EGX snaps losing streak as investors hold breath for interest rate decision, weekend developments

You may now take a breath: The sell-off on the EGX30 finally cooled off yesterday as the index closed up 3.2%, breaking an eight-session losing streak. We’re going to go out on a limb and say it is likely to be an uneventful day today as investors hold their breath ahead of the central bank’s interest rate decision and wait to see whether there are protests again this weekend.

And for all of the hand-wringing this week, it’s particularly nice to end with a run of decent business news: Global insurance giant Prudential is investing in a Sarwa Capital subsidiary, e-commerce startup MaxAB just raised a massive USD 6.2 bn seed round, and France’s Valeo is going to open two customer service centers in Egypt. We have chapter and verse on all three developments in this morning’s Speed Round, below.

That’s right, folks: It’s interest rate day. The Central Bank of Egypt’s Monetary Policy Committee will meet today to review key interest rates. The market’s reaction to last weekend’s protests “coupled with greater political risk across the Middle East, mean a more moderate cut, or even a hold, may now also be on the table,” Bloomberg forecasts.

Who’s expecting what? Eight of the nine economists we surveyed expect a rate cut of 50-150 bps, while all respondents to Reuters’ interest rate poll also expect a cut. Our friend the economist Reham El Desoki told Bloomberg she expects a 50-100 bps cut, but isn’t ruling out a “more conservative” decision to keep rates on hold for now and accelerate monetary easing next year. Expectations of a cut come on the back of unexpectedly low inflation figures in August. Prime Securities’ Mona Bedair also said in a research note picked up by Masrawy yesterday she expects a 50-100 bps cut when the MPC meets today.

Middle East eurobond issuances are ramping up as interest rates come down: Corporate and sovereign eurobond issuances in the Middle East and North Africa are hitting the market “at a record pace as global monetary easing prompts them to exploit the lowest funding costs they’ve ever experienced,” according to Bloomberg. The region has seen around USD 85 bn-worth of eurobond sales this year, with Saudi Aramco and Qatar leading the pack with the largest issuances. Saudi Arabia could also bring a new issuance to market this year, while the Egyptian government is expected to move ahead with a USD 2.5-3 bn eurobond issuance at the end of 2019 or early 2020.

Conferences taking place in the coming days:

• The launch of the Mediterranean Business Angels Network will take place at the three-day Techne Summit 2019, which starts on Saturday, 28 September at Alexandria’s Bibliotheca Alexandrina.
• Beltone Financial Holding will hold its Beltone Access conference in Dubai next week.

Aramco could list in November: Saudi Aramco could kick off its IPO process around 20 October ahead of a potential listing on the Tadawul in November, sources told Bloomberg. The company hopes to achieve a minimum USD 2 tn valuation, and began meetings with analysts yesterday. This contradicts the claims of two sources who said on Tuesday that the IPO is unlikely to take place this year due to the recent attacks on the company’s facilities. Aramco is currently battling to get the Abqaiq and Khurais refineries back online, a process which sources said earlier this week could take months.

The stake on offer could also be doubled: Sources separately told the Wall Street Journal that the Saudi Royal Court is considering upping the stake to as much as 10%, instead of the 5% stake that the company was expected to offer. Should Aramco get its target valuation, the listing would raise USD 200 bn, eight times more than the USD 25 bn brought in by Alibaba, currently the biggest IPO in history.

CEO scalps are hanging on boardroom walls: It’s been a really horrible week in which to be a high-profile CEO in the US of A, with Adam Neumann having been forced out as CEO of WeWork, EBay chief Devin Wenig stepping down after conflicts with his new board, and Juul Labs tossing out its CEO and replacing him with a veteran executive of Big Tobacco.

A readout of a phone call confirms The Donald asked Ukraine’s president to investigate American presidential candidate Joe Biden, adding fuel to impeachment proceedings.

Bibi has 28 days to try to form a new government and could request a two-week extension if necessary, Reuters reports. Netanyahu.

Among the handful of things making us go “Hmm…” heading into the weekend:

• Facebook has gobbled up a company that mind-controlled tech: Our social media — and soon-to-be financial — overlords have agreed to purchase CTRL-Labs, a tech startup developing software that can be controlled by thought alone, Bloomberg says.
• Pre-food at McDonalds: Like Minority Report, but with burgers. The US fast food giant is harnessing big data to predict what each customer wants to eat before they even order. This short Bloomberg video has more (watch, runtime: 1:30).
• The struggle over the gig economy continues: Drivers working for ride-hailing companies such as Uber and Lyft are divided over new legislation signed in California last week that reclassifies them as employees, the Wall Street Journal reports.
• Our greener future is in … natural gas? An opinion piece in the Wall Street Journal argues that existing solar and wind initiatives are not enough to drive the kind of economic change necessary to raise the standard of living in African countries.

** A quick programming note: My Morning Routine, our popular Thursday section, is on hiatus this week and will be back next Thursday.

President Abdel Fattah El Sisi’s visit to New York was again the top news item on last night’s talk shows. The president, who has been in the Big Apple for the UN General Assembly for a little under a week now, participated in the UN Sustainable Development Summit, Al Hayah Al Youm’s Lobna Assal noted (watch, runtime: 6:13). We have a rundown of the speech and the remainder of El Sisi’s activities in this morning’s Speed Round, below.

The EGX30’s recovery yesterday following a sustained sell-off was on the radar of Yahduth fi Masr’s Sherif Amer (watch, runtime: 1:23).

Naguib talks Beltone Access conference, Egypt’s EM darling status: Naguib Sawiris phoned into Yahduth fi Masr to give Amer a rundown of the Beltone Access conference, which gets underway next week, and give his take on Egypt being hailed as an emerging markets darling (watch, runtime: 3:59).

Elsewhere, the role of the Ikhwan in last weekend’s protests was the focal point for Masaa DMC’s Ramy Radwan. The host aired what he claimed were leaked telephone conversations between an unnamed senior Ikhwan member and former presidential candidate Ayman Nour’s Turkey-based office manager (watch, runtime: 4:39) and another allegedly between Ikhwan leader Aly Bateekh and an anonymous co-conspirator (watch, runtime: 5:52). The recordings suggest the Ikhwan is looking to increase its social media activity to encourage more demonstrations.

EGX30 rises 3.2% after eight-day slide: The Egyptian Exchange rebounded yesterday, bringing a dose of much-needed positivity to a week that had seen shares experience their sharpest falls since 2015. The benchmark EGX30 closed up 3.2%, with 29 of the index’s constituents rising. “What is happening is just a breath-taking break after three sessions of severe downturn and about eight sessions of consecutive declines,” Ibrahim Al Nimr, head of technical analysis at Cairo’s Naeem Brokerage, told Reuters.

Gains for 29 out of the 30 stocks: CIB, which counts for over a third of the EGX30’s weighting, gained 3.4%. Palm Hills was up 6.1% and Elsewedy Electric 4.3%. Investors also snapped up shares that were among the hardest-hit earlier in the week, with Eastern Company and Ezz Steel each up 4.7%, Egyptian Iron & Steel gaining 5.4%, and Juhayna rising 3.5%. Education outfit CIRA was the only company on the index to finish in the red, down 3.9% at close.

Foreigners bought the dip: They may have been leading the sell-off on Tuesday, but yesterday foreign investors offered the EGX some respite from a losing streak that had seen the index plunge 11% in the previous three sessions on the back of weekend protests. Trading data showed foreign investors as net buyers to the tune of EGP 131.6 mn and Arabs buying a net EGP 48.2 mn worth of shares.

INVESTMENT WATCH- Prudential Financial to invest in Sarwa Insurance: Fortune 500 insurance firm Prudential Financial’s impact investing arm has inked an agreement to invest alongside our friends at Sarwa Capital in subsidiary Sarwa Life Insurance Company, according to an emailed statement (pdf). The statement did not disclose the value of the investment. Prudential’s impact investment arm is building a portfolio of USD 1 bn-worth of investments in socially impactful ventures with financial returns. Its investment in Sarwa Life “will help … accelerate the roll out of quality and innovative products to the market,” said Sarwa Capital CEO Hazem Moussa.

Background: Consumer- and structured-finance player Sarwa Capital acquired licenses from the Financial Regulatory Authority (FRA) earlier this year to begin offering life and non-life insurance policies. It provides life and health insurance and long-term savings through Sarwa Life Insurance, and property and liability insurance through a separate entity, Sarwa Insurance Company.

STARTUP WATCH- Cairo-based e-commerce startup MaxAB has raised USD 6.2 mn in one of the MENA region’s largest-ever seed rounds, it said in a statement (pdf). The round was co-led by Beco Capital, 4DX Ventures, and Endure Capital, while 500 Startups, Outlierz Ventures, and other local investors participated. The company expects the investment to enable it to reach 50% of the Egyptian population in the next two years, before expanding into other markets.

MaxAB connects micro-retailers with suppliers, aiming to streamline a USD 45 bn industry: MaxAB is a platform that connects informal food and grocery retailers with suppliers through an Android app. It aims to automate and simplify the USD 45 bn consumer goods industry in Egypt by providing retailers in underserved areas access to a variety of products, the ability to order stock online, a rapid delivery service, and access to credit. Brands that use the platform can make use of tools including real-time demand monitoring, helping them make informed decisions about their purchasing. MaxAB has a stock list of over 600 products and 9k retailers active on the platform, and has recorded 50% month-on-month growth.

Investors anticipate rapid growth: Co-founders Belal El Megharbel and Mohamed Ben Halim, who lead a team of 270 people, have been praised by investors for the effectiveness of their business model. “The metrics they have recorded in such a short period are impressive, and we expect to continue to see double-digit growth as they scale,” said Yousef Hammad, managing partner at Beco Capital.

INVESTMENT WATCH- France’s Valeo to open two customer service centers in Egypt: The Information Technology Industry Development Agency (ITIDA) has signed an MoU with French software developer Valeo to open two global shared service centers in Egypt, the CIT Ministry said in a statement. The ministry said the agreement aims to help Egypt increase its role as an outsourcing destination for foreign companies and create jobs. “This also reflects the international companies’ trust in the investment environment in Egypt and strengthens Egypt’s position as a leading country in providing IT and value-added services,” CIT Minister Amr Talaat said during a France visit to meet with industry players. During the visit, Talaat also met with representatives from Ecole Polytechnique to discuss cooperation in training staff and AI research and development, according to a separate statement.

WB boss Malpass pledges more support for Egypt’s infrastructure projects: The World Bank is looking to push on with “its growing cooperation with Egypt” in sectors including infrastructure, private sector and SME development, transportation, energy, education, healthcare, wastewater treatment, and vocational training, World Bank President David Malpass told President Abdel Fattah El Sisi, according to an Ittihadiya statement. The two, who met yesterday on the sidelines of the United Nations General Assembly, also discussed boosting cooperation on infrastructure projects in Africa.

El Sisi also met yesterday with UN Secretary General António Guterres for talks that focused largely on counterterrorism efforts. The president had similar discussions with Portuguese President Marcelo Rebelo de Sousa, and talked about bilateral relations and the situation in Syria, Libya, and Yemen with Ukrainian President Volodymyr Zelensky.

The president separately delivered a speech at the UN Sustainable Development Summit, in which he presented Egypt’s plans for sustainable growth laid out in his administration’s Vision 2030, including the economic reform program and plans to create more jobs, empower women, and improve health and education services. El Sisi called on the international community and institutions to increase their funding to developing nations to allow them to meet the Sustainable Development Goals laid out by the UN. You can watch his full speech here or read the full Arabic transcript here.

Heikal Foundation for Arab Journalism awards EGP 250k prizes to two young journalists: The third edition of the Heikal Foundation for Arab Journalism competition this week saw two young journalists awarded EGP 250k each in a ceremony at the Cairo Opera House, the foundation said in a statement (pdf). The foundation, established in 2007 by former Al Ahram editor-in-chief and journalism icon Mohamed Hassanein Heikal, aims to develop youth-driven journalism in the Arab world. The Arab Journalism award was set up in 2016 following Heikal’s death.

Rights groups claim more than 1.1k people have been detained after protests last weekend, according to Reuters. The arrests were jointly documented by the Arab Network for Human Rights Information (ANHRI), the Egyptian Center for Economic and Social Rights, and the Egyptian Commission for Rights and Freedoms, according to ANHRI head Gamal Eid. Notable reported arrests include Hazem Hosny, a former spokesman for the 2018 presidential campaign of former military chief of staff Sami Anan, and Hassan Nafaa, a writer and Cairo University professor. Prominent rights lawyer Mahienour El Massry was also arrested earlier in the week. The Wall Street Journal also has the story.

Coffee with Walid Sheta, regional president of Egypt, North East Africa, and Levant at Schneider Electric: 2019 has been an interesting year for Schneider Electric here in Egypt. Infrastructure development in the country is growing, particularly on the electricity transmission front and on water, desalination and wastewater front. The past year also saw the country take strides in upgrading railway and land transport network. And Schneider has its hands in all of it. But beyond utilities, the company sees itself as a technology solutions provider, specializing in energy efficiency and it’s betting the future on it. The company is also planning to focus on growing exports from Egypt now that it had reached a settlement with the government on overdue subsidies. That’s the vision laid out for us by the company’s regional president for Egypt, North East Africa and the Levant, Walid Sheta, in the latest installment in our Coffee With… series.

Who is Walid Sheta? Sheta’s 25-year career at Schneider Electric has seen him work across Africa, the UAE, France and others. Sheta was regional president of the West Africa region which comprises of Nigeria, Ghana, Sierra Leone and Liberia, following a stint as the company’s vice president for all of Africa.

Is Schneider Electric getting into the VC game? One of the surprising takeaways from the sit-down was Sheta’s announcement that Schneider Electric is setting up a venture capital fund that will target startups whose focus will be on the digital economy and energy efficiency. He added that some of the startups that the company is targeting will be based in Egypt. As we noted yesterday, Middle East and Africa President Caspar Herzberg said that the company is mulling the acquisition of a number of Egyptian tech companies.

Other key takeaways from the interview include:

• Egypt is the anchor for Schneider Electric’s growth in the region, and is at the center of its global transformation strategy;
• Expanding its staff of digitally-literate engineers is the focus of the company’s investment plans this year;
• Schneider Electric anticipates growth in sales in hospitality (and away from traditional oil and gas) as tourism continues to rebound;
• Bureaucracy and red tape continue to be the biggest operating challenge in Egypt;
• The government’s continued focus on electricity power generation with Dabaa despite a surplus is key to ensure supply meets the demands of our birth rates;
• Government taking a step back in infrastructure development and allowing the private sector a bigger role is the most exciting trend happening in infrastructure today.

Enterprise: Can you tell us what the company is focusing on in Egypt? Where does the country fit into its global strategy?

Walid Sheta: Globally, Schneider Electric has shifted its focus for the past 12 years towards energy efficiency and transitioning away from being a company focused on electrical distribution equipment and automation. We define ourselves now as a technology provider that makes energy safer, more efficient, more productive, and greener in all our markets. Globally, we’ve made 74 acquisitions worldwide, two of which were leaders in managing power grids. While we haven’t made any acquisitions for energy efficiency companies in Egypt as of yet, we see it as a prime market for this focus, considering its 100 mn population, its growing consumption rate, and the need to maximize our energy efficiency.

Egypt is also crucial for us in the next step in the company’s global transformation: The move to digital and digitization. We want to become digital technology providers. From a tech point of view, this is very easy to do in Egypt right now. The Egyptian population is extremely digitized and connected. Moving forward, a key focus of ours for Egypt is to train the electricians to adapt to this changing landscape. We’re teaching them how to install electrical equipment in your house, or in electrical distribution boards — a black box that, through the Cloud, can connect you through an app. We believe that transformation is taking place in Egypt in this sector.

E: How does that translate vis-à-vis your investments on the ground?

WS: This year, we’re ratcheting up our investment in people. We added 280 new people to our workforce of 1,600 employees here. Half of the new recruits are tech savvy engineers or white-collar professionals to service our two main lines of business. The first is the standard electricity consuming businesses and the other is the turnkey projects, for which you need a lot of talented project and contract managers, engineers, and others with technical expertise.

This investment in our people is driving our regional expansion plans as we intend to boost our staff of engineers to be able to carry on projects all over Africa. These will likely be major projects that will employ a lot of Egyptians. We also export from our EUR 210 mn Badr City factory which produces low- and medium-voltage distribution equipment. We recently spent approximately EUR 10 mn on increasing capacity for the plant.

E: So in numbers, how much did you invest this year?

WS: In 2018, we invested around EUR 35 mn. It would be slightly less this year.

E: You mentioned earlier that Egypt was a regional success story for Schneider Electric. How does it compare in terms of growth to other countries in the region? Where does Egypt rank?

WS: In 2019, Egypt is spearheading regional growth both in value and percentage all over the Middle East and Africa. This includes Saudi Arabia and the GCC, Turkey, South Africa, Nigeria. This has been the case in 2017, 2018, and is continuing in 2019 where we had consistent double-digit growth. And this spike in growth has been seen in all sectors, including in water and waste-water, utilities, and transportation infrastructure. We’re continuing to supply the electrical equipment that has made the Cairo Metro Line 1 run since the 1990s. Business is also growing in sectors outside of infrastructure. We supply the electrical distribution switchgears for the Zohr gas field. We even supply electrical equipment to important cultural heritage projects like Bibliotheca Alexandrina.

E: Which megaprojects are you guys working on currently?

WS: A big focus for us is working with the Electricity Ministry on the dispatch control centers for the electricity grid. President Abdel Fattah El Sisi has made developing the grid’s distribution capabilities and their required dispatch control centers a national priority. We’ve been tasked with automating and making the grid “smarter.”

We’re also working on supplying the electrical infrastructure works on new cities currently being constructed, including in the new administrative capital. We’re currently advising on making the new capital a smart city and how it can be done in a sustainable, energy-efficient way.

Tap or click here to read the rest of the interview.

Environmental photographer of the year 2019 chronicles damage of rising sea levels: India’s SL Shanth Kumar was announced as the Chartered Institution of Water and Environmental Management’s (CIWEM) environmental photographer of the year 2019, at this week’s UN climate summit in New York. Kumar’s prize winning photograph, High Tide Enters Home, shows houses being battered by floods in Mumbai. Like Alexandria, and an increasing number of cities around the world, Mumbai is threatened by rising sea levels and coastal flooding as a result of climate change. CIWEM is a charity that seeks to build a global community of water and environmental professionals working for the public good. You can view a selection of the winning photographs here.

The foreign press is delving deep into Egyptian whistleblower, Mohamed Ali, following protests this past weekend widely linked to his viral allegations of misuse of public funds by the government. Ali touched a sore spot for the Egyptian population as many fall under the poverty line, several outlets suggest: The Economist, the Financial Times, Deutsche Welle, and the Guardian all have the story.

Open Democracy goes one step further, using data to suggest that many Egyptians continue to suffer under precarity, despite the positive macro indicators that have so many economists excited. Meanwhile, the Working Group on Egypt, which describes itself as “a bipartisan group of foreign affairs experts formed in 2010,” is calling on US officials to “clearly state … support for peaceful protests in Egypt.”

Trump’s name is also being thrown into the mix after he dismissed the protests and praised El Sisi as a great leader during their meeting at the United Nations General Assembly in New York. Bloomberg questions Trump for not asking El Sisi about the allegations after Trump specifically defended his right to ask foreign leaders about corruption. Meanwhile, the Jerusalem Post contemplates whether Trump’s support of El Sisi might egg protestors on.

In a reminder that there are other things going on in Egypt:

• The touchy subject of female pastors: Al Monitor asks whether female pastors will ever become a thing in Egypt, after Cairo-born Gihan Farag returned to Egypt this summer having become a priest in the United Church of Christ in Texas.
• Egypt retrieves looted coffin from New York: A gilded Pharaonic coffin that has been exhibited at the Metropolitan Museum of Art in New York is making its way back to Egypt on account of being “looted antiquity,” reports the AP.

Annexing the West Bank would significantly impact Israel’s relationships with Egypt and Jordan, says King Abdullah: Israeli Prime Minister Benjamin Netanyahu’s campaign pledge to annex the West Bank would have a major impact on its relationships with Egypt and Jordan — the only two countries in the region with whom it has signed peace treaties — Jordan’s King Abdullah II told MSNBC (watch, runtime: 08:53). Abdullah stressed that a two-state solution was the only solution to the conflict, and that an “apartheid Israel” with one rule for Jews and another for Muslims and Christians, would add fuel to an already incendiary situation in the region.

Erdogan’s UN speech provokes strong condemnation from Egypt: The Foreign Ministry issued a statement yesterday strongly condemning comments made by Turkish President Recep Tayyip Erdogan in a speech to the UN General Assembly on Tuesday, in which he claimed that President Abdel Fattah El Sisi came to power in a coup. Ministry spokesman Ahmed Hafez rebuked Erdogan for domestic human rights violations and his sponsorship of terrorism abroad.

Telecom startup Raseedi aims to attract USD 1.5 mn in investments in 2020 to expand into new markets and reach 1 mn users, co-founder Samuel Samy told the local press. Raseedi expects to launch new services by the end of this year, including caller ID, and plans to extend its business to Nigeria within the coming two years. Launched at the beginning of this year, the Egypt-based app aims to help mobile users get the best value for the calls they make.

Cheese producer Domty has signed a medium-term, EGP 100 mn loan with the CIB to fund future expansion plans, including the launch of new products, the company said in an EGX disclosure (pdf). The company agreed to repay the bank within 75 months from the date of the first withdrawal.

The SME Development Authority has signed contracts with six governorates for infrastructure projects that will be financed through a two-year EUR 15 mn European Investment Bank grant signed last year, the authority’s head of human and social development sector, Mohamed Massoud, told MENA news agency. The project aims to improve the business environment for SMEs, and will be implemented in Assiut, Menoufia, Alexandria, Port Said, Sharqia and Giza at the beginning of next year. The rest of the EUR 15 mn grant will be disbursed in 2021, Massoud said.

New WEF program to improve women’s participation in Egyptian economy: The World Economic Forum is launching its “Closing the Gender Gap Accelerator” in Egypt, an initiative to support boost women’s role in the economy, it said in a statement. The three-year initiative aims to increase participation in the job market, including in leadership positions, and push for equal pay. Egypt is the ninth government to adopt the initiative and the first in the MENA region. Al Ahram reported that the initiative will be run by the Tourism Ministry alongside the National Council for Women, noting that a letter of intent was inked earlier this week on the sidelines of the Sustainable Development Impact Summit in New York.