Good afternoon, ladies and gentlemen. Today’s issue was brought to you by the letter “i” for inflation, inflation, inflation.
THE BIG STORIES TODAY-
#1- Annual urban inflation continued its upward trend in September, hitting a 20-month high on the back of increasing food, healthcare and education costs, according to Capmas figures released this morning. Headline urban inflation saw a significant rise to 6.6% last month, up from 5.7% in August. This is the highest annual inflation rate since January 2020, when it recorded 7.2%. On a monthly basis, headline inflation rose by 1.1% following August’s 0.1% rise.
#2- The World Bank is more optimistic about Egypt’s GDP this FY: Egypt’s economy is expected to grow 5.0% in FY2021-2022, up from the 3.3% registered in FY2020-2021, according to the World Bank’s October 2021 MENA economic update (pdf). The World Bank’s forecast marks an upward revision from its April economic update, when it said Egypt’s GDP would grow at a 4.5% clip during the current fiscal year.
The region’s GDP per capita is expected to inch up by a mere 1.1% — a rebound from the 5.4% contraction registered in 2020 and an upward revision from the 0.6% the World Bank had penciled in back in April.
#3- MIH could IPO in 2H2022: Misr Ins. Holding (MIH) is looking to offer 25% of its subsidiary Misr Life Ins. in an EGX IPO during the second half of 2022, depending on market conditions, MIH Chairman Basel El Hini told Al Mal. El Hini had previously said that the IPO would happen by the end of this year or early next year. Enterprise is currently trying to reach out to MIH or Misr Life Ins. to confirm the news.
^^We’ll cover these stories and more in tomorrow’s EnterpriseAM.
** CATCH UP QUICK on the top stories from today’s EnterpriseAM:
- Fuel prices are up by as much as 3.7%: The government’s fuel pricing committee raised the price at the nation’s pumps by EGP 0.25 on Friday as global oil and gas prices spike.
- Retail subscription period for e-Finance’s IPO kicks off: The subscription period for the retail offering of 1.61% of e-Finance (25.78 mn shares) will run until the close of the trading session on 17 October. The company could announce on Tuesday how it will price the offering.
- MPs are pushing back against the capital gains tax: House Planning and Budgeting Committee Secretary Abdelmoneim Emam has handed a briefing request to the house speaker in a bid to sway lawmakers away from reintroducing capital gains tax on the EGX with the argument that it would be tantamount to dual taxation.
THE BIG STORY ABROAD- As with Egypt, inflation continues to be the big worry abroad as continued supply chain disruptions are driving policy makers and analysts to conclude that inflation is set to continue. Bloomberg Economics is forecasting that central banks in Brazil, Norway, South Korea and New Zealand (who have all raised rates this year) will likely continue to do so well into 2022 as inflation is expected to linger on. High on the list of countries likely to raise rates is the UK, which is reeling from an energy crisis.
Some, including the Fed, could take the long view and simply not move at all. The US Fed might have its hands tied as it scrambles to fight high inflation, as tightening isn’t likely to help this time around, co-chief investment officer at Bridgewater Associates, the world’s largest hedge fund, told the Financial Times. “If there is inflation, the Fed is in a box because the tightening won’t really do much to reduce inflation unless they do a lot of it, because it is supply driven,” Prince told the salmon-colored paper. Excessive tightening isn’t the preferred route as it tends to drive down financial markets, he added. This means policymakers will be more likely to tolerate inflation.
In addition to supply chain worries, the Fed also has to contend with a sluggish growth in US jobs, which had lagged for the second consecutive month, according to the latest jobs report.
Let’s hope that’s the case as bond yields in the states are already on the rise: A more accommodative Fed is good news for our debt market. This time around, however, we’re yet to see how this plays out as ten-year US treasury yields have actually climbed up over the weekend and crossed the 1.6%-mark for the first time since June.
These concerns will likely impact how markets open tomorrow, as inflation and supply chain concerns have been wreaking havoc on markets last week with European and US equities closing in the red.
And earnings season might not save equities this time: Inflation, supply chain worries, shortages and the energy crisis are leading analysts to forecast weaker earnings this quarter, writes Bloomberg. Citigroup’s Global Earnings Revision Index is sliding dangerously close to negative territory, a steep plunge considering May of this year saw it rise to an all-time high. Meanwhile, Bloomberg Intelligence data is projecting S&P 500 firms’ earnings to climb 28% in the third quarter — down from 94% in the previous quarter, according to Bloomberg.
Strong earnings have rescued equities six times in a row, with stocks rising in response to companies’ strong results. “Almost all segments of the economy that are not pure service or pure technology driven will be struggling with supply-chain issues for a long time,” one investment firm head told Bloomberg.
Not even banks are immune from the earnings storm, the FT reports. Most Wall Street lenders are also facing a margins squeeze, having spent the summer raising wages as they fight each other for talent, and hiking tech costs as they fight the fintech sector for the future of banking.
But hey, there’s a silver lining as there’s some good news on the global chip shortage: The price of semiconductors raw materials, mainly silicon, is expected to fall as chip manufacturing hubs, including Malaysia, restart production, writes Bloomberg. In a sign that investors are seeing a light at the end of the tunnel for the chip shortage, chipmaking giants Samsung Electronics, Micron Technology, and Intel have seen their shares fall at least 20% compared to recent peaks while 12-month forward earnings estimates have also slumped.
ACWA Power shares will start trading on the Tadawul tomorrow: Trading on Saudi Arabia’s first USD 1 bn IPO since Aramco will begin tomorrow, according to a Tadawul bourse statement. The renewable energy giant, which is half-owned by the kingdom’s sovereign wealth fund, is set to raise USD 1.2 bn through an 11.1% stake offering. Last week’s institutional allocation was nearly 248x oversubscribed, as investors fought for a piece of what is seen as a crucial business in Saudi’s move away from oil, according to Bloomberg. The company has a significant presence in Egypt, including minority stakes in three plants in Benban, its 200 MW Kom Ombo solar power plant, and an upcoming project with the EETC to convert an electricity plant in Luxor to renewable energy.
The IMF and World Bank annual meetings kick off tomorrow: The gatherings run from Monday, 11 October to Sunday, 17 October. The odds are that embattled IMF chief Kristalina Georgieva will at least make it to the first day, though it might also be her last: Georgieva’s fate still hangs in the balance as the IMF continues its investigation of allegations that she pressured staff to manipulate data and make China look more business-friendly than it is in the World Bank’s now-defunct Doing Business rankings. Reuters reported that talks are ongoing today, with a decision on Georgieva’s future expected Monday at the earliest.
🗓 CIRCLE YOUR CALENDAR-
Conference season ratchets up this month, with a number of exhibitions and business events here and throughout the region taking place this week, including:
- The Turathna Exhibition kicked off yesterday at the Egypt International Exhibition Center and will run until Friday, 15 October.
- The two-day Mediterranean Offshore Conference will take place in Alexandria on Tuesday.
- Further down the road: The Middle East Angel Investment Network is hosting its Angel Oasis in El Gouna on 27-29 October, with separate pricing for in-person and virtual attendance.
PSA- We have another long weekend coming up — the Prophet Muhammad’s birthday falls on Monday, 18 October. We expect a three-day weekend starting Thursday, 21 October. Look for confirmation from the cabinet toward the end of this week.
Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.
☀️ TOMORROW’S WEATHER- We’ve been feeling lost while standing in front of our wardrobe these days: Our favorite weather app forecasts 34°C weather tomorrow, with nighttime lows of 21°C.