Tuesday, 24 August 2021

EnterprisePM — Sovereign sukuk sale coming in early 2022

TL;DR

WHAT WE’RE TRACKING TONIGHT

Good afternoon, nice people. We hope hump day has been kind to you all.

THE BIG STORY TODAY- The Finance Ministry could take its first sovereign sukuk issuance to market as soon as January. With the ink still drying on the Sovereign Sukuk Act, Finance Minister Mohamed Maait said his ministry will be on the road (virtually or otherwise) in the second half of the state’s current fiscal year. It’s an exciting development, and we have a look at what might be next in this afternoon’s Speed Round, below.

HAPPENING NOW- Uber has again raised its fares in Egypt, according to a notice (jpg) it sent to clients. In Cairo, the base fare for an UberX ride will go to EGP 8 from EGP 7.50 (+6.7%), with the fare per kilometer going up 7.0% EGP 3.05 from EGP 2.85. The app last changed its fares in May. The rate hike comes one month to the day after the government’s fuel pricing committee kicked the price of 92- and 95-octane petrol up 2.8%.

THE BIG STORY ABROAD- It’s still all Afghanistan, all the time in the pages of the international press this afternoon ahead of today’s emergency (virtual) G7 summit, during which leaders will try to agree on a common approach to the Taliban as the 31 August withdrawal deadline nears. It’s front-page news everywhere from Reuters and the AP to the New York Times and the BBC.

** CATCH UP QUICK on the top stories from this morning’s EnterpriseAM:

  • EKH plans to invest big: Egypt Kuwait Holding is looking to invest USD 500 mn over the next five years across at least six verticals.
  • Heka raises pre-seed funding: Egyptian health startup Heka has raised a seven-figure USD pre-seed funding round led by angel investor Mohamed El Khamissy.
  • Majid Al Futtaim to partner on tech outsourcing center: Majid Al Futtaim and ITIDA will construct a tech outsourcing center that will employ more than 600 tech workers.

🗓 CIRCLE YOUR CALENDAR-

It’s Jackson Hole week: The Federal Reserve Bank of Kansas City’s annual gathering of central bankers and policy makers at Jackson Hole will take place on Friday, 27 August. This is the second year in a row that the gathering will take place online. Look for signals coming out of the gathering that the Fed may start tapering off stimulus this fall.

Good vibes ahead of the gathering: Sentiment among traders was buoyed by good news on the US vaccination drive, a rebound in Chinese tech stocks, and hopes that the US Fed may think twice before starting to slow down on stimulus. Global oil prices, bond yields and equities were all up today, with all the major benchmark stock indices showing slight gains, while the USD was down against a basket of currencies, reflecting greater risk-on sentiment. Brent crude rose 1.2% to USD 69.50 a barrel after jumping 5% on Monday.

When will we hear something out of Jackson Hole? Fed boss Jay Powell is expected to speak on Friday afternoon our time.

In a strange reversal on recent trends, concerns about the delta variant may be bolstering markets this week, according to one analyst: “The rising covid cases and the soft data can only keep the Fed alert and reluctant to act prematurely. And that's all the market wants to hear.” That should also signal a warning about just how tricky it could be for markets to wean themselves off the massive US stimulus measures when tapering becomes unavoidable.

The Tokyo 2020 Paralympics will run through 5 September, with Egypt sending a 49-athlete-strong team to the games.

🚙 FOR YOUR COMMUTE-

When taxis fly: investors enticed by promises of the “next Tesla” have poured more than USD 4.3 bn into electric air taxi start-ups so far this year, the FT reports citing figures from McKinsey. SPACs, the new-ish investment vehicle making a splash in clean transport this year (including here in Egypt), joined VCs to build the hype. The catch: They still don’t have any actual flying taxis to show for it. “We are in a white-heat situation where you can float almost anything for bns. We have companies that don’t yet have a product selling the dream and raising bns,” one tech consultant told the salmon-colored paper. Things now seem to be calming down after an underwhelming New York listing for one firm and a valuation cut for another. But while some are cynical, others expect the low-flying taxis to course-correct. “You are getting a correction, but I am still optimistic this industry is something really different,” says the CEO of one small electric aviation start-up.

Dual-fuel vehicles aren’t just a thing in Egypt — Maersk is planning to do it on the high seas as part of its “decarbonization” drive: The world’s biggest container liner has ordered eight hybrid mega vessels that can run on either traditional fuel or “green” methanol. Each of the new ships costs USD 175 mn — 10-15% more than your standard massive tanker. The dual-fuel tankers are set to replace existing ships in Maersk’s fleet rather than build capacity, but they won’t be delivered by Hyundai Heavy Industries until 2024. With a 20-25 year life cycle, each of the new ships is key to the company’s net-zero emissions goal by 2050. But while Maersk’s “clear ambition” is to run the dual-fuel vessels only on carbon-neutral methanol, the company’s head of fleet told the FT that “we don’t yet know what will be the winning technology.” The new fuel has its downsides: It entails double the usual costs, and while Maersk is betting that traders will pay a premium for “green” transport, some critics have cast doubt on methanol’s environmental credentials.

Visa jumps on the NFT bandwagon: Visa has purchased “cryptopunk,” a digital avatar that works via non-fungible token (NFTs), for USD 150k in ethereum. NFTs let you have ownership of an “original” virtual items, without giving you copyright or other intellectual property rights to the artwork itself. (Think of an NFT like an old-school print from a classic film negative.) That means you cannot distribute or commercialize NFT-based items. According to CNBC, a number of big firms and media publications have been joining the NFT craze, including CNN, New York Times and Fortune magazine, as NFTs are becoming seen (in some quarters, if you squint really hard) as an integral part of the future of retail, social media, entertainment, and commerce.

📺 ON THE TUBE TONIGHT-
(all times CLT)

Zamalek could be crowned champions of the Egyptian Premier League tonight: The White Knights need a victory against relegation-threatened El Entag El Harby (kick off: at 9pm) to claim the trophy. Second-placed Al Ahly are still able to claim a 43rd league title, but with only two games remaining and a four-point gap to close, they’ll need to make sure they beat El Gouna tonight (kick off: also at 9pm) and hope that Zamalek drop points. Wadi Degla plays Ceramica Cleopatra in the early kick-off at 5:30pm.

Marlon mixes family-friendly comedy with relevant social commentary: The all-black-cast TV show follows internet personality Marlon, who is co-parenting his two young children with his ex-wife Ashley, who proves to be a saint as she puts up with his antics. Yvette, Ashley’s best friend, isn’t as understanding and is in a constant rivalry with Marlon and his bff, Stevie. The show depicts family, struggles, and growing up as Marlon often falls into stand-up comedy-like monologues. The show also explores racism, discrimination, and the black experience in the US in a way that keeps the show socially relevant.

🥩 EAT THIS TONIGHT-

Another hidden gem in Maadi: Zulu Restobar. Located not far from El Maadi Metro station, Zulu is well hidden — an unimposing sign is the only indication that this South African joint exists. Take a few steps down and you’ll find a restobar in the heart of Maadi that offers all the drinks you could ask for as well as a great selection of food options. Every wall at Zulu is covered with graffiti and paintings (we particularly appreciate the zebras). They also hold a ton of events every week such as karaoke nights, acoustic live music, and DJs. Go for their steaks, burgers or chicken strips, or just wind down with a beverage and enjoy the atmosphere.

🎤 OUT AND ABOUT-
(all times CLT)

Mohasseb / Heavy Pins is playing at Cairo Jazz Club 610 in Sheikh Zayed at 8pm: DJ Mohasseb and Heavy Pins will both be spinning their deep house and electronic music at CJC’s Tuesday Midweek Party.

💡 UNDER THE LAMPLIGHT-

The author of The Girl on the Train is back at it again: Paula Hawkins’ new thriller A Slow Fire Burning explores the themes of resentment and revenge and how good people are capable of both. When 23-year-old Daniel is found dead on a houseboat, three women are narrowed down as suspects by the police. Laura is a girl he briefly dated who suffers from mental and physical disabilities, Carla is his seemingly grief-stricken aunt, and Miriam is the nosy neighbor who is hiding something from the police. The novel explores the lives and experiences of the three women and how they could be involved in the murder as well as Daniel’s history and how it led him to his demise. A fitting title, the novel is a slow burn that leads to an ending that is nothing short of shocking.


☀️ TOMORROW’S WEATHER- Folks in Cairo can expect a high of 39°C during the day and 25°C at night, while Sahel is on course to see a daytime high of 32°C and 23°C at night, our favorite weather app tells us.

SPEED ROUND: ECONOMY

Sovereign sukuk sale coming in 2H FY2021-2022

Egypt is preparing to issue its first tranche of sovereign sukuk in the second half of FY 2021-2022, Finance Minister Mohamed Maait said in a statement today, less than a week after legislation allowing the government to sell the sharia-compliant bonds was signed into law. The ministry provided no further details on the timing, size or type of the planned issuance. Maait said in June that the ministry is considering a USD 2 bn sale but cautioned at the time that the exact size and timing of the issuance had not been finalized.

Returns and trading on the securities will be subject to the same tax rules as treasury bonds, Maait said, adding that the sukuk will be issued on both the local and international stock exchanges.

The news comes less than a week after the Sovereign Sukuk Act was signed into law, paving the way for the country’s maiden sovereign issuance of the sharia-compliant bonds. The bill sets up a regulatory framework allowing the state to issue a variety of sukuk in local and international debt markets.

Exec regs landing in November? The executive regulations for the legislation will be issued within the next three months, Maait said. The Financial Regulatory Authority (FRA) and Al Azhar are working with the ministry on the regulations, which when approved by the cabinet will set up a company to manage sukuk offerings and a regulatory body composed of legal, financial and religious experts to manage technical and legal issues. The ministry said earlier this year that it would begin working on the sale immediately after the regulations are published.

Issuing sovereign sukuk is part of a wider strategy to reduce government debt and shift towards longer-term borrowing. To diversify its debts, the ministry last year completed its maiden green bond issuance and is planning to sell new “floating rate” bonds, and is focusing on selling longer-term bonds to increase the average maturity.

SPEED ROUND: IPO WATCH

Mubasher Capital wants to IPO by 2025

Mubasher Capital Holding has ambitions to debut on the Egyptian Exchange in the next 3-5 years, Chairman Ehab Rashad told Enterprise this morning, confirming statements reported by Al Borsa (pdf).

But the details remain sketchy: Mubasher has not yet identified potential advisors for the listing, he said. Rashad provided no further details about the size or timing of the potential offering.

Mubasher to take over management of EGP 21 mn fund by mid-September: Mubasher Capital will take over the management of an Egyptian company that owns an equity and bond fund with almost EGP 21 mn in AUM in the first half of September, Rashad said, declining to provide the name of the company. It will gain full ownership of the company once the Financial Regulatory Authority gives a final approval, he added. Mubasher also plans to set up 10 investment funds in Egypt by the middle of the decade, launching one every quarter between 2022 and 2025.

ANALYST OF THE WEEK

Meet our analyst of the week: Naeem’s Hesham Hamdey

OUR ANALYST OF THE WEEK- Hesham Hamdey, research analyst at Naeem Holding for Investment (LinkedIn).

My name is Hesham Hamdey and I’m a research analyst at Naeem Holding for Investment. I have more than five years of experience, mainly in financial modeling, equity valuation, and economic analysis. I cover multiple sectors including telecoms and consumers (which has F&B and consumer durables under its umbrella) and recently started covering cement stocks as well. I also analyse economic indicators such as inflation in Egypt and its impact on investment.

The most interesting sector I cover is telecoms as I’m very interested in their NBFS and e-payments businesses. The sector has so much potential and I think it will begin to materialize more in the coming years. Financial inclusion is extremely important for economic growth. Given that a huge percentage of the population is unbanked, banks have excess liquidity that is being underutilized. NBFS has already greatly opened the financial services sector to the unbanked, but firms offering microfinance and installment plans have proved that there’s significant demand for these services as well.

The best part of my job is the knowledge I acquire. I’m aware of so many areas of the market and economy that I never would have imagined I would be engaged in. Every sector has its specifics and dynamics and it’s very interesting to have an overview on each one and how they interact with each other.

The worst part of my job is that I often can’t disconnect my mind from work. I’m always thinking about the news or what I still need to do. However, I enjoy my job a lot so I’m not too mad about it.

My theory of investment is to go for stocks that have a lot of movement. A lot of the time in the EGX, there isn’t much rationale between the fluctuations, but the fact that they’re there gives an investment a lot of potential. Nonetheless, this only works if the firm has good fundamentals and a strong outlook.

Something I look at before recommending an investment is the intensity of regulations in the sector and how much these impact businesses. It can really make a huge difference on future performance. The auto industry for example changes in fees, license requirements, regulations on two and three wheels, or even trends in natural gas and EVs all have a direct or indirect impact on auto stocks.

I don’t think 2021 will be the year of Egypt. Comparatively to other countries, we rode the wave pretty smoothly this year, but these weren’t the targets we had set for ourselves pre-covid. We were also hit by imported inflation on account of the commodities boom that is taking place globally. It’s worrisome since the central bank will have less room to cut interest rates in the coming period which will impact GDP growth. Our saving grace will probably be tourism as increased foreign currency inflows could help it lower yields on T-bills, which will in turn propel portfolio managers to reallocate parts of their portfolio to the EGX. Instead, I expect the recovery to continue picking up steam next year, setting us up for 2023, which could be the year for Egypt.

If I had to switch and cover another industry, I would choose banking. It’s extremely related to daily life and you can see its impacts almost immediately.

Given the chance, I don’t think I would switch careers. Becoming a financial analyst was my dream job from early on, so I’m quite pleased with where I’m at. At one point I was considering mechanical engineering, but that never manifested.

I don’t watch much TV, but my favorite movie is Interstellar. I go back to it time and time again and I don’t get bored. I also enjoyed the show Chernobyl. The last great thing I read is Possible Worlds: An Introduction to Logic and Its Philosophy.

When I’m not on the clock, I like to go out with friends, read, or go to the gym. These days though I’ve been studying a lot since I’m working to get my CFA.

GO WITH THE FLOW

Abu Qir net income up 30% in 2020-2021

Abu Qir Fertilizers’ net income rose 30% during FY2020-2021, clocking in at EGP 3.5 bn compared to EGP 2.7 bn the previous year, according to the company’s earnings release (pdf). The company attributed its performance to higher international prices and lower operational costs during the second half of the year. The company’s revenue rose 12% to EGP 8.8 bn from EGP 7.9 bn in FY 2019-2020. On a quarterly basis, the company’s net income almost doubled to EGP 1.1 bn in 4Q, while revenues were up 22% to EGP 2.5 bn.


MARKET WATCH-

The EGX30 rose 0.6% at today’s close on turnover of EGP 2.57 bn (45.5% above the 90-day average). Regional investors were net buyers. The index is up 1% YTD.

In the green: Egyptian Resorts Company (+10.0%), Ibnsina Pharma (+5.1%) and Pioneers Holding (+4.1%).

In the red: Orascom Development Egypt (-2.0%), AMOC (-1.7%) and Medinet Nasr Housing (-1.7%).

THE MACRO PICTURE

Commodities, strong earnings could resuscitate emerging-market stocks, say analysts

A “lost decade” for emerging-market stocks could be coming to an end, as the commodities boom and earnings optimism perk investors’ interest in companies in the developing world, Bloomberg reports. Goldman Sachs, Bank of America and Lazard Asset Management all expect inflows into undervalued EM equities to pick up as the vaccine rollout gains pace and the global recovery continues, despite headwinds in Asia caused by China’s escalating crackdown on business.

EM indexes have consistently underperformed since the financial crisis. MSCI’s EM stock index has increased just 8% in the 10 years since the global financial crisis — and is currently only slightly above its post-crisis market peak in 2011. In the same time, equities in developed markets have more than doubled in value. So far in 2021, the EM index is down 5%, while the benchmark for companies in developed economies has risen by 14%.

Goldman Sachs is “quite upbeat” on EM stocks, one analyst told Bloomberg, naming Brazilian, Russian and Mexican currencies as top picks. Meanwhile, a Bank of America strategist said he expected the acceleration of capital inflows into markets in Eastern Europe, the Middle East and Africa since March to continue “given supportive macro drivers and equity valuations.” Some analysts are predicting that emerging-market equities could gain 15% in the next 12 months.

EMs might need some time to deliver on their potential: Once vaccination rates pick up, one State Street analyst said he expects EM equities to outstrip EM debt and even catch up to developed-market equities. “Don’t discount the EM consumer when the pandemic’s grip on consumer activity fades,” he told Bloomberg, adding that technology would play a key role in boosting developing nations’ growth.

But others are more pessimistic: BlackRock has warned of a “risk of permanent scarring” to EM growth as a result of slow vaccination rates, a withdrawal of policy support and heightened uncertainty about the trajectory of the USD. Many central banks in emerging economies have begun raising interest rates in response to rising inflation, which BlackRock said brings a “greater risk of scarring.”

CALENDAR

24 August (Tuesday): MEED will hold a webinar named Energy Transition in the Middle East.

24 August-5 September (Tuesday- Sunday): Tokyo 2020 Paralympics

27 August (Friday): Jackson Hole Economic Symposium.

September: Delegation of Russian companies to visit Russian Industrial Zone.

1-3 September (Wednesday-Friday): Digi Sign Africa, Cairo International Convention Centre, Cairo, Egypt.

2 September (Thursday): The new EGX mechanism for calculating closing share prices will come into effect.

3-5 September (Friday-Sunday): The World Karate Federation will hold the third competition of the 2021 Karate 1-Premier League in Cairo.

5 September (Sunday): Paralympics closing ceremony, Tokyo

5-7 September (Sunday-Tuesday): The Arab Security Conference, The Nile Ritz-Carlton, Cairo, Egypt.

7-8 September (Tuesday-Wednesday): Euromoney Conferences will host the GlobalCapital Sustainable and Responsible Capital Markets Forum 2021, featuring Vice Minister of Finance Minister Ahmed Kouchouk.

7-9 September (Tuesday-Thursday): Egy Health Expo, Al Manara International Conference, Cairo, Egypt.

9 September (Thursday): DevOpsDays Cairo 2021 is being organized by ITIDA and the Software Engineering Competence Center in cooperation with DXC Technology, IBM Egypt and Orange Labs.

11-12 September (Saturday-Sunday): International Conferences on Economics and Social Sciences, Cairo

12 September (Sunday): International schools begin 2021-2022 academic year

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

13-21 September (Monday-Tuesday): 76th session of the general assembly, New York

15 September (Wednesday): The CFO Leadership & Strategy Summit is taking place in Egypt.

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

18 September (Saturday): Expiration of United Nations Investigative Team to Promote Accountability for Crimes Committed by Daesh/ISIL

21-22 September (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

22-25 September (Wednesday-Saturday): Cityscape Egypt, Egypt International Exhibition Center, Cairo, Egypt.

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.

30 September: Closing of 2021’s first oil and gas tender in the Gulf of Suez, Western Desert, and the Mediterranean.

October: New legislative session begins.

October: Romanian President Klaus Iohannis could visit Egypt in mid this month to discuss ways to boost tourism cooperation between the two countries.

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

1 October (Friday): Expo 2020 Dubai opens.

1 October (Friday): State-owned companies and government service bodies selling goods and services to customers that have not yet signed 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.

6 October (Wednesday): Armed Forces Day.

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

9 October (Saturday): Public schools begin 2021-2022 academic year

11-17 October (Monday-Sunday): IMF + World Bank Annual Meetings.

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.

24-28 October (Sunday-Thursday) Cairo Water Week, Cairo, Egypt.

27-28 October (Wednesday-Thursday) Intelligent Cities Exhibition & Conference, Royal Maxim Palace Kempinski, Cairo, Egypt.

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

30 October – 4 November (Saturday-Thursday): The first edition of Race The Legends, Egypt.

31 October – 12 November (Sunday-Friday): The 26th UN Climate Change Conference, Glasgow, UK.

November: The French-Egyptian Business Forum is set to take place in the Suez Canal Economic Zone.

November: Egypt will host another round of talks to reach a potential Egyptian-Eurasian trade agreement, which can significantly contribute to increasing the volume of Egyptian exports to the Russia-led bloc that includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

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

2-3 November (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

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

16-17 November 2021 (Tuesday-Wednesday): Africa finch summit, Cairo

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

7-8 December (Tuesday-Wednesday): North Africa Trade Finance Summit.

12-14 December (Sunday-Tuesday): Food Africa Cairo trade exhibition, Egypt International Exhibition Center, Cairo, Egypt.

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

14-19 December (Tuesday-Sunday): The Cairo International Festival for Experimental Theater.

14-15 December (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

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.

22-24 April 2022: World Bank-IMF spring meeting, Washington D.C.

May 2022: Investment in Logistics Conference, Cairo, Egypt

16 June 2022 (Thursday): End of 2021-2022 academic year for public schools

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.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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