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Monday, 23 January 2017

What we’re tracking on 23 January 2017

We’re starting to see the impact of the EGP float and devaluation on international companies’ bottom lines in their 4Q2016 results. Schlumberger had to write off USD 63 mn in Egypt and Savola recorded an unexpected loss in the quarter, citing the EGP devaluation as a factor.

Before we continue, a word from our regulators: Egyptian Financial Supervisory Authority (EFSA) Sherif Samy and EGX chairman Mohamed Omran gave Al Borsa their two cents on investment policy, with the two operative words being stability and cohesion.

Egypt needs a way to codify the economic reform agenda in a manner that would make it impervious to change by future governments, said Omran. He advocated for state-owned assets and companies to be managed by a single investment entity which would include the private sector, as a means to ensure the streamlining of policy and management of public assets. Curious Omran should mention that just as the state plans to restructure the National Investment Bank (NIB) and amend its regulations, according to Planning Minister Ashraf El Araby. NIB, which is charged with running the IPOs, is locked in a EGP 56 bn dispute with the National Insurance Authority, and Finance Ministry, the newspaper says.

More input from outside the Ismail cabinet is needed on a number of key pieces of legislation such as the cabinet-approved Bankruptcy Act, said EFSA’s Samy. Important elements are missing from the law in its current form, including provisions outlining the fiduciary responsibilities of board of directors in cases of insolvency, said Samy. Input from outside the cabinet is crucial, says Samy, to prevent any conflict and contradictions in the many laws which are in the pipeline for 2017, which include: amendments to the Capital Markets Act which allow trading of futures contracts and to the Competition Protection Act.

Samy shared his thoughts on the IPO of state-owned industry, which he feels must be made more enticing by merging smaller entities into larger ones. Samy would also like to see Egyptian indices such as the EGX30 traded on indices markets, especially considering the gains made on the EGX.

Positive news for Egypt coming out of Saudi Arabia last night, as the Kingdom’s finance ministry announced that there would be no fees applied on remittances out of the country, Reuters reports. The move comes days after the kingdom’s advisory Shura Council said it was considering a proposal to impose a 6 percent levy on expatriate remittances.

Saudi made more headlines with news that OPEC members have agreed on a monitoring mechanism for the accord to cut production by 1.8 mn bbl/d to be implemented by OPEC’s monitoring committee. Production cuts have reached 1.5 mn bbl/d, said Saudi’s Oil Minister Khalid Al-Falih. The optimism over the ensuing rising oil prices may not last long, however, as Al-Falih said that there was no need to extend the agreement beyond the six months. Bloomberg’s Julian Lee speculates that the six month limit arose out of a surplus during the era of overproduction coinciding with Saudi increasing its dependence on natural gas for its electricity supply, a surplus which is expected to run out in six months.

As for the Aramco IPO, Saudi has promised it will reduce oil taxes to make the flotation more appealing, Bloomberg reports.

Over in Trumpland, El Presidente has shot the starting gun on Nafta negotiations, saying that meetings with the Canadian Prime Minister and Mexican President have been scheduled. He warned that US will unilaterally withdraw should both countries refuse to negotiate, BBC reports.

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