PM — Business confidence is up as our PMI inches closer to stabilization

Happy hump day, ladies and gentlemen. It’s a relatively calm afternoon on the local news front (thank you, shortened workweek), but with the House of Representatives back in session, that might soon change.

Bankers and finance folks are officially off this Thursday, as the EGX confirmed earlier today the bourse will be closed in observance of Coptic Christmas, which falls on Friday. Cabinet and the Central Bank of Egypt announced earlier that the public sector and banks will also be getting a holiday. All that’s left is the Manpower Ministry to confirm the same goes for the private sector.

THE BIG STORY TODAY

Our PMI is still in contraction — but there’s hope of better days ahead: Activity in Egypt’s non-oil private sector contracted for a 13th consecutive month in December, albeit at a slower rate, as inflationary pressures eased, export revenues increased, and an uptick in tourism supported new business, according to IHS Markit’s Purchasing Managers’ Index (PMI) survey (pdf). Our PMI reading inched up to 49, from 48.7 in November, remaining below the 50.0 mark that separates expansion from contraction, but rising above its decade average of 48.2 as business activity moved closer to stabilization.

HAPPENING NOW-

The House of Representatives just gave its preliminary approval to the Unified Planning Act in a plenary session, according to Ahram Gate. The legislation would, if passed, dictate how governorate-level economic, social, and urban development plans are implemented.

OPEC+ is currently in a virtual meeting to decide on whether to up oil production next month. Since December, the oil cartel had plans to add another 400k barrels per day to the market in February. However, the spread of the omicron variant and the potential dent in demand have put question markets on whether they’ll move forward with the decision. Nonetheless, sources have signaled that we’ll likely see a ramp up in production despite the variant, with CNBC and the Associated Press echoing Bloomberg’s predictions yesterday.

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

• Edita isn’t acquiring assets of Ole bakeries manufacturer: Edita Food Industries’ bid to acquire assets belonging to Egyptian Belgian Company has fallen through after the two companies were unable to agree on a valuation.
• Oil Ministry awards eight oil + gas exploration licenses: Seven international companies were awarded eight of the 24 oil and gas exploration blocks included in the government’s bid round held last year.
• Fashion marketplace Gahez has raised USD 2 mn in a pre-seed funding round led by Disruptech Ventures, with participation from Egypt Ventures, EFG Hermes’ Tanmeyah, LoftyInc Capital’s Afropreneurs fund, and other angel investors.

THE BIG STORY ABROAD-

The global business press is still leading its front pages this afternoon with Theranos founder Elizabeth Holmes’ conviction on four charges, including defrauding investors. Holmes faced charges related to misleading investors and patients over the accuracy of her firm’s blood-testing technology, which she claimed could perform dozens of tests using exceptionally small quantities of blood. (Financial Times | Wall Street Journal | Bloomberg | Reuters | WaPo)

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???? CIRCLE YOUR CALENDAR-

Key news triggers to keep your eye on:

• Foreign reserves: December’s foreign reserves figures will be announced before the week is out.
• Interest rates: Further afield, the Central Bank of Egypt (CBE) will hold its first policy meeting of 2022 on Thursday, 3 February.

The 2021 Africa Cup of Nations gets underway in Cameroon next Sunday, 9 January. The championship will run until Sunday, 6 February.

The World Youth Forum kicks off in Sharm El Sheikh next Monday, 10 January and runs until Thursday, 13 January.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

☁️ TOMORROW’S WEATHER- Expect a daytime high of 19°C and a nighttime low of 10°C tomorrow, our favorite weather app forecasts.

Ford equities shrugged off the semiconductor shortage in 2021, soaring 140% and outperforming other automakers, including Tesla, reports CNBC. The almost-120-year-old automaker hit a market cap of USD 83 bn, making 2021 “the most important year for the company since the financial crisis” according to a Morgan Stanley analyst. The solid performance and strategic importance comes partially because of the change-up in its leadership that saw auto veteran Jim Farley take over as the company’s CEO 15 months ago. Under Farley’s leadership, the company launched the Ford+ restructuring plan, which shifted resources to developing the company’s EVs. As the semiconductor chip shortage took hold last year and hit the automotive industry hard, Ford signed a non-binding agreement in November with the US-based semiconductor maker GlobalFoundries to collaborate on providing chips for the automaker.

Omicron’s potential next victim: The Grammys, which could be postponed as the new strain leads covid cases to spiral in the US, sources told the Wall Street Journal. No decisions have yet been made, but there is a conversation on how to move forward with the award show, according to the sources. The Grammys are scheduled to take place on 31 January at Crypto.com Arena — previously known as the Staples Center — in Los Angeles. This would be the second year the award show was forced to stray away from the norm, last year postponing the event to mid-March and moving it to the Los Angeles Convention Center to allow for more spacing out between guests.

The private library of late Supreme Court Justice Ruth Bader Ginsburg (RBG) will be on auction this month, with over 1k books up for grabs, according to Bloomberg. The auction will run from 19-27 January at Bonhams and includes books on everything from law and politics to detective novels. The collection also has a number of books signed by the likes of Jane Goodall, Al Gore, and Toni Morrison. The low estimate for the entire sale is USD 60k, but is expected to go for much more as they are currently priced only as books and not as collectibles, said Catherine Williamson, director of fine books and manuscripts at Bonhams. RBG died in September 2020 after a lifetime of pushing landmark work on women’s rights.

Saudi Prince Fahad Bin Sultan is facing a lawsuit from Credit Suisse for allegedly failing to repay some USD 78 mn in interest and loans to refinance his USD 65.5 mn, 82-meter Cayman Islands-registered yacht and a UK mansion property valued at USD 47 mn in 2019, Bloomberg reports. In the London lawsuit filed in November, the Swiss bank said two offshore companies defaulted on a pair of loans — for which Bin Sultan is the guarantor — provided for refinancing the purchases. His lawyers are yet to file defense papers, Bloomberg notes.

Never mind that Nevermind lawsuit: The baby in Nirvana’s Nevermind album cover won’t be getting any candy from the band, after a lawsuit over the cover was dismissed by a court in California today, according to BBC. Nirvana’s famous artwork for their album Nevermind featured the now-30-year-old Spencer Elden, who last year filed a lawsuit against the band saying the image constituted child [redacted] abuse. Elden also claimed that the infamous picture caused him “extreme and permanent emotional distress,” as well as loss of wages. The lawsuit is widely seen as Elden’s attempt to extend his 15 minutes of fame, considering he spent his life celebrating his presence on the album cover, often charging to pose for similar pictures and getting a large “Nevermind” tattoo on his chest, the BBC writes.

???? ON THE TUBE TONIGHT-

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Netflix’s Don’t Look Up features a star-studded cast and a comet plummeting towards Earth: Directed by Adam McKay — who is known for The Big Short — the film follows two astronomers (played by Leonardo DiCaprio and Jennifer Lawrence) after coming to the harrowing discovery that a huge comet is headed towards Earth and could erase humankind’s existence. The pair quickly start at the top and inform the president (played by Meryl Streep) and her chief of staff (hilariously brought to life by Jonah Hill), but the leaders brush them off with politician speak and fail to give the matter any urgency. This is the theme that continues throughout the film as DiCaprio and Lawrence go through increasingly unorthodox channels to get literally anyone to care about the possible end of the world — even going as far as to appear on a kids’ show. In a clear pointing of fingers at capitalist greed, people only start to give the comet any attention when they judge its potential to be lucrative.

The film acts as a satirical reflection of similar events taking place today, with a majority of the world’s population turning a blind eye when it comes to climate change, writes The Wrap (warning: spoilers). Don’t Look Up also captures the general sentiment of the pandemic, where people are so exhausted with events out of their control that they opt to focus on trivialities and ignore the consequences of their neglect.

⚽ There are no matches to tune into today but there’s potential transfer chatter: Arsenal may be tapping Real Sociedad striker Alexander Isak after reportedly urging European clubs to sign Pierre-Emerick Aubameyang, according to EuroSport. Meanwhile, Romelu Lukaku could don Chelsea’s jersey once again after positive talks with head coach Thomas Tuchel and Paul Pogba wants to be on the same team with Karim Benzema, with no definitive plans just yet.

???? EAT THIS TONIGHT-

Texas BBQ for days at Dickey’s: Located inside City Centre Almaza, it’s the perfect place for someone who is a meat (or chicken or sausage) lover. Dickey’s is known for their hickory-smoked brisket, which is featured in a variety of plates, appetizers, and sandwiches. Because we like to try a bit of everything, we had their old school plate with brisket and beef sausage and sides of mac & cheese and sweet corn (their creamy spinach is also great). We were glad to discover that the brisket was well seasoned and tender — and everything else was just as delicious. We’re also a fan of their sandwiches, especially their Texas hot brisket, their barbeque ranch bird, and their wild westerner. Don’t leave without trying their pecan pie — we always appreciate the (rather rare) chance to enjoy the pie in Egypt.

???? OUT AND ABOUT-

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Egyptian audiobook startup Iqraaly is hosting a book discussion for Ibrahim Eissa’s new release, Rosasa fel Raas (Bullet to the Head). The event will take place today at Downtown coworking space Consoleya at 7pm.

The Darkroom Cairo is organizing a workshop titled “Experimental Printing with Old Negatives” on Saturday at 5pm. The workshop will see students combine archive negatives with photograms or other materials they can bring with them such as flowers or leaves.

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AUC Press released an English translation of Ihsan Abdel Quddous’ novel “I Do Not Sleep”: Translated by Jonathan Smolin and published by Hoopoe, the novel was a shock to readers upon its release in the 1950s for portraying strong women characters and going against patriarchal norms, according to a press release (pdf). Abdel Quddous wrote the book in the form of a letter filled with confessions from the main character Nadia who reflects on her actions in the past five years. Raised by her father after her parent’s divorce, Nadia is determined to make sure she is the only woman in her dad’s life. However, when she finds out he remarried without her knowledge, she conspires an elaborate and revengeful plot that will soon cause the family to descend into tragedy and destruction. The novel was adapted into a film by the same name in 1957, starring Faten Hamama.

OUR ANALYST OF THE WEEK– Ahmed Abbady, senior investment analyst at Misr Capital’s asset management unit (Linkedin).

My name is Ahmed Abbady and I’m a senior investment analyst at Misr Capital’s asset management unit. I participate in selecting stocks and providing the necessary support to make investment decisions. I started my career as a sell-side analyst at Jazira Capital, where I covered building materials and consumers for three years, then moved to Misr Capital in 2018. From my experience, working as a buy-side financial analyst is very similar to the sell-side — they both use the same analytic tools. I love numbers and believe in their honesty in relaying information; this was exemplified for me when I got my CFA.

The best part of working in asset management is the exposure to many sectors. Curiosity is my chronic disease and research and analysis is my recovery [laughs]. Every day, I like to read and learn something new. The job forces you to get to know most industries in depth, and in the end you have the understanding to hold a conversation in investments, stocks, or asset allocation.

I focus on fertilizers, building materials, healthcare, pharma, and real estate. I think healthcare, pharma, and real estate have been oversold in the past period amid the uncertainty of the pandemic and new regulations and they might need more time than 2022 to recover. A lot of people began avoiding hospitals and medical services because they were afraid of getting infected with the virus, and this was a hit to the companies’ volumes, and in turn, their stocks. Meanwhile, fertilizers are booming, but could slow down in the coming period. As for building materials and construction, it all depends on commodity prices and how they move this year.

The worst thing about my job is the stress. You have to be as accurate as possible in the shortest time possible. Time is of the essence in the field and if anything happens locally or globally, you have to interrupt your plans and get the work done.

We’re currently employing a hybrid system at work. We spend two weeks at home and two weeks in the office. I don’t enjoy WFH because I feel that all days start to feel the same — but it really made me appreciate my wife and all her efforts to take care of me, our home, and our infant son Mazen.

Regarding my job, the uncertainty from the pandemic has made markets more sensitive. Any news related to covid-19 or new variants have a very visible global reaction both here and abroad. However, the vaccination rollouts are progressing well and I hope that we recover from the pandemic very soon.

The secret sauce for investment, in my opinion, is to perfect the methodology of selection and the timing of execution. The methodology of selection involves looking at a stock with a strong growth story, sustainable quality, good governance, and a potential short term catalyst that can unlock the expected upside. As for timing, it’s important to note the average cost of a stock and aim to buy when it’s around that level. Investors should avoid buying a stock when prices are on an upward trend or selling when stock performance is down.

The most important factor I look at before making a recommendation is management. Your forecast and assumptions on a company are based on how credible management was in the past and how much they succeeded in delivering on their guidance. I’ve also learned during my time in asset management that investors focus on stock liquidity when looking at emerging markets, so that’s also something I factor in.

It’s a bit too early to forecast the performance of the EGX in 2022, but the year seems promising. The bourse has been performing well for over 30 weeks now, we saw a recovery in many sectors in 2021, and Egypt’s vaccine drive is moving forward steadily. However, inflation and higher interest rates are the main challenges that could affect us in 2022. All indicators say that local inflation will increase in 1H2022, in line with the global trend.

Being a new father, the day becomes too busy to watch anything without interruption. However, some movies are close to my heart such as 3 Idiots, The Green Mile, and Escape Plan. I’m also a huge fan of classical Arabic films. I find them a perfect mix of comedy and romance. A few names off the top of my head are Ibn Hamido, A’elit Zizi, and Esha3et 7ob.

In my downtime, I like to repair my house [laughs]. I know it’s a bit weird, but I take fixing any damage as a challenge and YouTube is a great mentor. Sometimes I’m successful at repairing things myself, but a lot of the time, I make the situation much worse [laughs] — that’s when I finally decide to call a specialist. However, the best time I spend during my day is playing with my son. We love to play hide and seek and he always gets so excited when he finds us. I also enjoy going out with family and friends, especially on the weekends.

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MARKET ROUNDUP-

The EGX30 rose 0.7% at today’s close on turnover of EGP 1.09 bn (14.7% below the 90-day average). Regional investors were net buyers. The index is up 0.3% YTD.

In the green: Egypt Kuwait Holding (+7.4%), AMOC (+6.4%) and Raya Holding (+5.9%).

In the red: Cleopatra Hospital (-1.4%), Ezz Steel (-1.4%) and Orascom Development Egypt (-0.9%).