Did Beltone just get out of the penalty box?

The EU-Arab League summit wraps up today in Sharm El Sheikh. President Abdel Fattah El Sisi’s meetings at the summit, which opened yesterday, have focused heavily on migration and security cooperation. Look for a final communiqué some time today. The summit is dominating the conversation on Egypt in both the local and international press, and we have a wrap on day one in this morning’s Speed Round, below.

Brexit loomed large at the gathering, with UK Prime Minister Theresa May taking the opportunity to announce a parliamentary vote by 12 March. The European Union could tell her she’s stuck in the European Union until 2021 if she can’t get her pact through parliament and wants to delay the departure date, Bloomberg reports.

News of the summit dominates the press here at home, pushing business news to the back burner yesterday.

Cabinet members are on an investment roadshow in South Korea. Finance Minister Mohamed Maait, Investment Minister Sahar Nasr and Suez Canal Authority boss Mohab Mamish are in South Korea today meeting with executives from leading companies and financial institutions to drum up investment, according to an Investment Ministry statement (pdf). Egyptian exports to South Korea rose more than 300% in the first 11 months of 2018 compared to the same period a year ago, according to figures from state statistics agency CAPMAS reported by the local press. Exports topped USD 198.5 mn last year, up from USD 47.3 mn in 2017, while imports from S. Korea dropped to USD 1.6 bn in 2018 from USD 1.9 bn the year before.

In business miscellany this morning:

• US-China trade talks deadline pushed: The Donald has reportedly agreed to extend the 1 March deadline for a US-China trade agreement, citing progress in talks. The WSJ and Reuters have more.
• Will Brent crude break USD 70 a barrel this week after hitting USD 67 on Friday? It’s up nearly 30% since the start of the year.
• Fund of hedge funds: Aberdeen has raised more than USD 150 mn for a fund that will track an index of 140 Europe-based hedge funds. (FT)
• BlackRock is not having the best of luck as it tries to ape Warren Buffett and push into some approximation of private equity. (WSJ)

‘Simplifying’ is the rage at a certain salmon-colored paper, with Moira O’Neill writing about How to ‘Marie Kondo’ your investment portfolio while serial entrepreneur John Murphy (the guy behind Interbrand) writes about How I simplified my life by selling (nearly) everything I own. Are you late to the Marie Kondo craze? Or, like us, just unable to muster the enthusiasm? At least check out Netflix’s trailer to know what everyone else is talking about.

The 91st Oscars (otherwise known as the Raspberries of semi-decent, politically correct films) are taking place without a host for the first time in 30 years. By dispatch time, the best picture winner had yet to be announced, but among the favorites nominated are BlacKkKlansman, Roma, Green Book and Bohemian Rhapsody. Notable winners so far include:

• Best supporting actress: Regina King (If Beale Street Could Talk)
• Best supporting actor: Mahershala Ali (Green Book)
• Production design: Hannah Beachler (Black Panther)
• Sound mixing and sound editing: Bohemian Rhapsody, starring Egyptian-American Rami Malek
• Best foreign film: Roma

Head over to the New York Times for live updates.

In miscellany this morning:

Foldable smartphones are upon us. Samsung unveiled its USD 1,980 Infinity Fold, which goes on sale in April, at the end of last week, but Huawei’s USD 2,600 Mate X is getting more attention for being thinner, having a bigger screen and folding flatter. The Verge has your back if you want more, and the WSJ also has a deep dive.

Want to go more mainstream? Android Central has a rundown on its first 72 hours with Samsung’s new Galaxy S10+. Or somewhere in the middle? LG has rolled out a 5G smartphone with two independent screens.

With our annual trek to Dubai ahead of us, we look forward to an Enterprise tradition: The taste test of Five Guys downstairs, followed by Shake Shack upstairs — back to back. What better way to prime the palate than with the Los Angeles Times’ generally spot-on Official fast-food French fry power rankings. H/t Daring Fireball.

Spain, Italy and Iceland are the world’s healthiest countries, according to data crunched by Bloomberg for its 2019 Healthiest Country Index. Israel is ranked #10, the United States #35, while Bahrain is the highest-ranked Arab country at #36, followed closely by Qatar at 37 and then the UAE at 46. Egypt doesn’t make the top 60.

PSA- It’s short-sleeves weather today in the capital city with the mercury set to peak at about 29°C this afternoon, according to our favourite weather app. Look for temps to cool to 22°C tomorrow and 17°C by Thursday.

The EU-Arab League summit was the sole topic on the airwaves last night, with Masaa DMC, Al Hayah Al Youm and Hona Al Asema dedicating a significant portion of their coverage to the first day of the summit.

Don’t expect much by way of a concrete, united policy, EU foreign policy chief Federica Mogherini told MasaaDMC. Both the EU and Arab countries face the same challenges dealing with terrorism in Yemen and Libya. And although we may not agree on all aspects, it is important that both regions have gotten together to discuss the issue, she added (watch, runtime: 02:29).

This opinion was mirrored by Arab League Secretary-General Ahmed Abu Gheit, who told Lama Gebril that the significance of the summit goes beyond terrorism. This is the first real chance for the two blocs to discuss a host of key political issues, including climate change, countering illegal migration and trade (watch, runtime: 01:50).

Differences of opinion: The interview also looked at issues that have divided both blocs, with particular focus on democracy post-Arab Spring. Abu Gheit said that the demonstrations of 2011 had brought about the European-style democracy that was hoped, but rather those have led to the “disintegration of the nation state” (watch, runtime: 03:47).

Foreign Minister Sameh Shoukry kept the conversation focused squarely on terrorism in a talk with El Hekaya’s Amr Adib. Shoukry stressed that international cooperation is essential in order to fight Daesh. Speaking on the summit, Shoukry lauded the decision to hold it in Egypt, saying that it signifies huge trust the global community has in the country’s leadership (watch, runtime: 02:56).

Has Beltone’s investment banking arm been unshackled? The board of the Financial Regulatory Authority (FRA) has reportedly informed Beltone Financial that it is lifting its suspension of Beltone’s investment banking arm, allowing it to resume normal operations as of this morning, according to a local press report. The FRA also cut to six months the period of time it requires Beltone’s brokerage arm to maintain an EGP 50 mn insurance cover. The decision has yet to be made public and Beltone declined to comment when we reached out to them to confirm the news.

Background: The FRA suspended Beltone’s IPO unit late last year for six months over alleged irregularities in its management of Sarwa Capital’s IPO, which saw the structured- and consumer-finance player’s shares nosedive 11% in their EGX debut. The authority also ordered Beltone’s brokerage arm to raise its insurance cover to EGP 50 mn and maintain it at that level for a year. The company denied the allegations and has pursued legal action against the FRA’s decisions. Its plea to the FRA’s appeals committee was turned down and Beltone said it was seeking a settlement.

LEGISLATION WATCH- The House general assembly postponed its final vote on the E-Payments Act after MPs failed to reach quorum on Sunday, Al Ahram reports. It’s unclear when the vote will be rescheduled or when our esteemed representatives plan to grace the 21st century with their presence in parliament. The law drafted by the CBE makes it mandatory for government and private sector entities to make all payments to subsidiaries, suppliers and contractors electronically. The law comes as part of the government’s push for a cashless, paperless society.

Egypt’s first listed real estate fund to launch in March: The Egyptians Real Estate Fund will be up and running by no later than March, CEO Hashem El Sayed told the domestic press. Billing itself as the country’s first listed real estate fund and established by Egyptians Abroad Investment and Development Co., Pioneers Holding, and Misr Iran Development Bank, the fund will invest in real estate projects worth EGP 2.5 bn. These include an EGP 1.5 bn project on the Maadi corniche (on which work will begin in early December) and acquiring a 6,000 sqm administrative building in Smart Village to lease to multinational corporations. The fund listed on the EGX last year, and is planning further public and private offerings of in-kind assets and cash in the coming period to reach its target size of EGP 2.5 bn.

IPO WATCH- Real estate player El Attal Holding is mulling a listing on the EGX sometime next year, Chairman Ahmed El Attal tells the local press. News came as the company launched last week its three-phase EGP 4 bn Park Lane New Capital residential compound, which is slated for completion in two years’ time. El Attal is also planning to launch an EGP 5 bn project in New Alamein and an EGP 3 bn project in Ain Sokhna, for which details are yet to be announced.

INVESTMENT WATCH- Australia’s Atoun looking to invest EGP 15 bn in solar power projects in Egypt: Atoun Energy Australia is looking to build solar power stations worth as much as EGP 15 bn in Wadi El Gedeid governorate, Governor Mohamed El Zamalot told the domestic press. The company has reportedly filed for approval to start the investment program by building a 250 MW solar plant, El Zamalot said. His statements came at the meeting of the Saudi-Egyptian Business Council in Cairo yesterday.

Also from the Saudi-Egyptian Business Council meeting: Saudi FDI in Egypt by the numbers: Saudi investment in Egypt stands at USD 54 bn today, of which some USD 44 bn is FDI by private companies and USD 10 bn via the Saudi Public Investment Fund, deputy head of the Saudi-Egyptian Business Council Abdullah Bin Mahfouz told the local press at the sidelines of the meeting.

He listed off some of the USD 10 bn in recent pledges made by Saudi companies, singling out Saudi interest in our services, manufacturing, construction and real estate, ICT, tourism and banking sectors. Among them: two agreements signed between Arab Petroleum Pipelines Company (SUMED) and Saudi Aramco during this month’s Egypt Petroleum Show worth some USD 2 bn. He also noted Saudi’s ACWA Power and Hassan Allam Holding’s 2.3 GW, USD 2.3 bn Luxor power plant. Other projects noted include:

• EGP 8 bn-worth of shopping malls in Katameya, Mansoura and Tanta being built by Fawaz AlHokair Group’s Marakez;
• EGP 5 bn in commitments to medical cities in Sheikh Zayed and Ismailia being built by Batterjee Medical Services;
• EGP 3 bn-worth of hospitality and tourism projects being built by Golden Pyramids Plaza and subsidiary City Stars Properties, including Fairmont Sharm El Sheikh, City Stars North Coast and City Stars Sharm El Sheikh. The companies are owned by the Saudi Sharbatli family.

There’s still no Turkey-style agreement with the EU on migration, but politicians made some headway was the first day of the EU-Arab League summit. Officials from both sides vowed to increase cooperation on migration and terrorism, without unveiling a concrete agreement, according to the Associated Press. Following his opening remarks on confronting terrorism, President Abdel Fattah El Sisi met with President of the European Council Donald Tusk on the sidelines of the summit, according to an official statement. Tusk praised Egypt’s efforts to prevent illegal migration in the Mediterranean while El Sisi emphasized the importance of cooperation to tackle the threat of extremism. Tusk had been a strong proponent of signing a migration pact with Egypt and wants to expand the agreement on a regional level.

Energy cooperation was the topic du jour in a separate meeting between El Sisi and Cypriot President Nicos Anastasiades.

El Sisi also held several rounds of bilateral talks with other European and Arab leaders on the sidelines of the summit including Saudi King Salman, Tunisian President Beji Caid Essebsi, Palestinian Authority President Mahmoud Abbas, Omani Deputy Prime Minister Asaad bin Tariq Al Said and Iraqi President Barham Salih.

Reaction from the foreign press has so far been mixed: Press reaction to the first day of the summit has been mixed. The AP underlines the “largely symbolic” nature of the meeting, reporting continuing disagreements over migration, Syria and Yemen behind the scenes. The FT and The Guardian have both published pieces critical of European leaders for working with “authoritarian” Arab states. The National meanwhile describes the conference as a “milestone summit.”

Turkey’s cry-baby-in-chief is not happy that his invite is still in the mail. Turkish President Recep Tayyip Erdogan criticized the Egyptian government over last week’s execution of convicted terrorists, stating that “this is not something we can accept,” France 24 reports. It was only two years ago that Erdogan himself spoke favorably about capital punishment. For its part, the Foreign Ministry has denounced the Office of the United Nations High Commissioner for Human Rights (OHCHR) for criticizing the legal process in last week’s trials leading to the execution of nine men for the 2015 assassination of former Prosecutor General Hisham Barakat, according to a ministry statement.

What are investors telling Renaissance Capital about Egypt? A lot of good things, according to the EM-focused investment bank’s CEO for North Africa, Amr Helal. We sat down with him last week following RenCap’s Egypt Investor Trip to Cairo on 11-13 February. The trip saw global fund managers with total AUM of c. USD 70 bn meet face-to-face with more than 20 companies. Excerpts from our conversation:

The trip went very well on the corporate side, the investor-side, as well as the stakeholder side, which included the Finance Ministry and the CBE. The overall sentiment has been positive. and it’s not just from the equity investors but our bond investors, too. Positives they brought up include the Egypt macro story and the eurobond issuances. They were also impressed with the quality of the corporates and how well businesses have been doing.

The most common questions we got from investors? “How well are the reforms going? What are the expectations around the government privatization program? What are the expectations around potential interest rate cuts, inflation, and where the currency is expected to land?” They are asking the right questions. They want to get the feel for how well businesses are doing. Things such as what’s happening in terms of the recovery of consumer spending. What are companies doing to navigate the new market reality? When do they expect companies to start investing in CAPEX?

On a macro level, the most common concern tends to be around the sustainability of reforms in light of the changing global backdrop.

We expect interest rates to come down in 2019. After the rate-cutting cycle resumed in February, we expect at least another 100 bps rate cut to 15.75% this year, with further rate cuts in 2020 when inflation falls to single digits in a sustainable way.

Based on our in-house numbers, we can probably expect the exchange rate to average EGP 17.60-17.80 this fiscal year. The EGP has strengthened against the USD and that was driven in January by positive inflows into the t-bill market. You had USD 2-3 bn of positive inflows, reversing months of decline. Obviously, tourism has picked up a bit from a low base. Remittances from Egyptians living abroad continue to be very strong.

Does Egypt need to go back to the IMF for another round of funding? That’s obviously a decision for the government. But I think the program will come to an end and not be renewed and I don’t think Egypt needs to or will go back to the IMF for another round of funding. But the relationship might continue in the form of regular engagement with the IMF, or something along those lines. This is something that investors would welcome, and some have broached the topic of having some form of continued engagement with the IMF.

On the wider economy, I expect Egypt to continue to perform strongly this year, especially with further interest rate cuts to come in 2H2019. The government is projecting GDP growth of 5.6% in FY2018-19. Hopefully, the rate cuts should spur corporates to start investing for the long term. Other factors we see as continuing to drive growth include the gradual recovery in consumer spending, the recovery in tourism and other sources of FX, and obviously Egypt having a net surplus of gas production as well.

FDI is the missing component for Egypt: We need to ask ourselves, on a macro level, what’s the missing component in Egypt’s value proposition? We are good at attracting investors in terms of portfolio inflows and fixed income investors. What has been thus far lacking is the ability to attract longer-term foreign direct investment (FDI) outside the oil and gas industry.

Egypt ranks high on top of the list of economies that we cover in terms of macro development and investment opportunities. And again, this is driven by the success of the reform program, which has put the economy on a solid growth path There is a pipeline of potential transactions that should be coming to the market this year and next year, either through the government’s privatization program or private companies looking to access capital markets.

When will the privatization program restart? I would argue that it already has started. Today, you have a number of companies that have already been picked and mandated, and banks have been working on them for quite some time. I think the next step is to start bringing those companies to market and that will depend on market conditions moving in the right direction.

I think the IPO outlook this year is very good, especially with the number of private and public sector listings coming to market in 2019 and 2020. There is a number of quality and sizeable offerings which should be a boost to the market. Hopefully we should see increased investor interest driven by the quality as well as the size of the issuances.

We’ll continue to see M&A driven by both strategic and financial interest across a multitude of sectors, but especially around consumer stories. This includes healthcare, education, non-banking financial services, food and beverages, etc. I think we’ll see a good M&A pipeline this year.

Consumer-facing sectors will continue to outperform this year. I would add the industrial sector, as these benefit from a number of key characteristics in terms of their ability to export and compete. I don’t see a certain sector that is likely to underperform.

On the emerging markets front, I think that the US Federal Reserve’s less aggressive stance on interest rate hikes has definitely helped sentiment around EM. With the current Fed signaling, there has been a recovery in emerging markets and investors are again deploying capital and we clearly see that year-to-date in the solid performance of emerging markets.

Cautiously optimistic that there won’t be another EM zombie apocalypse: At the end of the day, we are cautiously optimistic. It’s a wait-and-see game. There are a number of significant uncertainties in the global economy — the US-China trade war, Brexit, softening of growth in China — and these are all global factors that affect sentiment and impact how markets perform.

As far as other emerging markets are concerned, we like strong growth. We think South Africa can get a lift assuming the President Cyril Ramaphosa does well in this year’s elections. Pakistan could become a very interesting market if it gets an IMF program to support it.

UN talk showcasing uses for blockchain outside crypto tomorrow: The UN Technology Innovation Lab Egypt, Egypt Technology Innovation & Entrepreneurship Center, UNDP, and IBM Egypt are hosting a discussion tomorrow to introduce blockchain and its uses outside of cryptocurrencies. You can find more details and register for the event here.

The EGP 500 mn phase 4A of Cairo Metro Line 3 is due to open “soon,” Cairo Governor Khaled Abdel Aal said, according to Ahram Gate. The 4 km phase will link four stations in Cairo: Harun, Heliopolis, Alf Maskan and Shams Club.

A Russian delegation will visit Sharm El Sheikh and Hurghada airports sometime soon to run a final security sweep ahead of a decision on whether to allow the resumption of direct flights, AMAY reported.

A consortium of Russian companies is expected to visit Egypt next month to explore investment and operational logistics in the Russian Industrial Zone area of the Suez Canal Economic Zone, reports the local press.

The gov’t will begin rolling out its debt control strategy next month, Finance Minister Mohamed Maait told Al Mal. The four-year strategy aims to bring down Egypt’s public debt to 80-85% of GDP by the end of FY2021-22.

An Egyptian ministerial delegation will visit France in March to discuss boosting bilateral trade, local press reported.

The window for emerging markets to industrialize is closing — and quickly, at that: Structural shifts in global trade patterns will make it increasingly difficult for emerging markets to industrialize, writes Steve Johnson in the FT. Research from the McKinsey Global Institute suggests that new trends in production (more automation, for example) mean the importance of labor-cost arbitrage is decreasing — bad news for countries hoping for economic growth through a strategy of labor-intensive manufacturing of goods for export. Worse, advances in technology are seeing more and more work “reshored” to advanced economies.

Other indicators that will prove disheartening for emerging markets: The increasingly regional nature of trade (especially in Europe and Asia); the growing importance in the value chain of intangible assets, knowledge, and research and development (which correlate with a highly skilled workforce); and the massive spike in trade of services as opposed to physical goods (the former growing 60% faster than the latter in the past decade.)

There is a glimmer of hope for countries that have managed to find “a profitable niche,” but even that may prove unsustainable. We may expect to hear this narrative more and more often: that emerging markets will need to start really investing in developing the skill sets of their workforces (focusing on higher cognitive skills, soft skills and technological skills) as the “window of opportunity” for economic growth through industrialization keeps narrowing.

The EU-Arab League summit is the only real coverage Egypt is getting in the foreign press this morning.

Other headlines worth noting in brief include:

• Tourism numbers this year could beat the 15 mn visitors record of 2010 when Russian flights to Red Sea resorts resume, Hamza Hendawi writes for The National.
• Saudi King Salman bin Abdulaziz Al Saud issued an order late on Saturday to pardon and release a number of Egyptian citizens imprisoned in the kingdom, the Saudi Press Agency reported.
• The Dostour Party has denounced a “campaign of arrests” against its members for opposing parliamentary efforts to consolidate presidential powers through constitutional amendments, AFP reports.
• The family of a Canadian man who has been detained in Egypt is urging Ottawa to intervene amid concerns for his safety, CBC reports.

Still topping headlines among the state’s leading newspapers is the opening day of the EU-Arab League Summit. Both Al Akhbar and Al Ahram focused on President Abdel Fattah El Sisi’s opening remarks, with the latter noting his call to action for a conflict-free Middle East. Al Akhbar looked at the heads of state who sat down with El Sisi in Sharm El Sheikh. Al Gomhuria focused on discussions about Palestine and Hamas.

Spotlight on our most important relationship in Africa: A look at “reform-minded” Ethiopian leader Abiy Ahmed: Ethiopia is being touted as one of Africa’s great success stories — not just economically, but politically and socially too — and many of the most glowing accolades fall at the feet of its charismatic new leader, Abiy Ahmed. David Pilling and Lionel Barber’s sweeping piece in the Financial Times paints a picture of a reformer looking to open his country’s market up and create jobs for a burgeoning population (102 mn and counting).

Establishing a regional power: Economic growth in Ethiopia over the last decade has been indicative of “remarkable progress,” increasing by more than 10% annually (up until last year when it dipped to 7.7%). Ahmed’s liberalization initiatives include a drive towards privatization, with a particular focus on the telecoms industry, continued growth in manufacturing and services, and the exploration of trade relationships amid a push to attract more FDI. Despite friction with Egypt over the construction of the Grand Ethiopian Renaissance Dam (GERD), the two countries have been looking in the last year at deepening ties, with some discussion of a tripartite investment fund being established with Sudan.

But can he live up to the promise? Ahmed has also attracted praise for ending 20 years of hostility with Eritrea, freeing 60,000 political prisoners (including all detained journalists), working with opposition politicians and appointing women to half his cabinet. But despite being “wildly popular” at home — and increasingly abroad — Ahmed still has his work cut out for him when it comes to fulfilling the political and economic expectations of a nation eagerly seeking jobs and opportunities.

The internet is beyond fixing, we need a new one: The web has caused tremendous political, economic and societal problems, and we “desperately” need a new internet, FT correspondent Hannah Kuchler tells us in a video for FT Rethink (watch, runtime: 02:09). We are now routinely seeing people losing money and reputation, as well as witnessing previously unheard of interference in elections, says Kuchler, citing the more trivial examples of what is wrong with the internet. But something “truly terrible” could happen before we step in to get it right, she warns.

Italy’s Eni will complete the Zohr field’s sixth natural gas treatment plant at the end of March, raising output to 2.3 bcf/d from 2.1 bcf/d currently, the domestic press reports. The Italian company has also completed drilling the tenth well, which has been gradually linked to treatment units that have begun operations, an Oil Ministry source said. One Zohr well produces an average of 250 mn cfd.

Our friends at Pharos Holding were acknowledged by Planning Minister Hala El Said for being named “Best Equity Research Company” by the International Finance Magazine (IFM) for 2018, the company said in a press release (pdf). Chairman and CEO Elwy M. Taymour received the award at a gala dinner on 20 February, which was attended by CEOs, managing directors and other high-profile industry figures.

The Cairo Regional Center for International Commercial Arbitration has granted USD 39 mn in compensation to Amer Group in a dispute with Antaradous for Touristic Development, according to an EGX disclosure (pdf). The claims were brought to commercial arbitration by the Syria-based company in 2014 following a dispute over its partnership with Amer to develop the Porto Tartous tourist resort. Despite this, it seems the court saw that the claimant is the party which failed to uphold its contractual obligations.

Teams from around the world participated in the Yangtze dragon boat race on the Nile on Saturday as part of the Chinese spring festival, Ahram Online reported. The Egyptian team won the men’s race, which traditionally takes place on the Yangtze river in China. Teams from China, Portugal, US, Australia, Hong Kong, Macao, Philippines and Singapore also took part in the event.