EnterprisePM — Foreign investment in Egypt’s debt may have taken a hit in March

After a slow morning, we’re getting a flood of stories running the gamut of investment, to Egypt macro trends to covid, to plane hijacking (you heard right).

THE BIG POSITIVE STORY TODAY- Ittihadiya health advisor Mohamed Tag Eldin believes covid numbers should start to come down next week, suggesting that the dreaded third wave has peaked. Official infection and death numbers appear to back his assertion. This comes as the Health Ministry wants to shorten vaccination wait times. We have more in the Speed Round below.

THE BIG MACRO STORY TO WATCH OUT FOR- Rising US yields appear to have hit us hard in March, with the net foreign assets drop of 13.7% m-o-m in March to USD 17.70 bn we noted this morning suggesting a decline in ne portfolio investments for that month, analysts we spoke with told us today. We give their two cents on the decline in the Speed Round below.

** CATCH UP QUICK on the other top stories from today’s EnterpriseAM:

• It’s budget week in the House: The House of Representatives will be holding hearings this week on the allocations of government agencies in the FY2021-2022 budget.
• But there’s still time for fintech: The House CIT Committee gave a preliminary nod yesterday to a draft law that would govern the fintech space.
• Ever Given drama continues: The SCA has again lowered its compensation demands for the Ever Given’s blockage of the Suez Canal.

Regional diplomacy paying back dividends (or gas shipments, rather): Israeli gas exports to Egypt resumed after having gone on pause due to the Hamas-Israel conflict in Gaza, Delek Drilling — a partner on the Eastern Mediterranean Gas (EMG) pipeline between Arish and Ashkelon — said yesterday, according to S&P Global. Flows through the EMG pipeline, which has a section offshore Gaza, were restarted after an Egypt-brokered ceasefire agreement between both sides took effect over the weekend, ending the violence that began on 10 May. The escalation saw energy company Chevron temporarily halt operations at Israeli offshore field Tamar that supplies some gas to Egypt after reports claimed Hamas is targeting offshore gas installations.

Meanwhile, US Secretary of State Antony Blinken will visit Egypt in the coming days as part of a peacebuilding trip to the Middle East to build on the Israel-Gaza ceasefire, according to a statement by the US State Department. Blinken will visit Jerusalem and Ramallah first before heading to Cairo and finishing off with Amman, Jordan. Meetings have been scheduled for Blinken to sit down with President Abdel Fattah El Sisi and Foreign Minister Sameh Shoukry.

The post-ceasefire meetings have already begun with Shoukry visiting both Ramallah and Amman today. Shoukry met with his Jordanian counterpart Ayman Safadi earlier today to discuss the Palestine-Israel conflict before heading to Ramallah where he sat down with Palestinian President Mahmoud Abbas and pressed the two-state solution and promised that aid would be delivered.

And while we’re on US diplomacy, Ethiopia could be getting some smoke: The Biden administration is imposing visa restrictions against Ethiopian and Eritrean officials It holds these officials responsible for taking “no meaningful steps to end hostilities” and undermining the peace process in the ongoing conflict in Ethiopia’s Tigray, Secretary of State Antony Blinken said yesterday in a statement. Further punitive measures might follow should the international community continue to not take action in the conflict that has sparked allegations of ethnic cleansing and fears of famine. This came after Ethiopia moved for the first time on Friday to accuse Eritrean troops of killing 110 civilians during last November’s massacre in the troubled Tigray region.

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THE BIG STORY ABROAD- Belarus’s hijacking of a RyanAir plane by the Belarus government is topping coverage in the foreign press. A Belarusian fighter jet forced the RyanAir flight (which had 120 passengers on board) to divert to their capital city Minsk where authorities quickly came and took Roman Protasevich, a dissident journalist on the plane, according to CNBC. The original flight path should have seen it travel from Greece to Lithuania. The Belarusian Foreign Ministry has since said that the West is jumping to conclusions and the situation “deliberately politicized.”

The European Union is not taking the stunt lightly, currently deliberating sanctions against Belarus over their crackdown on freedom of speech as well as the breach of international aviation rules. The sanctions could range from banning Belarus’s national carrier from landing at EU airports, declaring the country’s airspace unsafe, or imposing sanctions on individuals such as travel bans and asset freezes. Picking up the story are : The Financial Times | Reuters | BBC | Axios

The whole thing is flashbacks of the Great Egyptian Love-jacking of 2016, proving that in addition to being terrible at silencing the political opposition, hijacking a plane out of love is not an effective way to earn your ex’s heart back.

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???? CIRCLE YOUR CALENDAR-

Day two of the British Egyptian Business Association’s (BEBA) Healthcare Virtual Week, is this Wednesday. The session will offer solutions on how to digitalize Egypt’s healthcare industry. The event starts at 12pm and you can register here.

BEBA will also hold a virtual conversation with Oil Minister Tarek El Molla on 7 June to discuss the sector’s achievements. You can register through this link.

The El Gouna International Squash Open 2021 is ongoing and runs until Friday. Fans will be allowed to enter the stands, with the first few match days without charge and tickets to be sold for the semis and finals. You can also watch the matches live on PSA Squash YouTube page. The event is supported by our good friends at CIB.

Meanwhile, the CIB PSA World Tour Finals will run on 22-27 June in Cairo.

Bibliotheca Alexandria is organizing a webinar to discuss safekeeping artifacts and heritage this Thursday. Headlined “Fighting treasure hunting from Africa for the Americas: Protecting the history of the drowning world,” it will feature University of Edinburgh’s Arturo Rey da Silva. You can tune in live at 2:30pm from the Alexandria Center for Hellenistic Studies’ Facebook page.

???? FOR YOUR COMMUTE-

Is Europe hosting the SPACs afterparty? As special purpose acquisition companies are falling out of favor in the US, its sponsors are turning their gaze to Europe, Alex Webb writes for Bloomberg Businessweek. Those SPAC investors appear to be headed to Europe (particularly Amsterdam), where the number of listings grew between February and April. This time, however, SPAC backers appear to be conscious of past mistakes, especially when it comes to affording more investor protection and less oversized payouts to sponsors, Webb adds.

BTC is continuing its spiral downwards, after crypto miners were forced to halt operations in China after Beijing intensified its crackdown on BTC mining and trading, writes Reuters. Companies such as Huobi, HashCow, and BTC.TOP have suspended some or all services to clients in Mainland China, with Huobi saying it would focus its efforts abroad. China has cited fending off financial risks and mining using up energy and carbon neutrality goals as reasons for the country’s sudden aversion to crypto. However, the move has hit global crypto and stock markets, especially seeing as China is estimated to account for as much as 70% of the global crypto supply. BTC picked up a bit around dispatch, floating at about USD 38k.

???? ON THE TUBE TONIGHT-

Fast and Furious 9 (if you’re into that sort of thing) is currently in cinemas nationwide. Featuring bulked up lead duo John Cena and Vin Diesel, the franchise has decided to leave Earth’s racetracks and city streets to cut each other off in space (insert mega-eyeroll here). The possible last movie in the franchise tries to give each character a backstory, giving the film a ‘looking back’ kind of feel. It’s not the best, but it's a good goodbye and salute to the characters that have been a part of the fans’ lives (certainly not ours) for the past 20 years. Variety and Indie Wire have chimed in with their opinions.

⚽ With Premier League and Serie A coming to an end yesterday, it might be time to tune back into local leagues. El Zamalek is playing Al Masry tonight at 9pm in the Egyptian Premier League and you can also check out the earlier 7pm match featuring Ismaily and Misr Lel Makkasa.

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The age-old myth of an altruistic Wall Street explored: How to hold onto ethics while working in the global finance scene is the main theme of Jean-Christophe de Swaan’s new book Seeking Virtue in Finance. The Princeton University professor acknowledges all the corruption that goes on in Wall Street and how the steep financial incentives are quick to tempt people to go rogue, but De Swaan poses an alternative way to ride up the ladder. He poses a framework to be successful at investing while also benefiting society and upholding humanistic values by giving examples of firms and people in the sector who have prioritized social values. The Financial Times says the book could help graduating finance students be “less vulnerable to being tainted after reading this”.

???? TOMORROW’S WEATHER- Expect daytime highs of 37°C tomorrow, with the mercury falling to 21°C at night, according to our favorite weather app.

EXCLUSIVE- Foreign investment in local treasury bonds and bills may have dipped in March after having hit a record high in February, say analysts and capital market experts we spoke to. Recent CBE figures revealed a 13.7% m-o-m drop in the net foreign assets (NFAs) in Egypt’s banking sector to USD 17.70 bn, and this is directly related to foreign portfolio investments (FPI), they tell us. FPI had reached a record high of USD 28.50 bn at the end of February, climbing back above pre-covid levels following a 60% drop between March and May last year due a covid-19 sell off.

This shouldn’t come as a surprise since some volatility was expected, especially after the uptick in US treasury yields that began earlier this year translated into higher borrowing costs and made debt investments in emerging markets less attractive, CI Capital senior economist Sara Saada tells us. Another reason Saada’s firm had penciled net portfolio outflows in March is that the demand for imports into Egypt and hard currency was elevated as we headed into Ramadan, which meant there was less of a cushion to mitigate the outflows.

Recent monetary tightening in EMs may have also played a role, HC Securities’ Monette Doss, meanwhile, said. EM central bankers across 37 emerging markets delivered five net interest rate hikes in March, shifting away from an easing cycle, primarily because of the rising US treasury yields and expectations of upward pressure on inflation globally.

But it’s likely only seasonal: The drop was a direct reaction to rising US treasury yields, and it only resulted in volatility, not a sell-off, Saada said. While there were likely outflows in March in response to the increase in the 10-year US treasury yield, inflation concerns, and signs the Fed may hike policy rates sooner than expected, the fall in FPI was a temporary market reaction and not a trend, a senior banker who spoke to us on the condition of anonymity said. We could also see some FPI reflected in April figures, but to a lesser extent than in March, and this should begin reversing in May, they said, adding that FPI is in line for a leg-up further into 2021, when Egyptian bonds become “Euroclearable” and are reincluded on the JPMorgan bond index.

We’re yet to see the latest figures for FPI: Numbers for March and April haven’t been announced, neither through the central bank nor the official government sources that are usually quoted by the local press. We reached out to the central bank for comments on the story but did not receive a reply as of dispatch time.

Good thing US yields are heading in the opposite direction now: US treasury yields have largely been stable since the start of May. The yield on the 10-year note fell slightly this morning to 1.617%, and it has been holding close to this level (which is considerably lower than a 14-month high of 1.776% reached on 30 March) since the start of the month.

Egypt-based PickAlbatros Hotels has obtained USD 23 mn worth of mezzanine loan from South African fund manager Vantage Capital, according to a joint statement (pdf). The hotel owner and operator will use the financing to fund its working capital and renovate five hotels it recently acquired.

The funding transaction marks Vantage’s “inaugural investment” into Egypt, Vantage Managing Partner Warren van der Merwe said. The Egyptian hotel group has been reportedly in talks with Vantage since last January for a USD 40 mn convertible loan to finance three planned hotels.

This is also one of the largest mezzanine transactions by a foreign investor in the Egyptian tourism industry, a source close to the transaction told us.

Promising performance despite covid-19: PickAlbatros Hotels has seen a “resilient performance” in recent months despite the covid-19 implications on the hospitality sector, David Kornik, a partner at Vantage Capital, said in the statement. The hotel group’s long-term growth potential seems to be "firmly intact," he added

Advisors: Zilla Capital acted as the financial advisor to PickAlbatros, while Matouk Bassiouny & Hennawy and South Africa's Werksmans were assigned as legal counsel.

Egypt retains its position as the most attractive outsourcing and offshore operations in the MENA, ranking 15th in global management consultancy AT Kearney’s Global Services Location Index 2021. Egypt was also the only MENA country to make it to the top 20 of the index, with UAE ranking 25th and Turkey 26th, according to a report (pdf). While retaining the top MENA spot, Egypt did fall one spot down from 14th a year earlier. The index, which looks at the viability of some 60 countries as outsourcing destinations, analyzes 47 metrics across four main categories: financial attractiveness, people skills and availability, business environment, and digital resonance.

Egypt is seen as a financially luring outsourcing destination for multinational services companies thanks to its low compensation and infrastructure costs as well as solid entrepreneurial environment, the report noted, highlighting the “public sector willing to make strategic investments.” The government is boosting its “Digital Egypt” initiative, which has attracted Ericsson to establish a digital hub in Cairo to manufacture cognitive software for global markets, the report notes.

UAE-based service marketplace Rizek is planning to expand into Egypt and Saudi Arabia “in the coming months'' after raising USD 10 mn in a series A funding round led by Abu Dhabi wealth fund ADQ and US-based financial investment company Peak Investments, according to The National. The investment, which “a number of [unnamed] family offices from the UAE and Saudi Arabia'' also helped raise, brings Rizek’s total VC financing secured to date to over USD 15 mn. The timeline for the expansion into the Egyptian market was not specified.

About Rizek: Established in February 2020, Rizek is deemed the UAE’s first local “super app” (think WeChat) for on-demand services, providing consumers with access to many third-party mobile apps that offer under one umbrella a raft of one-stop-shop home services, including home cleaning, covid-19 pcr swabs, maintenance, automotive, and other at-home services. In June 2020, the startup raised USD 3.5 mn in a seed funding round from Abu Dhabi Investment Office (ADIO), E-Tech Investments, Rozana Investments, and some other stakeholders — the largest seed round ever to be raised in the MENA region.

CATCH UP QUICK-

• Real estate firm Inertia Egypt has partnered with valU and PayTabs Egypt to allow clients to process payments online for home improvement financing, according to a press release (pdf). This includes property finishing, furnishing, maintenance, and unit reservation in an agreement that aims to utilize digital solutions for the real estate sector.

Are we past the covid third wave danger zone? Covid-19 cases are likely to start declining as of next week, Ittihadiya health advisor Mohamed Tag Eldin said in a phone interview with Extra News (watch, runtime 13:40). The advisor also expected a higher recovery rate, which reportedly stands at 73.6% in isolation hospitals. The Health Ministry already announced yesterday a decline in new covid-19 infections to 1,145 from 1,151 the day before, while new deaths also went down to 51 from 59 a day earlier.

Measures to curb overcrowding at vaccination centers: Meanwhile, the Health Ministry is triaging those in short waiting lists for jabs to other medical centers in a bid to speed up the vaccination process and reduce the waiting lists, an unnamed ministry source tells Masrawy. The ministry has also rolled out a new service that allows those registered for the vaccine to know which vaccination center is less crowded, another source at the ministry said.

We have some 4 mn people who have registered to take the vaccine thus far, up from the 3.5 mn recorded last week, the source added. The ministry has been developing its automated registration system to fasten the process of giving vaccination appointments.

IN GLOBAL COVID NEWS- The European Commission is taking Astrazeneca to court on Wednesday over late covid-19 vaccine deliveries, with hopes that the legal battle will force the pharma company to make an immediate delivery of an additional 90 mn jabs, according to The Associated Press. Astrazeneca’s contract with the commission should have seen an initial 300 mn doses sent for distribution among all 27 countries in 2021, with an option for a further 100 mn. However, only 30 mn shots were sent during the first quarter and while Astrazeneca has since upped deliveries, the target is far from being reached. The Anglo-Swedish pharma company has argued that vaccines are difficult to manufacture and it made its best effort to deliver on time.

Testing for covid is just a stinky breath away: Singapore has approved a breath test that detects covid-19 and gives accurate results within one minute, reports Bloomberg. The test was created by National University of Singapore spinoff startup Breathonix and will be used to screen incoming travelers from Malaysia. If the breath test comes out positive, the patient will be referred to do a PCR swab test. The potential adoption of the new technology proves successful could help unlock the travel sector and allow for quicker detection and quarantine of infected individuals, the news agency notes.

China, meanwhile, is not happy that we’re talking about the lab origin hypothesis, again: China has denied a US intelligence report claiming researchers from the Wuhan Institute of Virology becoming sick in November 2019, Bloomberg reports. The US report’s findings fuel an earlier theory that covid-19 may have originated in a lab in Wuhan. “The report that you mentioned about three people getting sick, that is not true,” Foreign Ministry Spokesman Zhao Lijian said at a briefing in response to a Wall Street Journal report, accusing the US of "hyping the lab-leak theory."

???? Now we’re just being petty: China believes that the virus could have originated in a US lab at a military base in Maryland, with Zhao highlighting a "suspicion about the activities at Fort Detrick and the more than 200 biolabs run by the U.S."

Trading of Egyptian Iron and Steel shares will be suspended as of tomorrow, pending approval from the EGX listing committee on the listing of shares of its mining spinoff on EGX, the company said in a bourse filing (pdf) this morning. The Financial Regulatory Authority (FRA) gave on Thursday the all-clear for the new company’s registration and trading on the EGX, which comes as part of Egyptian Iron and Steel’s two-year liquidation process that includes spinning off its mining operations into Iron and Steel for Mines and Quarries. A date to when the new company’s shares will be listed is yet to be announced.

MARKET ROUNDUP-

The EGX30 fell 0.47% at today’s close on turnover of EGP 1.75 bn (27.7% above the 90-day average). Local investors were net sellers. The index is down 0.78% YTD.

In the green: ElSewedy Electric (+1.7%), Eastern Company (+0.5%) and CIB (+0.3%).

In the red: Pioneers Holding (-3.0%), AMOC (-2.9%) and Qalaa Holdings (-2.8%).

Responsible and ethical investors are going long on EMs: Investors with environmental, social, and governance (ESG) mandates are turning to emerging markets, which have traditionally been slow on the uptake of green investments, Bloomberg says. With slightly higher yields than developed markets and “without too much risk-taking,” emerging markets are fund managers’ new go-to for cheaper assets that, in the long term, will meet ESG goals. “Money managers who have already spent time digging around for sustainable investments in emerging markets say ESG is definitely gaining a foothold, but from a rocky beginning,” the business information service says.

Who’s in? Europe’s Nordea Asset Management has earmarked about a fifth of its newly-launched green bond fund to emerging markets, says Thede Ruest, head of emerging debt markets at Nordea’s investment management unit in Copenhagen. And the Evli Emerging Frontier Fund — a Nordic fund management company owned by Finland’s Evli Bank — has a portfolio (pdf) of around EUR 146.5 mn and is also particularly focused on assessing “unquantifiable good governance factors and compliance with the principles of the UN Global Compact” when making its investments.

Greenwashing is always a concern — but that risk is less present in EMs, where companies are “under less pressure to disclose ESG metrics,” meaning they’re unlikely to claim a green reputation if it’s not really there. The risk of greenwashing is a serious red flag for investors as a global explosion in ESG- and sustainability-related assets has been met with an uptick in misleading ESG credentials.

One strategy some investors swear by: Look to invest in companies that are making progress on their ESG credentials, rather than those that are opting for “established names” that seem to be as green as they come at first glance. On the financial side, these lower-profile companies are likely to be cheaper to invest in, seeing as companies with “stellar ESG reputations” tend to be expensive and over-investing in them could add to the risk of an ESG bubble. And on the, you know, sustainability side, investing in companies that are still working on getting their ESG ducks in a row is more beneficial to long-term sustainability goals. “Investing only in companies that have high ESG standards doesn’t fix problems,” one pundit says.

The bottom line: Locking down the perfect ESG shot in EMs is no easy feat, so do your homework. Investors need to do thorough research on any investment, but that necessity becomes increasingly important when hitting up emerging markets — not least because these markets typically tend to struggle with transparency.

20-28 May (Thursday-Friday): Gouna International Squash Open 2021.

24-26 May (Monday-Wednesday): British Egyptian Business Association virtual healthcare week.

26 May (Wednesday): Final day for Africa-based startups to apply for the French government-sponsored AFD Digital Challenge (pdf).

27-29 May (Thursday-Saturday): Informa Markets’ Nextmove real estate exhibition, Cairo International Convention Center, Nasr City.

30 May (Sunday): Al Mal GTM is organizing the Portfolio Egypt conference under the theme ‘Growth under the weight of the pandemic.’

31 May (Monday): Egypt is hosting Trescon Global’s World AI Show with the support of ITIDA.

7 June (Monday): British Egyptian Business Association hosts event featuring Oil Minister Tarek El Molla.

14 June (Monday): The third edition of Egypt's Green Economy Forum.

17 June (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

17-20 June (Thursday-Sunday) : The International Exhibition of Materials and Technologies for Finishing and Construction (Turnkey Expo), Cairo International Conference Center.

22-27 June (Tuesday-Sunday): The CIB PSA World Tour Finals for 2020-2021 will take place in Cairo.

24 June (Thursday): End of the 2020-2021 academic year (public schools).

26-29 June (Saturday-Tuesday): The Big 5 Construct Egypt, Cairo International Convention Center, Cairo, Egypt.

30 June (Wednesday): The IMF will complete a second review of targets set under the USD 5.2 bn standby loan approved in June 2020 (proposed date).

30 June (Wednesday): 30 June Revolution Day.

30 June- 15 July: National Book Fair.

July + August: Thanaweya Amma exams take place.

1 July: (Thursday): National holiday in observance of 30 June Revolution.

1 July (Thursday): Large taxpayers that have not yet signed on on to the e-invoicing platform will suffer a host of penalties, including removal from large taxpayer classification, losing access to government services and business, and losing subsidies.

1 July (Thursday): Businesses importing goods at seaports will need to file shipping documents and cargo data digitally to the Advance Cargo Information (ACI) system.

15 June (Saturday): EGX-listed will have to complete filing their financial disclosures for the period ended 31 March.

19 July (Monday): Arafat Day (national holiday).

20-23 July (Tuesday-Friday): Eid Al Adha (national holiday).

23 July (Friday): Revolution Day (national holiday).

5 August (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

9 August (Monday): Islamic New Year.

12 August (Thursday): National holiday in observance of the Islamic New Year.

12-15 September (Sunday-Wednesday): Sahara Expo: the 33rd International Agricultural Exhibition for Africa and the Middle East.

16 September (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

30 September-2 October (Thursday-Saturday): Egypt Projects 2021 expo, Egypt International Exhibition Center, Cairo, Egypt.

30 September-8 October (Thursday-Friday): The Cairo International Fair, Cairo International Conference Center, Cairo, Egypt.

1 October (Friday): Expo 2020 Dubai opens.

6 October (Wednesday): Armed Forces Day.

7 October (Thursday): National holiday in observance of Armed Forces Day.

12-14 October (Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

18 October (Monday): Prophet’s Birthday.

21 October (Thursday): National holiday in observance of the Prophet’s Birthday.

28 October (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

1-3 November (Monday-Wednesday): Egypt Energy exhibition on power and renewable energy, Egypt International Exhibition Center, Cairo, Egypt.

1-12 November (Monday-Friday): 2021 United Nations Climate Change Conference (COP26), Glasgow, United Kingdom.

29 November-2 December (Monday-Thursday): Egypt Defense Expo.

13-17 December: United Nations Convention against Corruption, Sharm El Sheikh, Egypt.

16 December (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

14-16 February 2022 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

1H2022: The World Economic Forum annual meeting, location TBD.

May 2022: Investment in Logistics Conference, Cairo, Egypt.

27 June-3 July 2022 (Monday-Sunday): World University Squash Championships, New Giza.

**Note to readers: Some national holidays may appear twice above. Since 2020, Egypt has observed most mid-week holidays on Thursdays regardless of the day on which they fall and may also move those days to Sundays. We distinguish below between the actual holiday and its observance.