State IPO program coming in September

House to vote on new budget today: The House of Representatives is expected to make its final vote on the state’s FY2017-18 budget in a plenary session today, Al Borsa reports. The body had already approved the budget late last month, but the legislation needed a final approval from the Egyptian Council of State before being sent back for a final vote. The Finance Ministry, eager to get the ball rolling on the budget (which is technically four days behind schedule) reportedly refused the House Health Committee request for an additional EGP 64 bn for healthcare.

Approving the budget may be the final act of the current House session which is set to close by Wednesday, House speaker Ali Abdel Aal says, according to Al Shorouk.

It is perhaps not surprising that the House rushed through a number of legislative amendments to the Personal Status Act, the law governing the National Human Rights Council, and that for the Supreme Antiquities Council, news reports say. MPs also signed off on a KWD 100k (EGP 5.9 mn) grant from the Kuwaiti Fund for Arab Economic Development to finance an organic farm project in North Sinai.

We are expecting an announcement that Egypt’s FX reserves for June have continued to grow sometime this week, according to statements by Central Bank Governor Tarek Amer picked by Ahram Gate. Egypt’s net FX reserves had reached USD 31.1 bn in May. Amer added that Egypt will be making another payment to the Paris Club this month.

Qatar responds to Arab neighbors’ demands: Qatar’s Foreign Minister Mohammed Al-Thani presented to Kuwait’s Emir Sheikh Sabah Al-Ahmad Al-Sabah his country’s response to the 13 demands set by Egypt, Saudi Arabia, the UAE, and Bahrain, according to a statement that provides exactly zero details. Qatar has until the end of tomorrow to respond to the demands, which include shuttering Al Jazeera, or face the possibility of further sanctions.

The laptop ban on flights to the US to be scrapped tomorrow? That’s what we’re hearing from Turkish Airlines CEO Bilal Eksi who made the announcement in a tweet on Monday. He gave not detail on whether this was exclusively for Turkey, or would include Egypt, Morocco, Jordan, Saudi and Kuwait. Laptops on flights from Abu Dhabi had been given the okay by US authorities.

Goodbye, heatwave: The weather is expected to improve over the next few days as we recover from a heatwave that pushed temperatures above 40 degrees Celsius, Al Ahram reports. All we can say is thank heavens it is no longer Ramadan.

Nine out of 10 economists polled by Reuters believe that it is unlikely that the Central Bank Monetary Policy Committee will move to raise interest rates at its meeting this Thursday, despite anticipating a rise in inflation over the coming months as a result of last Thursday’s fuel hikes. "We expect the CBE not to react to the recent fuel price hikes as it’s likely to wait for a few inflation readings to investigate any second round effects for the fiscal measures," said EFG Hermes economist Mohamed Abu Basha. "Inflationary pressures from cost push factors would not be affected by another rate hike," said economist at Arqaam Capital Reham El Desoki who expected no change to rates. The sole detractor in the poll, CI Capital senior economist Hany Farahat, said the bank needs to signal its inflation targeting mandate following the hikes.

The Electricity Ministry is expected to announce this week new electricity prices. In the meantime, the House of Representatives continued to push the Electricity Ministry on reducing subsidy cuts on power at a hearing with minister Mohamed Shaker on Monday, according to Al Mal.

Enterprise staff suffer an acute case of Dabaa-fatigue: We would be remiss if we didn’t have at least one update on the mythical phantom nuclear power plant that is Dabaa.Last we heard the contracts — having been ironed out with the Russians — are being inspected by the Egyptian Council of State before sending them to President Abdel Fattah El Sisi for the final signatures, Al Borsa reports. Also look for updates on our Yeti-watch and latest from the SETI project.

Inflation and a resurgent EGP were in the limelight on the airwaves last night.

The strengthening of the EGP can be attributed to an influx of foreign currency at the banks, thanks to increased remittances, revenues from international bond sales, as well as a rise in exports and foreign direct investments, National Bank of Egypt Deputy Chairman Yehia Aboul Fotouh told Amr Adib on last night’s Kol Youm. Aboul Fotouh said he expects the EGP to continue strengthen as long as foreign currency reserves are on the rise (watch, runtime 3:05)

Over on Hona Al Asema, Lamees Al Hadidi spoke to MP Mohamed Elsewedy about a proposal he submitted to increase the price of crops the government purchases from farmers in response to the recent fuel price hike (we have more in the Speed Round, but you can catch thee talk here, runtime 5:33).

Lamees then moved on to talk about the Electricity Ministry, which is apparently looking to add about 10k new bill collectors to its rosters due to a staff shortage, according to what Minister Mohamed Shaker told House representatives yesterday. Unfathomable to Lamees was the fact that the ministry is not looking for new hires, but will resort instead to the police or military to provide it with the muscle needed for the job. “These are valuable job opportunities,” the host said. Ministry Spokesperson Ayman Hamza told Lamees though that those would be temporary jobs since the government is moving to replace most meters with prepaid ones that would not require collectors (watch, runtime 11:12).

On Yahduth fi Misr, Sherif Amer, was on the listing of state-owned enterprises and unemployment benefits. Cabinet spokesperson Ashraf Sultantold the host that the main drive behind the IPOs of publicly-owned companies is not to privatize but to grow capital and expand activities. He also confirmed to Amer that the government is looking into the possibility of unemployment benefits in light of the the Administrative Court’s verdict on Monday.

Fitch says Egypt Banks’ FX liquidity to improve as transfer cap ends: Egypt’s removal of FX transfer limits will help to restore confidence in the economy and attract foreign investments, increasing the availability of FC and helping banks provide more lending needed by FC borrowers, particularly importers, Fitch Ratings says. “We expect a greater inflow from foreign investors now that the Central Bank of Egypt (CBE) has ended the USD 100K annual cap on the amount that account holders can transfer outside Egypt. The removal of the cap last month, a requirement of Egypt’s lending program with the IMF, should reduce foreign investors’ concerns that investments could be trapped in Egypt,” the agency said in a statement picked up by Reuters. Fitch notes that the banking sector’s FX-denominated loan-deposit ratio is still too high despite falling 3.7 bps in 1Q17, but expects these to given the weak operating environment and a falling EGP.

Other analysts, however, believe that the move to end transfer caps will add pressure to the EGP. The threat appears to come from foreign companies repatriating profits, according to Capital Economics’ Jason Tuvey. “Look at the historical moves of the EGP. You can feel the pressure is coming,” he added. “It could be the moment of truth of Egypt’s currency. Egypt’s monetary supply has been growing by about 20% per year, while GDP has hovered below 4%. That means the EGP is losing approximately 16% of its value every year,” Focus Economy said in a research note picked up by Daily News Egypt. The risks to investors posed by a floating currency, comes from the potential for investors playing the market to lose their capital, should the currency swing dramatically, according to the report. But, in the case of Egypt, the convergence of the currency’s official exchange rate and its black market rate should give investors the confidence that the worst of the fluctuations are over.”

These concerns appear to be far-fetched considering Egypt’s growing net FX reserves. A report by MENA news agency citing CBE officials claim FX inflows reached USD 54 bn since the EGP was floated back in November. The banking sector had drawn in USD 20 bn, while USD 25 bn came from foreign funding by multilateral finance institutions and other sources. Foreign investors chipped in with USD 9 bn. Investment and International Cooperation Minister Sahar Nasr told Reuters on Monday that Egypt has received USD 6.5 bn in foreign direct investment in the 9M2016-17, and expects more than USD 10 bn in the next fiscal year starting in July.

INVESTMENT WATCH – Enppi listing to kick off state IPO program in two months: It seems that a tentative deadline of September has been set for the IPO of state-owned Enppi, as Prime Minister Sherif Ismail announced that the listing will take place in two months’ time at a press conference on Monday, according to Youm7. The cabinet’s economic group had discussed the state’s IPO yesterday, where it gave a preliminary nod yesterday to a list of potential candidates for the program put together by state-owned investment bank NI Capital. The government is considering listing 49% of Banque du Caire, whose IPO will be managed by EFG Hermes and HSBC. The Middle East Oil Refinery (MIDOR), has also been slated for an IPO.

Ismail also announced that the revised executive regulations for the newly-issued Investment Act should be ready by August. The House of Representatives’ Economics Committee is currently reviewing the draft, which was unveiled last week, and intends to send its remarks back to the cabinet by Wednesday, Al Mal says. It’s worth noting that the cabinet does not need parliamentary approval to begin implementing the regs.

Oil Ministry announces results of EMRA’s gold exploration tender: Four companies, including two foreign ones, have won the Egyptian Mineral Resources Authority’s gold mining exploration tender for five concessions in the Eastern Desert and the Sinai Peninsula, Petroleum Minister Tarek El Molla said in a statement on Monday. The UK’s Veritas Mining Limited won exploration rights to the Omm Ras concession, while Ghassan Spain Investment was awarded the Dahab concession. Egypt’s East Gas Company took home the Omm Oud and Hangaliya concession, while Resolute Egypt won both the Boukary and Omm Samra concession. The tender had been unpopular among a number of mining companies as a result EMRA’s insistence on production sharing agreements, with Centamin, Aton Resources, and Thani Stratex, the three largest mining companies in Egypt, refusing to bid. It had been reported back in April that 14 Egyptian and International companies had participated in the tender. The results were expected last month.

Private sector hikes prices in response to the fuel subsidy cuts: Food producers are days away from announcing new prices that are expected to be 10-15% higher, industry executives tell Al Borsa. The move comes as part of a series of measures companies are taking to offset production costs as a result of last Thursday’s fuel hikes. These include adjusting profit margin projections and increasing exports, improving packaging and marketing capabilities, and decreasing the size and weight of products.

The auto industry is way ahead of the food sector on that with a number of companies raising prices on cars. GB Auto marked up its Hyundai and Geely models by EGP 1,600-8,000, Al Mal said on Monday, while Al-Mansour Automotive added some EGP 2,400-9,000 to the price of its Chevrolet brands. The move is expected to exacerbate the slump in auto sales driving it down by as much as 40% in the coming months, Egyptian Automotive Dealers Association head Osama Aboul Magd tells Youm7. The price hikes might also change the market dynamics from the demand-side as consumers will be looking for models that offer them higher fuel efficiency, El Masria Auto CEO Shady Rayan says.

Fertilizer companies’ hopes to raise price were thwarted as the government reportedly denied their request yesterday to raise product prices by EGP 500-1000 per tonne, the newspaper adds. Authorities will be paying the additional cost of EGP 3 mn a month to transport some 200k tonnes of fertilizers to avoid passing on costs to farmers, Agricultural Union head Mamdouh Hamada says.

The government has been making efforts to coordinate with the private sector to limit the inflation, which, according to Vice Minister of Finance Ahmed Kouchouk is expected to rise by 3-4.5%. Supply Minister Ali El Moselhy and members of the Federation of Egyptian Chambers of Commerce agreed during a Monday meeting that shipping and good transport fees should not rise by more than 10% in response to the most recent hike in fuel prices, Al Mal reports. The Finance Ministry also decided to relieve the shipping and unloading of imported goods from the value-added tax — backtracking on a decision it had issued early in June — in a possible effort to keep shipping costs lower, according to Al Mal.

Meanwhile, the MPs who never tire of grandstanding are asking for price controls, according to AMAY. Some, such as MP Mohamed Elsewedy, also demanded that the government pay farmers higher prices for agricultural products such as barley, sugarcane, and beets to offset the effects of inevitable inflation.

Administrative Court ruling could force government to pay out unemployment benefits: The Supreme Administrative Court issued a verdict on Monday that could force the Sherif Ismail government to pay out unemployment benefits under its social welfare package, Al Shorouk reports. The right to unemployment benefits is guaranteed by article 17 of the 2014 constitution and articles four and five of the 2010 Social Welfare Act, the court ruling states. The verdict pertains to a lawsuit filed in 2014 by two Egyptian men in their twenties who claim to be unable to find suitable work, the newspaper adds. The government has yet to officially respond to the verdict, but with Egypt’s soaring unemployment rates and budget constraints, unemployment benefits could prove a challenging task for the state.

EFSA implements amendments to general assembly provisions Companies Law amendments: The Egyptian Financial Supervisory Authority (EFSA) began enforcing on Monday amendments to the Companies Act mandating that listed companies issue their first call for a general assembly at least 21 days in advance rather than 15 previously, Al Borsa reports.

Amazon has completed its acquisition of Souq.com, the Dubai-based online retailer said on Monday. The company said that the firms now would work on the "next phase of the integration to bring more products and offerings to the region’s customers even faster." Users can now also log into their website using their Amazon account, the company added. No official acquisition figure has been disclosed, but the Associated Press is noting that the transaction had beat out Emaar Malls PJSC’s bid of USD 800 mn bid for Souq.com, which it announced in a filing on the Dubai Financial Market.

Orascom Construction (OC) signed a USD 100 mn contract to build a 650 MW steam turbine power plant in Assiut’s Walidiya, according to a filing with the EGX. OC is mandated with the full civil work for the plant. OC had completed a USD 420 mn project in cooperation with General Electric to convert a plant in Assiut into a combined-cycle plant.

Abraaj Group plans to acquire 100% of Kenya-based coffeehouse and dining chain Java House from private equity firm Emerging Capital Partners (ECP), and the Company’s founder and chairman, Kevin Ashley, the company announced in a statement on Monday. Java House, which runs three flagship brands, runs 60 stores across 10 cities in Kenya, Uganda and Rwanda. Freshfields Bruckhaus Deringer LLP and Bowmans in Kenya were tapped as legal advisors, while PricewaterhouseCoopers will act as financial and tax advisors to Abraaj on the transaction, whose size had not been disclosed yet.

Market trends show Egypt’s property boom looks set to continue on the back of demand from abroad: Egypt’s property boom appears to show no signs of slowing down, particularly since the EGP float, according to OLX Egypt’s most recent report (pdf). The appeal appears to be significant among foreign investors and expats, with traffic of online searches for property in Egypt from the GCC reaching 51%. The report, which ran a comparative analysis between Cairo and Dubai, suggests that the decreased purchasing power of the EGP is driving this influx. The cost of living index in Dubai is approximately 186.15% higher than in Cairo, with the value of apartments for sale being seven times greater and where rent prices are almost six times more expensive. Overall, Egyptians spent a total of 65 mn minutes perusing for real estate on OLX Property in 2016, with top locations searched being Nasr city, Maadi, Sheikh Zayed City, Heliopolis and the Fifth Settlement. “These results demonstrate the Egyptian property trend moving towards urbanization, as property seekers are on the look-out for areas such as Fifth Settlement and Sheikh Zayed where the long-term investment is worthwhile as prices are always on the rise,” said the report.

The tourism industry’s revival continued in May with the number of tourists visiting Egypt in May increasing 32.9% year-on-year, according to a CAPMAS report picked by Youm7. The number of nights tourists spent in Egypt increased by 145.8% y-o-y in May to 5.9 mn nights, up from 2.4 mn during the same month last year. Hotel occupancy rates also rose to 45.2% in April 2017, compared to 20% in April last year.

CORRECTION – In yesterday’s issue we had mistakenly referred to Mohamed Elsewedy as the CEO of Elsewedy Electric in our Talk Shows segment. The President and CEO of Elsewedy Electric is Ahmed Elsewedy. Mohamed Elsewedy is the head of the Federation of Egyptian Industries and the leader of the Support Egypt coalition in the House of Representatives — and its largest coalition. Our apologies for the oversight.

Improving wage dynamics in the EU will apparently help drive foreign direct investment in Morocco, Tunisia, Egypt, and Turkey, according to a report from Renaissance Capital (pdf). 13 European countries have reportedly reached “peak” wages, driven in particular by Central European states. This increase looks set to continue, driving inflation, according to the report. MENA nations look set to be unintentional beneficiaries of this trend, attracting FDI in manufacturing with their comparative low wages. Other factors which will drive this influx include improving education levels especially among women, and better demographics than Central Europe.

Soma Bay is one of Egypt’s best-kept secrets, writes Abra Dunsby for TTG Media. The Red Sea resort offers windsurfing, sailing, and diving experiences, with the newest activity being the opening of the Somasplash Waterpark this summer. “Soma Bay has also been rated one of the world’s best kitesurfing spots with calm, clear waters and strong side-shore winds to keep even the pros entertained,” the piece says. Pretty enticing to pick up a water sport with this particularly boiling summer. (Photo Courtesy of Soma Bay’s website)

The arrest of exiled cleric Yusuf Al Qaradawi’s daughter and her husband on charges of funding the Ikhwan led coverage of Egypt in the international press this morning. Security forces arrested the couple on Sunday at a North Coast resort and will be detaining them for 15 days pending investigations, the Associated Press says.

Austerity measures in Egypt have been good for investments but no so much for the people, Farid Y. Farid writes for QZ. While reform measures, including the recent hike in fuel prices, have “paid off handsomely with the EGP ranking as one of the best performing currencies this year,” he says, “the painful belt tightening measures are hitting the middle class hard in a country where nearly 28% of the population lives below the poverty line.”

Reflecting on the 30 June uprising four years later: A number of publications have put out pieces on the fourth anniversary of the toppling of Morsi. The Arab Weekly’s Amr Emam recounts the details of the Ikhwan’s short-lived ruling period and the 30 June revolution that left the organization “in tatters.” The piece is particularly more bearable than some of the other pseudo-history being spewed out there. A prime example being this hogwash from Neil Ketchley in the Washington Post, who accuses the military of having manufactured the protests that led to Morsi’s downfall. We’d like to see how he would feel with no power in 41-degree weather. Naturally, one of the sore losers of that event, Al Jazeera is saying that President Abdel Fattah El Sisi’s regime is more authoritarian than Hosni Mubarak’s and that current economic conditions show how Egypt is “worse off” now than ever before. You can skip right over it.

The foreign press also appears to be taking note of artistic works and artists inspired by the January 25 uprising. Omar Robert Hamilton’s debut novel, The City Always Wins, which chronicles the aftermath of the 2011 uprising in Tahrir Square, snagged itself a neat review from The Atlantic on Monday. Meanwhile, Gulf News’ Marwa Hamad followed the musical journey of Tahrir Square singer Ramy Essam who rose to fame through his ballads during the 18-day uprising.

The strengthening EGP speaks louder for the success of the CBE’s monetary policy than any of CBE Governor Tarek Amer’s statements and comments to the press, Mohamed Amin writes in a column penned for Al Masry Al Youm. This time around, the change in FX rates was not caused by speculation, but instead came after a series of policies enacted by the CBE, the columnist says. Amin also lauds Amer for keeping a low profile recently and refraining from commenting on economic developments, and allowing his team’s decisions to speak for themselves.

President Abdel Fattah El Sisi presented Egypt’s counterterrorism strategy to Hungarian President János Áder during his visit to Budapest, stressing the importance of international cooperation against terrorism sponsoring states, according to an Ittihadiya statement. The president also discussed with Hungarian Prime Minister Viktor Orbán bilateral economic ties, regional matters, and cooperation on counterterrorism, as well as the refugees crisis, an Ittihadiya statement says. El Sisi attended the Egyptian-Hungarian business forum, where he invited companies to invest in Egypt, especially in the manufacturing and energy sectors, as well as the agriculture, water treatment, infrastructure, and railway sectors. In parallel, the House of Representatives passed a presidential decree approving a June 2016 agreement to operate flights between Egypt and Hungary, according to Al Shorouk.

Export councils for steel, chemicals, and construction materials are reporting major growths in exports this year. Steel rose a whopping went up by 255.8% y-o-y during the same period, recording USD 402 mn. Egypt’s chemical exports increased 33% y-o-y between January and April to USD 1.33 bn, Al Borsa reports. Fertilizer exports rose 61% y-o-y in the same period to USD 330.7 mn, while exports of construction materials increased by 30% y-o-y between January and May to USD 2.3 bn, Al Shorouk reports.

Eni and EGPC JV Belayim Petroleum Company (Petrobel) awarded ADES International Holding the contract for a three-month drilling campaign in an offshore concession in Egypt, Alliance News reports. Petrobel also agreed to renew ADES’ existing contract for an offshore jack-up drill rig for another six months, with the possibility of extending for another term. ADES also reached a farm-in agreement with Fanar Petroleum Company to perform hydraulic fracturing at its North July well in the Gulf of Suez to boost production levels, according to Offshore Magazine.

Greece’s Vegas Oil and Gas intends to increase its investments in Egypt in the coming period and will be participating in upcoming oil and gas exploration tenders, CEO David Evans told Petroleum Minister Tarek El Molla in a meeting yesterday, according to a ministry statement. Vegas operates in the East Lagia concession in Sinai, where it is running ground gravity tests and magnetic surveys.

Turkey’s BIM is increasing its retail outlets in Egypt to 300 this year from 256, Al Borsa reports. There is a need for commercial chains in the Delta and governorates other than Cairo, the company’s regional director says. BIM, which has invested around USD 77 mn in Egypt since it entered the market in 2013, is also building an app that will allow customers to locate its branches and receive discounts.

The state-owned Egyptian Sugar and Integrated Industries Company bought 50k tonnes of raw sugar from France’s Tereos in a global tender at USD 349 per tonne, Reuters reports. The shipment is scheduled to arrive in November.

The Health Ministry plans to open 50 refurbished Takamol hospitals in September to be used as liver treatment centers and family health clinics, an unnamed ministry source tells Al Shorouk. The hospitals make up phase one of the ministry’s plans to rollout 402 Takamol hospitals that will be developed through public-private partnerships at a cost of EGP 200 mn each. Phase two will see 100 hospitals turned to obstetrics and gynecology clinics. This comes as the Administrative Court reportedly looks into a case to stop the ministry from cooperating with the private sector, Al Borsa reports.

Air Cairo began running flights from Copenhagen to Sharm El Sheikh yesterday, according to a Civil Aviation Ministry statement (pdf). EgyptAir Chairman and CEO Safwat Musallam said that the company will “soon” begin operating flights between Cairo and Alamein in the North Coast on Thursdays and Fridays, in Monday statement (pdf).

The Sheraton Cairo Hotel and Casino reopened its doors on Monday after completing extensive renovation work on its 326-room facility, according to a press release (pdf).

Egypt canceled its sale of five-year t-bills at an auction on Monday, according to CBE data. This was reportedly due to the high yields demanded by potential buyers, a Finance Ministry official told Reuters. Interest rates on the five-year bonds reached 23.6%, said the official, who speculated that higher rates were prompted by banks’ anticipation of the results of the Monetary Policy Committee’s meeting on Thursday.

Banque Misr is arranging a EGP 500 mn facility for micro financier Tanmeyah to fund upcoming expansion plans, sources in the banking sector tell Al Mal. The loan agreement will be signed in a few weeks’ time with a consortium of five-six banks, the sources say.

Prime Minister Sherif Ismail announced yesterday the formation of the board of directors that will manage the Food Safety Authority, established after parliamentary approval back in January, AMAY reports. The board, which now includes 15 members representing the relevant ministries and state authorities, will report directly to the presidency and will be responsible for ensuring the market’s compliance with health and safety benchmarks and setting food advertising regulations.

The Administrative Court issued a ruling on Monday that would force the Interior Ministry to disclose information on the whereabouts of citizens reported missing due to alleged forced disappearances, Ahram Online reports. The ruling relates to a case filed in 2014 after the disappearance of resident doctor Asmaa Khalaf from Assiut University Hospital, whose family accused police of detaining unlawfully. Police forces continue to deny knowledge of her location.

Former Brazilian football star Ronaldinho will be in Egypt tonight for a three-day trip to promote the Tour n’ Cure hepatitis C medical tourism program, Youm7 reports. Barcelona star Lionel Messi had come to Cairo for the same reason earlier this year.