PM — Homegrown SPAC regulations are here

Good afternoon, ladies and gents. It’s a slow start to the week, with barely any major news at home or abroad moving the needle.

THE BIG STORY TODAY-

SPAC rules are here: The Financial Regulatory Authority (FRA) issued today the rules and regulations (pdf) for companies looking to establish blank-check firms (aka SPACs) to raise capital and merge with or acquire another company through an IPO, FRA head Mohamed Omran said in a statement (pdf). The rules include the timeline for companies to pull the trigger on SPAC mergers and list on the EGX, as well as requirements on shareholder structure and minimum capital. The regulator has also issued amendments (pdf) to listing and delisting rules on the bourse to make way for SPACs to hit the EGX. The regulations come a few weeks after the proposal spearheaded by EGX boss Mohamed Farid received the greenlight from the FRA.

^^ We’ll have the full breakdown of the rules in tomorrow’s edition of EnterpriseAM.

HAPPENING NOW-

The Senate gave its preliminary approval today to a draft law to increase protections for senior citizens, Youm7 reports. The upper house of parliament will continue tomorrow its discussion of the bill, which will provide social care and benefits to up to 1.7 mn senior citizens in Egypt.

LATER TONIGHT-

AUC and the Egyptian Private Equity Association (EPEA) will host a panel on developments and regulatory changes in the stock market at the Tahrir campus tonight at 6pm, according to a press release (pdf). EGX Chairman Mohamed Farid, Sovereign Fund of Egypt Chief investment Officer Abdalla ElEbiary and managing director and chief investment officer at Nile Capital Holding Basel Roshdy will all make appearances.

** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

• EFG, SFE finalize acquisition of Arab Investment Bank: EFG Hermes finalized on Thursday their acquisition of a 51% stake in the Arab Investment Bank (aiBank), transforming the leading financial services corporation in frontier emerging markets into a universal bank in Egypt. The Sovereign Fund of Egypt’s financial services sub-fund is also acquiring a 25% stake in the bank.
• Al Ahly could offer almost half the club in an IPO on the EGX by selling shares in the newly-formed Al Ahly Football Company, which will hold all of the club’s football-related assets by June 2022.
• Géant plans EGP 1 bn investment in Egypt: French hypermarket chain Géant is planning to invest EGP 1 bn to open 15 new supermarkets, hypermarkets, and express markets in Egypt over the next five years.

THE BIG STORY ABROAD-

SUDAN WATCH- Hamdok is coming back as PM: Abdalla Hamdok is returning to his position as Sudan’s prime minister after signing an agreement minutes ago with military chief Abdel Fattah Al Burhan (watch, runtime: 23:16). Hamdok was ousted in a coup last month, which led to weeks of unrest that left scores of people dead. Hamdok will form an independent cabinet of technocrats and all political detainees will be released, under an agreement between the military and political parties, head of the centrist Umma Party Fadlallah Burma Nasir told Reuters earlier in the day. The coup had upended a two-year transition to civilian rule and drew strong international condemnation from the African Union, the UN and the EU, with donors like the US and the World Bank suspending aid to Sudan.

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???? CIRCLE YOUR CALENDAR-

The new administrative capital plays host to a Comesa summit starting on Tuesday, the same day the state’s SECC hosts a webinar on fintech in Egypt.

Startup festival RiseUp starts on Thursday and runs through Saturday, while the Cairo International Film Festival kicks off its weeklong run this coming Friday.

The Home Appliances and Table Show (HATS Egypt) starts tomorrow and wraps up on Wednesday. The event is organized by the Engineering Export Council of Egypt and brings together companies working in the home appliances sector.

ITIDA and the Software Engineering Competence Center are hosting a webinar on the future of fintech in Egypt on Tuesday, 23 November. The event will look at the current landscape and expected changes in light of new tech, regulations and market changes. You can register to attend here.

BOOK LAUNCH- Up and Doing, a memoir penned by Chairman of the Egyptian-American Enterprise Fund James Harmon (Morning Routine), will be published this Tuesday, 23 November. The memoir recounts Harmon’s career as a banker and discusses “how markets can move the world forward by creating stable, growing economies and sound [transactions] that promote economic development.”

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

☔ TOMORROW’S WEATHER- Another rainy day in store: There’s a 40% chance of showers tomorrow while the mercury will drop to 22°C during the day and a chilly 15°C at night, our favorite weather app tells us.

Don’t get too excited about winter finally coming: We’re starting to see forecasts that temperatures will rise to 28°C at the end of the week.

The green transition could see companies lose tns in stranded assets, the Wall Street Journal reports, as the shift away from fossil fuels forces write-downs of everything from pipelines to power stations. At least USD 11.8 tn of assets globally could become worthless as rules are increasingly enforced to curb emissions, according to International Renewable Energy Agency data from 2019, with the energy industry accounting for USD 3.3 tn of that.

The transition-timing tightrope: While many big emitters have made net-zero or carbon-reduction pledges, the risk of write-offs has left some dragging their feet on fulfilling the targets. “Every CEO, and every board, wants to ensure that they don’t go to the future more rapidly than is warranted,” one sustainability consultant told the WSJ. But the longer we wait to curb the effects of climate change, the greater the risk of further losses as extreme weather events destroy other assets like houses, farms and infrastructure. Meanwhile, any drastic regulatory action — such as introducing a carbon tax that wipes out the value of fossil fuel reserves — could cause a “green swan” event that leads to a financial crisis, the Bank for International Settlements, a consortium of central banks, said last year.

Visa and Amazon are squabbling over transaction fees: Visa is accusing Amazon of punishing customers with its decision to stop accepting UK-issued Visa credit cards starting next year because of the company’s high transaction fees, reported the Financial Times. The e-commerce giant will continue accepting Visa debit cards, but is also considering ending its partnership with Visa for its co-branded US card, and has offered incentives to customers to use alternative payment methods in Singapore and Australia. Visa and Mastercard charge almost identical transaction fees in the UK, one payments firm claims, while a person familiar with the negotiations says interchange fees were just one issue between the company and Amazon. Both Visa and Mastercard have been accused of doubling their fees over the past two years, according to the British Retail Consortium.

Could the future be cardless? Merchants like Amazon are pushing to renegotiate transaction fees with their newfound leverage in a market where alternative, API-powered payment methods that bypass traditional card systems take hold, the FT writes. The UK Payment Systems Regulator is looking into interchange fees, and may take action to correct any identified issues, it said this month.

SIGN OF THE TIMES- El Salvador hopes to get ahead of crypto by building the world’s first BTC City, which will be funded by BTC-backed bonds, Reuters reports. The “fully ecological” circular BTCH city would be powered by a volcano in the eastern region of La Union, President Nayib Bukele said yesterday. The city will not levy any taxes except for VAT, which will be used to finance the bonds and basic municipal services, Bukele said. The initial bonds will be issued in 2022, with crypto exchanges Mow and Bitfinex listed as bookrunners. The Central American country became the first to adopt BTC as an official currency in September.

Apple is pushing to launch its electric self-driving car as soon as 2025, Bloomberg reported. The tech giant is shifting its focus from a more conventional EV to a fully self-driving vehicle with no steering wheel or pedals, according to sources close to the matter. The much-rumored automotive project which started around 2014 is now targeting a faster release than the five-to-seven-year timeline some engineers had expected. Apple supposedly finished much of the “core work” on the car’s processor. The iPhone maker’s stock rose to a new all-time high following the news, CNBC reported, closing up 1.7% and trading at USD 160.55 per share on Friday. Apple venturing into cars would put the company in competition with the world’s most valuable automaker Tesla, and EV newcomers like Lucid Motors and Rivian, whose stocks have seen strong investor interest.

???? ON THE TUBE TONIGHT-

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Touted as the next South Korean hit, horror-fantasy series Hellbound has landed on Netflix. The show revolves around New Truth Society — a cult that works with otherworldly beings that decide when people will die. Police detective and recent widow Jin Kyeong-hoon gets put on the case to investigate whether the cult is deliberately carrying out mysterious killings. As much as Kyeong-hoon tries, he can’t find an earthly explanation to the otherworldly occurrences. The murders are all intriguing enough to keep you hooked on the show and while the flow is slow at first, the series really captures the characters and delves into their intentions and motives.

⚽ Gameweek 12 of the English Premier League concludes today, with the next match between Manchester City and Everton starting soon at 4pm. Later on in the day Tottenham will face Leeds at 6:30pm.

Speaking of the Premier League: Manchester United has sacked manager Ole Gunnar Solskjaer after yesterday’s embarrassing 4-1 defeat by Watford, the club’s fifth loss in its last seven PL games.

Meanwhile, don’t miss the La Liga match between Real Madrid and Granada at 5:15pm.

Serie A also has an exciting match today as Inter Milan hosts Napoli at 7pm. The game is Napoli’s chance to be at the top of the league after Milan fell yesterday against Fiorentina, losing 3-4. Meanwhile, Inter is trying hard to reduce the 7-point difference with Milan.

In the Egyptian League: Pharco will play against Ceramica Cleopatra at 5:30pm, before Misr Lel Mekassa hosts Alexandria’s Al Ittihad at 8pm.

???? EAT THIS TONIGHT-

Get premium seafood and more from this online shop: Seasalt Fish has a huge range of offerings from the sea, from fresh locally-sourced fish to imported specialties and ready-to-be-cooked seafood bags. You can get fresh Norwegian salmon, halibut, lobster, mahi-mahi, bottarga, herring, octopus, and more in various cuts, seasonings, and forms. They also sell the French delicacy escargot, with the snails seasoned with garlic butter, as well as all kinds of high-end caviar such as beluga. If you’d like to try them out with less-exotic offerings, get their cold spicy crab dip, cilantro lime wild baby shrimps, salmon tartare, or grouper fish skewers that come with tzatziki sauce. Seasalt fish also has a range of knives so you can really unleash your inner seafood sous-chef.

???? OUT AND ABOUT-

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Another film festival is brewing in Cairo, with the Retro Avant Garde Film Festival kicking off tomorrow and running until Friday. The international event also takes place in New York and Turkey every year, showing films by avant garde filmmakers in Egypt and around the world. You’ll find a bit of everything displayed on the Cairo Opera House screen, with genres including fiction, documentary, experimental, horror, fantasy, noir, animation, and even music videos. You can learn more about the festival from their website.

There are two days left at the Comic Strips Exhibition hosted by the Belgian Embassy in Cairo at the Al Hanager Arts Centre at the Opera House. The exhibition will feature original drawings from famous Belgian artists, with video interviews showing the process of creating these comics.

Also at the Cairo Opera House, pianist Omar Khairat takes to the stage today and tomorrow at 8pm.

Azza Fahmy is in the spotlight at a talk on Tuesday at AUC Oriental Hall from 6-8pm. She will be joined by Dean of the School of Continuing Education James Ketterer to talk about her design and jewelry brand, with a focus on the newly launched program Jewelry Making Business Management, which is being launched in collaboration with the school.

We previously sat down with the jewelry brand’s Managing Director Fatma Ghali on our podcast, Making It, to talk about the origin story of the business and how they’ve grown it to attract an international audience (listen, runtime: 29:30).

???? UNDER THE LAMPLIGHT-

Duke University professor Dorie Clark debunks the myth of overnight success in her new book The Long Game: Clark coins the term “strategic patience,” which companies should incorporate into their strategy to ensure they don’t grow at a pace that proves itself unsustainable. Instead, strategic patience calls for small, methodological steps that build a strong foundation for every new move, product, or service introduced that ensures that the business boasts quality and resilience. Clark breaks down what this kind of thinking would look like in different business situations through company case studies and personal experiences. She also takes the time to implement the strategy on a more personal level outside the workplace to really drive home the point that sometimes slow and steady really is the key to coming out on top in the race. Clark goes into the importance of strategic thinking in this interview with Forbes.

The EGX30 fell 0.6% at today’s close on turnover of EGP 547.6 mn (62.7% below the 90-day average). Local investors were net sellers. The index is up 3.9% YTD.

In the green: Eastern Company (+0.9%), EFG Hermes (+0.9%) and Credit Agricole Egypt (+0.1%).

In the red: Speed Medical (-6.8%), Raya Holding (-4.4%) and GB Auto (-3.7%).

Governments are widely scaling back massive fiscal programs that had helped push economies through covid — a trend that, contrary to popular belief, could potentially have more impact on the global economy than monetary policy tightening by central banks, says Bloomberg. Together, governments plugged in an amount equal to 2.5% of global GDP in the form of higher spending to aid their ailing economies, a staggering five times more than the funds deployed in post-2008 financial crisis austerity measures, estimates from investment bank UBS show.

A balancing act: While fiscal tightening leads to slower growth, it could also help combat the rising inflation cropping up in many parts of the world. The government does this by raising taxes, curbing public spending, or cutting public-sector jobs. This slows down the economic cycle temporarily to balance out growth and inflation. Contractionary fiscal policy has been a go-to approach for many governments facing mounting inflationary pressure, with the reasoning that a lower debt load will help the economy recover faster.

Fiscal stimulus and a successful vaccine rollout were key drivers in the post-pandemic rebound: With the global economy estimated to be expanding at its strongest post-recession pace in 80 years, huge spending programs, primarily in a small number of wealthy economies which put in place public programs to support households and businesses, were seen as the most powerful post-covid growth engine.

But the tides are now turning: A reversal of pandemic spending by the world’s biggest-spending governments is now threatening to dent the post-covid recovery drive, with the world’s largest economy, the US, ending emergency spending, and the Biden administration’s pushing for a spending plan with more of a long-term view. In Europe, an austerity debate is just around the corner and UK officials are beginning to moralize about their duty to start narrowing deficit spending. Elsewhere, Japan is planning more spending that won’t quite match pandemic-era stimulus, China is paying more attention to its budget figures, while Brazil is debating whether to keep in place spending limits, and Mexico isn’t budging much on its tight spending approach.

Spending wasn’t all the rage for developing economies, with an inability to sustain stimulus programs and high debt levels continuing to weigh on economic recoveries. EMs that rolled out aggressive spending programs added little to their recoveries, writer-investor Ruchir Sharma writes for the Financial Times. “Emerging markets that stimulated most aggressively got no pay-off in a faster recovery, owing in part to the downsides of overindulging,” Sharma says. Risk-taking EM governments that went long ended up with higher headline inflation, rising interest rates, and a weaker currency — all of which wiped out the potential gains of stimulus spending, he explains. The impact of stimulus in EMs was also limited by covid-19, with Goldman Sachs research showing an (unsurprising) correlation between the strictness of a lockdown and pace of vaccine rollout in one country, and the detrimental effect to growth.

Why? Overspending, particularly by EMs, often produces the opposite effect. This is because EMs lack both the financial resources and institutional credibility to pull off major budget tweaks without unbalancing the economy. When an EM country overspends, it adds pressure on interest rates and inflation. This phenomenon was seen throughout the pandemic, with large spenders witnessing a slower median post-pandemic recovery rate of 12% of GDP, compared to a median rate of 19% in light spenders. An element of fiscal spending may also be political, Sharma adds, with Latin American nations traditionally being heavy spenders, while Asian countries tend to keep a tighter fiscal purse.

Here at home, fiscal stimulus was implemented on a smaller scale, starting with an EGP 100 bn stimulus package President Abdel Fattah El Sisi signed off on at the start of the pandemic that ended up exceeding its limit, with spending going towards healthcare, breaks on energy costs for industry, tourism and hospitality, monthly stipends to day laborers, and vaccine purchases. The central bank and government also instituted tourism bailout programs (here and here), while the government implemented larger stipend handouts to seasonal laborers, and the CBE provided EGP 100 bn in subsidized lending to domestic factories.

Despite the risks of fiscal tightening, monetary policy remains in the spotlight, and the mainstream narrative seems more concerned that ultra-loose monetary policy and tapering by central banks will be what derails the global economy. This is especially true for EMs, whose currencies and bonds have done well this year after the covid-19 pandemic initially saw investors pulling a record USD 83 bn from EMs. They could face stiffer competition from lower risk developed countries’ debt if interest rates rise elsewhere. The US Federal Reserve announced a few weeks back that it would begin rolling back its USD 120 bn a month bond buying program as early as this month, phasing out the asset-purchase programme completely by June 2022. Fed chair Jay Powell reassured market watchers that a rate hike was still far off, but said the Fed would take firm action should inflation threaten to get out of control.