’s single active synagogue for USD 22 mn at the state’s expense, according to Haaretz. The 160-year-old Eliyahu Hanavi Synagogue (runtime 7:32), one of the largest in the Middle East with the capacity to seat over 700 people, closed a few months ago after a part of its ceiling collapsed.

Diplomacy + Foreign Trade

Egypt was one of 122 countries to nod to the first-ever treaty banning nuclear weapons at a UN meeting Friday, according to the AP. Iran, Iraq, Qatar, and Saudi Arabia also voted for the treaty, which will be open for signature in September and come into effect once signed by 50 nations. The UN ambassadors for the US, UK, and France said in a joint statement that their countries will never be a part of the treaty and were among those to boycott the Friday meeting.

A World Bank delegation visited Cairo last weekend to review a draft of the new pensions and social welfare act, according to a statement from the Social Solidarity Ministry picked up by AMAY. The Finance Ministry will also be reviewing the draft legislation before its put up for national dialogue, according to Social Solidarity Minister Ghada Wali.

Tourism

Germany’s FIT increases flights to Egypt, first flight operated to Hurghada from Paris

German tour operator FIT increased weekly flights to Egypt to 70 this summer and plans to double that figure to 142 by Winter, says the CEO of FIT’s Egyptian subsidiary Meeting Point, Ali Okda, according to Al Shorouk. FIT’s French subsidiary, FIT Voyages, operated the first Paris-Hurghada trip last Friday and should be doing three trips a week starting the second half of July. A new weekly flight from Slovenia to Hurghada will also start this week, while flights from Bulgaria should start coming in by September, Okda says.

Automotive + Transportation

Trade Ministry to hire outside consultancy to help with the automotive directive

The Trade and Industry Ministry will be hiring a German consultant to help with the automotive directive, Trade Minister Tarek Kabil told the press on Thursday, according to Youm7. He does not specify what this help will be, but stated that this mystery consultant had helped Morocco develop its industry. The legislation — which offers incentives to encourage local assemblers to move further up the value chain into manufacturing — has been in a deadlock for several months due to opposition from car importers and the EU. The ministry has been in talks with the opposing side trying to iron out the kinks.

Banking + Finance

CBE grants 10 banks licenses for electronic banking operations

The Central Bank has awarded e-banking licenses to 10 banks, Assistant Sub-governor Ayman Hussein told the press this weekend without naming the banks, AMAY reports. The government has been working on a mobile payments strategy as part of its financial inclusion efforts, forming the National Payments Council earlier this year for that purpose.

On Your Way Out

The bodies of 48 Egyptian workers trying to illegally cross the border into Libya were found in the desert on Friday, according to the Libya Herald. The Libyan Red Crescent has so far recovered 19 of the bodies, of whom seven have been identified, the Egyptian Foreign Ministry said. The ministry is working on returning the bodies and continues to follow up with Libyan authorities to identify the rest.

Also near the Libyan border on Friday, three Egyptians were reportedly accidentally killed in a military air strike, AP says, noting that “it was not the first time civilians have been killed in Egypt’s fight against Islamic insurgents near the Libyan border.” Egypt’s military is yet to formally comment on the incident.

By The Numbers

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EGP / USD CBE market average: Buy 17.8382 | Sell 17.9376

EGP / USD at CIB: Buy 17.86 | Sell 17.96

EGP / USD at NBE: Buy 17.82 | Sell 17.92

EGX30 (Thursday): 13,369 (+0.3%)
Turnover: EGP 975 mn (33% below the 90-day average)
EGX 30 year-to-date: +8.3%

THE MARKET ON THURSDAY: The EGX30 ended Thursday’s session up 0.3%. CIB, the index heaviest constituent ended almost flat. EGX30’s top performing constituents were: Credit Agricole up 2.8%, Ezz Steel up 2.2%, and Oriental Weavers up 1.9%. Thursday’s worst performing stocks were: Amer Group down 2.9%, Domty down 2.7%, and Juhayna down 1.8%. The market turnover was EGP 975 mn, and foreign investors were the sole net buyers.

Foreigners: Net Long | EGP +132.0 mn
Regional: Net Short | EGP -84.2 mn
Domestic: Net Short | EGP -47.8 mn

Retail: 53.4% of total trades | 48.7% of buyers | 58.1% of sellers
Institutions: 46.6% of total trades | 51.3% of buyers | 41.9% of sellers

Foreign: 21.6% of total | 28.4% of buyers | 14.8% of sellers
Regional: 22.4% of total | 18.0% of buyers | 26.7% of sellers
Domestic: 56.0% of total | 53.6% of buyers | 58.5% of sellers


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PHAROS VIEW

Another 200 bps Policy Rate Hike – May’s 200 bps Hike was not a Fully Preemptive Move: The CBE’s move to hike interest rates a full 200 bps implies that May’s 200bps was not a fully preemptive move, according to the latest Pharos report. Pharos believes that impact of the policy rate hike on the EGP exchange rate will be limited as the CBE tends to keep the hot inflows outside the system. Pharos believes that annual inflation rate to reach 14.6% in 4Q18, within the CBE’s target range. Pharos also revised its fiscal deficit forecast higher to 10.2% of GDP, while maintaining our primary deficit projection at 0.1% of GDP in FY2017-18. You can view the full report here.

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WTI: USD 44.23 (-2.83%)
Brent: USD 46.71 (-2.91%)

Natural Gas (Nymex, futures prices) USD 2.86 MMBtu, (-0.83%, August 2017 contract)
Gold: USD 1,209.70 / troy ounce (-1.11%)

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BB: 1,310.86 (-0.06%) (YTD: +7.41%)

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Calendar

13-15 July (Thursday-Saturday): AGRENA’s 19th Annual Poultry, Livestock, and Fish show, Cairo International Convention Center, Cairo.

15-19 July (Saturday-Wednesday): SSIGE’s GeoMEast 2017 International Congress and Exhibition, Sharm El Sheikh.

23 July (Sunday): Revolution Day, national holiday.

03-05 August (Thursday-Saturday): Watrex Expo Middle East, Cairo International Exhibition & Convention Center.

17 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates.

26 August (Saturday): 27th Egyptian-Jordanian Joint Higher Committee meeting, Amman Jordan. (TBC).

02-05 September (Saturday-Tuesday): Eid Al-Adha, national holiday (TBC).

13 September (Wednesday): EIB MED Conference: Boosting investments in the Mediterranean Region, Cairo.

13-16 September (Wednesday-Saturday): Cairo Fashion & Tex exhibition, Cairo International Conference Center

17-19 September (Sunday-Tuesday): Pipeline-Pipe-Sewer-Technology Conference & Exhibition, Intercontinental Citystars Hotel, Cairo.

18-19 September (Monday-Tuesday): Euromoney Egypt conference, venue TBD.

20-23 September (Wednesday-Saturday): 2017 Automech Formula car expo, Cairo International Convention Center, Nasr City, Cairo.

22 September (Friday): Islamic New Year, national holiday (TBC).

25-27 September (Monday-Wednesday): Egypt Downstream Summit and Exhibition, Kempinski Royal Maxim Palace, Cairo.

28 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates.

03-05 October (Tuesday-Thursday): J.P. Morgan’s Credit and Equities Emerging Markets Conference, London, UK.

18-19 October (Wednesday-Thursday): Middle East Info Security Summit, Sofitel El Gezirah, Cairo.

06 October (Friday): Armed Forces Day, national holiday.

11-12 October (Wednesday-Thursday): 2030 Mega Projects Conference, Nefertiti Hall, Cairo International Convention Center, Cairo.

11-13 October (Wednesday-Friday): Middle East and Africa Rail Show, Cairo International Convention Center, Cairo.

18-20 October (Wednesday-Friday): AfriLabs annual gathering with the theme “Smart Cities,” The French University, Cairo. Register here.

16 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates.

01 December (Friday): Prophet’s Birthday, national holiday.

03-05 December (Sunday-Tuesday): Solar-Tec, Cairo International Exhibition & Convention Centre.

03-05 December (Sunday-Tuesday): Electrix, Cairo International Exhibition & Convention Centre.

08-10 December (Friday-Sunday): RiseUp Summit, Downtown Cairo.

28 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594). Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2016 Enterprise Ventures LLC.