EBRD looks to invest €700 mn in Egypt, Sir Suma says

Hungarian Prime Minister Viktor Orbán arrives in Egypt today on a three-day state visit, Al Mal said. Orbán will meet with President Abdel Fattah El Sisi; the two are expected to hold a press conference.

Egypt is set to receive its first Mistral-class helicopter carrier from France on Thursday, according to Ahram Online. Defense Minister Sedky Sobhi and his French counterpart will attend the handover ceremony in Tolouse. Egypt signed an agreement last fall to acquire to Mistrals originally commissioned by Russia; expect the ship to be named after Gamal Abdel Nasser.

Shares of Cleopatra Hospital Company are due to start trading, opening at EGP 9.00, per the price announcement release last week.

Tomorrow is going to be a little bit on the busy side ahead of the start of Ramadan:

• The first annual EBRD Research Symposium on the Economics of the Middle East and North Africa is set to take place 2-3 June (Thursday-Friday) at EBRD headquarters in London.
• OPEC meets. Only one of 27 analysts polled by Bloomberg expects a deal to limit oil output.
• SODIC will hold its 1Q2016 results call at 16:00 CLT, hosted by Deutsche Bank. SODIC MD Magued Sherif will be leading off the call.
• “Capital in the Twenty-First Century” author Thomas Pikettywill speak at 11:00am CLT at the Faculty of Economics and Political Science at Cairo University and at 6:00pm CLT at the American University in Cairo’s downtown Ewart Hall.

On Saturday: GB Auto investor relations officer Andre Valavanis will compete for the World Boxing Federation’s African welterweight title on a fight card scheduled for Saturday, 4 June 2016. Event details are here.

Speaking of Ramadan, Markit / Emirates NBD PMIs for Egypt, KSA and the UAE are due out on Sunday, a day (or two) ahead of the expected start of fasting. The House Economic Committee will also discuss amending the Investment Act sometime next week.

The EGX will move to its customary shorter trading day during the Holy Month, with trading running 10:00am to 1:30pm CLT and the discovery session running for 30 minutes starting at 9:30am.

As to the Holy Month itself: We remain convinced it starts on Tuesday, 7 June; our moms are certain it’s Monday, 6 June.

The European Bank for Reconstruction and Development (EBRD) plans to inject EUR 700 mn into Egypt in the coming period, EBRD president Sir Suma Chakrabarti said during a meeting with President Abdel Fattah El Sisi on Tuesday, according to an Ittihadiya statement. During the meeting, which was also attended by Minister of International Cooperation Sahar Nasr, Sir Suma underscored the EBRD’s commitment to finance more projects to “enhance economic reform efforts.” Currently, the size of the bank’s investment in Egypt amounts to EUR 1.7 bn in 34 projects, he said, making Egypt EBRD’s third largest recipient of investments; the institution expects Egypt to become the second-largest recipient country this year, Ittihadiya notes Sir Suma as having said.

Ramadan accounts for the equivalent of two-and-a-half months’ worth of sales at Juhayna, which is aiming to grow its sales by a third in Ramadan compared to last year’s holy month, CEO Seif Thabet told Reuters’ Arabic service. Thabet noted that around 20% of the company’s sales annually are achieved during Ramadan. In preparation for the expected surge in demand, Thabet said the production lines underwent maintenance and increased distribution centres. He added that Juhayna benefits significantly from Egypt’s demographics as the population grows and living standards improve, but the company was impacted by the devaluation, which increased the input costs leading to product price increases. On the partnership with Arla Foods to create ArJu, he noted that ArJu was formed, but that it has not begun to distribute Arla Foods’ products yet.

Emerging markets investment bank Renaissance Capital has re-initiated coverage of CIB, which it calls the “best exposure to Egypt’s structural growth story.” Renaissance Capital said in a note yesterday that it believes “CIB is well positioned to benefit from the recovery in the Egyptian economy, supported by its solid fundamentals, strong corporate franchise and a rising share of the high-yielding retail category” and that it is expected to have a sector-leading return on equity over the next three years. It also says the bank is not exposed a material risk of depreciation and, thus, offers an attractive opportunity for high-quality exposure to Egypt, through its GDRs. Rencap has assigned a “buy” rating on CIB’s GDRs (with a target price of USD 4.70 per GDR) and a “hold” on the bank’s local shares (target price: EGP 51.20 per share). Rencap analyst Balram Ramesh notes that the GDR is already pricing in an exchange rate of EGP 12.40 to the USD.

The Egyptian Council of State (Majlis Al Dowla) has requested that a representative from the Finance Ministry be made available to it today to answer inquiries on the value-added tax (VAT) legislation, government sources tell Al Borsa. The Finance Ministry will send a team to help the Council of State complete its review of the legislation today, the source added.

he CBE kept FX rates unchanged at Tuesday’s auction, selling USD 118.6 mn at a USD 8.78 cut-off price, reported Reuters. The exchange rate in the parallel market was reportedly unchanged at EGP 11.00 per USD 1, according to Reuters and Al Masry Al Youm.

Private equity firm Actis sold half of its stake in Edita yesterday, sources told Reuters. Actis reportedly sold 50.7 mn shares, representing 7% of the company. The shares it unloaded were worth more than EGP 900 mn and were acquired by international institutional investors.

Only three applicants for 14 cement production licenses? The Industrial Development Authority will not extend the deadline to apply for cement licenses, which passed yesterday at 6pm, said IDA head Ismail Gaber. By Al Mal’s count, that means just three companies — including South Valley Cement Co. and El Sewedy Cement Co. — had applied for the 14 available licenses. As we noted on Sunday, six unnamed companies had been planning to form consortiums to apply for the licenses and had requested a one-month extension. The new production licenses met with limited appetite from existing players in the industry, who believe the market is oversupplied and that new capacity can be brought online long before Egypt switches to a deficit market.

Transactions that fall under the EGX’s deal market regulations that exceed EGP 100K must now be executed through CBE-approved banks and not brokerage firms, as per regulations issued by EGX chairman Mohamed Omran on Tuesday, Al Borsa reports. Deal market transactions fall under the EGX’s over-the-counter market regulations which govern trading and transfer of the ownership of the companies not listed on EGX and for capital increases of listed companies not yet under the Egyptian Financial Supervisory Authority. Requests for exceptions will be on a case-by-case basis.

The Health Ministry is reportedly considering exempting some medications priced at under EGP 30 from its EGP 6 limit on price increases, following a meeting between Health Minister Ahmed Rady and the [healthcare compounds] Division of the Federation of Egyptian Industries (FEI). The ministry apparently promised the industry association that it will outline a more detailed breakdown of the new changes in pricing, which have stirred confusion across the industry. As we noted on Sunday, the ministry had imposed a EGP 6 cap on retail price hikes for products priced under EGP 30 to stop manufacturers from repricing based on blister packs and not the entire box. The cap was vehemently opposed by manufacturers. The ministry also told industry officials that cabinet is studying incentives for manufacturers interested in exporting medication, the FEI’s Ahmed El Ezaby tells Al Borsa.

Meanwhile, the Health Ministry will be reviewing tenders issued over the past nine months. The review comes after the arrest of Assistant Health Minister Ahmed Abdul Aziz, which we noted on Sunday. Abdul Aziz stands accused of accepting EGP 4.5 mn in bribes from an unnamed importer of medical equipment, according to AMAY.

The government is in the market for international consultants to help establish its sovereign wealth fund, Planning Minister Ashraf Al Araby tell Youm7. Other regional and global SWFs will invest in the fund, according to Al Araby. Egypt’s SWF will itself control funds to invest in the logistics, energy, tourism, housing, agriculture, retail, telecoms and industry sectors.

** EARNINGS WATCH: SODIC reported a consolidated net profit of EGP 54.65 mn in 1Q2016, down from EGP 79.3 mn in 1Q2015, according to a company release. Revenue dropped 34% y-o-y to EGP 187 mn, with the company delivering 101 units compared to 108 last year. The company also reported a drop in 1Q2016 net contracted sales to EGP 673 mn. SODIC is guiding for contracted sales of EGP 4.9 bn compared to EGP 4.4 bn in 2015 and to deliver 935 units across eight projects. The company’s share continue to outperform those of its industry peers.

Oriental Weavers reported a consolidated net profit of EGP 94.17 mn in 1Q2016, down from EGP 152.67 mn in the same period last year, according to a bourse disclosure. Meanwhile, El Sewedy Electric announced a consolidated net profit of EGP 767.73 mn in 1Q2016, up from EGP 259.99 mn in 1Q2015.

Lawmaker wants religious status stripped from national ID: In one of the most intelligent suggestions we’ve heard out of the House of Representatives since it was seated, Rep. Alaa Abdel Moneim plans to introduce legislation that would remove a religious status from national identification cards, AMAY reports. Abdel Moneim, a one-time cop who became a lawyer, independent MP in the Mubarak era and something of an anti-corruption campaigner, is a member of the Support Egypt coalition. He says his bill would help eliminate discrimination and help instill the principles of equality. Good for you, sir.

The loonies from Daesh think smashing your “satellite TV sets” before Ramadan would heighten your enjoyment of the Holy Month, Reuters reports.

How should you trade the rest of 2016? After a horrible start to the year — and with Brexit, the U.S. Fed’s rate hike and more turbulence from China to come — the Financial Times asked top strategists and portfolio managers how to trade the rest of 2016. The paper also notes that this year’s best performing asset class has been Brent crude, up 32% since January, followed by gold (up 14%). MSCI Emerging Markets Equities are up just 2% YTD, but that handily beats European and Japanese equities, which are all in the red. Whether you’re trading actively or an armchair tycoon, you’ll want to read “Trades in 2016: the good, the bad and what comes next,” with nuggets from BlackRock, Fidelity, JPMorgan AM, GAM, Commerzbank and Citi, among others.

India is the world’s “fastest expanding large economy and the most dynamic emerging market.”The country widened its lead over China as economic growth rose to 7.9% in the first quarter of the year, according to the FT (paywall). But not everyone is so keen on India. Shilan Shah, India economist from Capital Economics, said: “There is some evidence that India’s economy has picked up speed recently but today’s remarkably strong GDP data are hard to believe.”

The M&A outlook remains strong, according to Goldman Sachs’ Gary Cohn. The same forces that drove “near-record: mergers and acquisitions in 2015 are still in place today,” he said Tuesday at an investor conference in New York sponsored by Deutsche Bank AG. “We still think in this lower growth environment with very cheap financing and low rates available that we’ll continue to see more of that merger activity over this part of the cycle," Cohn said.

International coverage on Egypt was largely centered on Environmental Affairs Minister Khaled Fahmy allegedly referring to Sub-Saharan Africans as “dogs and slaves,” with Ventures Africa’s Hadassah Egbedi calling the comments “not a surprise.” Meanwhile the Washington Post and Deutsche Welle report on allegations that top leaders of the Press Syndicate face trial for “harboring fugitives.”

The “clock is ticking” in the search for EgyptAir MS804’s black boxes, according to the FT (paywall). The jury is still out on the cause of the crash, however. “It would be a reasonable assumption that MS804 would be a high-speed impact due the lack of debris on the surface,” said Steve Saint-Amour, director of operations at Eclipse. “Saint-Amour estimates that the search for MS804 could take about six days using the latest device designed for the US Navy by Phoenix International, a US-based specialist in subsea search that he helped set up almost 20 years ago.”

Forbes reports on Italy’s TerniEnergia buying a USD 19.2 mn order to build a 47 MW solar power plant in Egypt to be constructed on behalf of an Italian utility in a location situated about in Benban. The company will handle engineering, procurement, and construction services. The plant was originally announced in PV Magazine on 20 May.

Terror and tourism: The countries we’re no longer visiting (and where we’re going instead)is the headline atop a Telegraph article that contains an incredibly depressing table of terrorist acts in Egypt since 1993, including EgyptAir MS804. “Currently, Egypt’s tourism is surviving very much thanks to the heavily discounted prices used to lure budget travellers, and the question is how much are these low-spending tourists ready to visit Egypt in light of recent events?” said Nadejda Popova, travel project manager at Euromonitor, who said the latest EgyptAir plane crash is likely to further impact Egypt’s struggling tourism industry. Travel Weekly has a slightly more uplifting point of view, quoting several industry players as saying things are slowly, but surely set to improve in 2017 and 2018.

Nael Shama writes for the English edition of Le Monde Diplomatique, explaining that the 1985 Egyptian film Al Baree (The Innocent) is an accurate reflection of Egypt post-2011. In a verbose, slightly elitist piece, Shama says in Egypt now, as in the film, “most of those incarcerated were intellectuals and writers, while all the brutal conscripts were illiterate. The ignorant enslaved the erudite, a society where those afflicted with total ignorance wreak havoc on those blessed with knowledge.” Doubling down on his rhetoric: “The revolution made the mistake of shouting for freedom to a sleeping people. Before setting off for Tahrir, the revolutionaries should have woken them up.”

“Arab media aren’t facing up to their responsibility of not fanning the flames of hate speech and sedition, and should exert more effort to mitigate conflicts they help provoke,” Magda Abu Fadil writes for the Huffington Post in relation to the assault of a Coptic woman in Upper Egypt.

An Egyptian teenage girl died under general anaesthetic in a private hospital during an FGM procedure, The Guardian reported. Egyptian prosecutors are investigating the death, as FGM is illegal nationwide. “The girls’ mother is a nurse, while their late father was a surgeon. The operation was being carried out by a registered female doctor,” according to a Health Ministry undersecretary. The girl’s death “raises questions about the north African nation’s efforts to end the practice,” anti-FGM campaigners said on Tuesday, according to Reuters.

The life and death of Hot Tamale Louie: The New Yorker has a long profile on a man named Zarif Khan, an Afghan who settled in Wyoming in 1909, and go on to become a “local legend” known as Hot Tamale Louie. Khan’s story and that of his family is used to examine how Muslims have been around in America and integrated into their communites for much longer than more recent waves of anti-Islamic sentiment, with the Khan family having lived in Wyoming for almost a hundred years before being confronted with a Stop Islam movement in their own backyard. (Read Citizen Khan, by Kathryn Shulz, The New Yorker)

The “Fragile Five” countries whose oil break-even points are far above current oil prices, pushing them closer to crisis. (View image via Financial Post)

SPOTLIGHT On Shobair memes: If you are one of the few remaining individuals in Egypt who has yet to see the latest televised meltdown of sports commentator Ahmed Shobair, this time on (where else?) Wael El Ebrashy’s television program, there’s no need to see the whole thing; this short segment will help you get all caught up. (Watch in Arabic, running time: 0:43)

The video has, quite naturally, served as ideal feedstock to fertilize memes of all sorts, starting with this Tom and Jerry-themed re-enactment, (running time: 37 seconds), which should be washed down with this Dark Knight-inspired image.

The Foreign Affairs Ministry issued a statement saying Minister Sameh Shoukry is investigating the claims by Kenyan diplomat Yvonne Khamati that Environmental Affairs Minister Khaled Fahmy referred to Sub-Saharan Africans as “dogs and slaves” during last weekend’s United Nations Environment Assembly in Nairobi. The investigation is underway, the statement read, but given the information available so far, the ministry is denying the accuracy of Khamati’s claims. MFA has directed the embassy in Nairobi to protest that attacks on Egypt as a nation are unacceptable and to make the point that Khamati, as a Kenyan diplomat, is acting beyond her remit. MFA is also calling on Kenya to make available any recordings or other evidence of the incident. The ministry is trying to position the incident as an attempt to cast doubt on its commitment to Africa.

Meanwhile, Fahmy claims he wasn’t even at the meeting at which he allegedly made the offending statement, according to Ahram Online. Fahmy said neither he nor an Egyptian support delegation attended the session, adding in a statement issued late Tuesday that he “commissioned Uganda’s environment minister to represent him during all assembly meetings as he had other commitments in Cairo.”

The Washington Post claims the remarks (if they were made) were made by “Mohamed Hesham Shobeir,” identified by the paper as the head of the Egyptian delegation at the the UN Environment Assembly in Nairobi, while the story has international legs as the Associated Press’ coverage gets picked up.

Egypt signed a USD 100 mn financing agreement with the Kuwait Fund for Economic Development to build five water desalination plants in South Sinai, Al Masry Al Youm reported. “The funding comes as part of the government’s plan to develop the Sinai peninsula,” said International Cooperation Minister Sahar Nasr. The 25-year loan carries preferential terms including a 2% interest rate and a five-year grace period, she added.

House Speaker Ali Abdel Aal met on Monday with the deputy speaker of the Italian parliament on the sidelines of the 12th round of the Parliamentary Assembly of the Union for the Mediterranean, according to SIS. The two agreed to exchange visit and deepen ties.

EGPC will pay Shell and Apache USD 4.6 per mmBtu for natural gas produced from the Apollonia field in the Western Desert. An EGPC source told Al Borsa the two companies have successfully completed the drilling of two horizontal wells on site at a cost of USD 3 mn each. Shell and Apache estimate that the site holds natural gas reserves of 700 bcf and have allocated USD 23 mn for the project through their respective JVs. The source added that surface facilities on site have been completed and that one well is expected to come onstream soon.

Russia is looking to sell its poultry in Egypt and the UAE to overcome a surplus that’s cutting domestic prices, Al Borsa reported. Record output of 4.49 mn metric tonnes in carcass weight in 2015 is hurting prices and producers like Cherkizovo Group PJSC. “Poultry in Russia is probably the cheapest in the world,” company director general Sergei Mikhailov. “The market is stressed.”

Mitsubishi Heavy Industries has expressed interest in advising on restructuring and upgrading the Helwan steel industry complex. The company will provide the Trade and Industry Ministry with a detailed plan to restructure complex in June, according to a statement from the Industry and Trade Ministry.

A Swiss-financed development project to improve the health sector has invested around EGP 350 mn to buy new equipment and improve hospital facilities, the Swiss Embassy told Al Borsa. The project is part of the cooperation protocol between the Egyptian Health Ministry and the Switzerland’s Federal Department of Economic Affairs. The project is set to be completed in June and has been executed over three phases, including upgrading the radiology department in over 200 hospitals.

The Alexandria governorate will issue licenses to renovate old real estate within the governorate at no cost while exempting renovators of “improvement fees,” Al Borsa reported. The decision comes to streamline the renovation process amidst a growing trend of collapsing real estate within the governorate, Alexandria Governor Mohamed Abdel Zaher said.

The Tourism Division of the Federation of Egyptian Chambers of Commerce wants the Central Bank of Egypt to extend a six-month rescheduling of tourism industry debt to three years, Al Shorouk reports. The CBE has pressured banks to reschedule debt for tourism operators in light of the ongoing slump in the sector, and the industry association now wants the six months of relief extended to 36 months. It has written central bank chief Tarek Amer in this respect and is beseeching Social Solidarity Minister Ghada Waly to use her influence to advance legislation in the House of Representatives.

Egypt is expected to sign an agreement with Hungary today that would see it import 700 air conditioned train cars and 80 locomotives, said an official from the Transport Ministry. According to Al Borsa, it would appear this was the agreement that dislodged a previously signed MoU with Russia, and International Cooperation Minister Sahar Nasr is reportedly in favour of the Hungarian bid, Al Mal reports. The determining factor in choosing the offer came down to terms of the finance package on offer, said the head of the National Railways Medhat Shosha.

British Airways has been able to repatriate EGP 40 mn in revenues booked in Egypt between October 2015 to March 2016 under an agreement with the Central Bank of Egypt that would which would allow airlines to repatriate 50% of their revenues, Al Borsa reports. Lufthansa has reportedly repatriated USD 15 mn, and Air France-KLM has also been able to repatriate. A source from Etihad Airways tells Al Borsa that the company was able to repatriate 25% of its revenues. Emirates Airlines did not specify its takings, but stated that it was not focusing on repatriating revenues at this time. Back in March, the government approved the repatriation of 50% of British Airways (BA) earnings in Egypt, 25% of Air France’s, and 25% of Saudi Airlines’, in an agreement meant to avoid the airlines suspending EGP payments on tickets.

Barclays-Egypt is going to distribute EGP 295 mn in dividends, the bank’s executive board member Mohamed Sherif said, according to Al Mal. The dividends will be distributed in EGP, and Sherif expects it will be reinvested domestically. He added that the decision came despite the plans by Barclays to exit its Egyptian operations, with the bank’s acting head of retail telling Al Masry Al Youm that Barclays-Egypt is still continuing its expansion plans domestically.

NBE froze EGP 5.2 bn of Misr Ins’ liquid assets on Sunday for failing to comply with an Economic Court’s ruling that both Misr Ins. and Hussein Salem’s East Mediterranean Gas (EMG) owe NBE USD 174 mn in unpaid debts plus 1.00% interest, Al Borsa reports. The move was sanctioned by the Economic Court, said NBE’s legal counsel Saher Al Faseeh. If Misr Ins. does not pay the amount owed, NBE will withdraw that amount from the company’s accounts, Al Faseeh added. Misr Ins. had filed an appeal and had dedicated over EGP 300 mn to fight the charges, according to sources. As we noted back in March, Misr Ins. is contesting that its insurance policy covers debt payments on loans taken out by EMG.

The Egyptian Council of State’s Tax Commission is expected to appeal a decision by the Tax Authority’s Appeals Committee to exempt Orascom Construction from paying back taxes on its USD 12.8 bn sale of its shares in Orascom Cement to Lafarge back in 2007. Orascom Construction had agreed to a EGP 7.1 bn settlement with the Tax Authority on the issue back in 2014, Al Borsa reports. The company had noted that the issue was resolved as of that agreement.

An administrative court banned the construction of nightclubs and “party halls” in close proximity to churches, Ahram Online reported. “In its ruling, the court argued that ‘Egypt was the cradle of religion… and any act that affects the sanctity of religious practices should be banned.’ The court added that such ‘sanctity’ is present in mosques as well as churches, maintaining that they are both houses of worship that enjoy the same protection under the constitution and the law.” A 1950s decision barred the building of “any such venues” near places of worship.

Local councils will be able to hold votes of confidence in governors in addition to district and village leaders under the Local Administration Act, said Ahmed Suleiman, deputy chair of the House Local Administration Committee, Youm7 reports.

Egyptian football club Smouha is apparently not interested in having Argentinean football legend Diego Maradona coach the team, according to Ahram Online. Maradona’s agent reached out to Smouha to offer his services for the upcoming season, the club announced early Tuesday. "Yes we were offered to sign Maradona, but we tend to reject the opportunity as the team is currently stable in the league competition and competes for a spot at African Confederation Cup in the new season," Smouha chairman Mohamed Farag Amer told top football website Filgoal.com.

EgyptAir Flight 960 to Bangkok was cancelled after a bomb threat was reported, Youm7 reports. A three-hour security inspection followed before the airline announced the threat was a hoax, according to a statement from EgyptAir.