PM — Get your tickets to the Pharaohs v Senegal

Happy hump day, ladies and gentlemen. As we expected, the news flow is picking up this afternoon, with a solid selection of stories to track as we slide into the second half of the week.

THE BIG STORY TODAY

#1- Unemployment falls in 4Q2021: Egypt's unemployment rate declined to 7.4% in 4Q2021 from 7.5% the previous quarter, according to the latest data by statistics agency CAPMAS (pdf). The jobless rate has remained steady over the past year, with mild fluctuations since reaching a near-two-year high in 2Q2020 on the back of the pandemic and nation-wide lockdowns.

#2- From London to Riyadh: Offshore oil and gas services company ADES International plans to IPO on the Saudi stock exchange in early 2023, less than two years after it was delisted from the London Stock Exchange following a Saudi-backed takeover, Al Mal reports, quoting the chairman of the company’s majority shareholder. ADES started life here in Egypt before going public in London in 2017. In the years since, it has expanded into several markets in the region, including Kuwait and Algeria. Here in Egypt, the company operates (pdf) eight rigs, an offshore barge, and a mobile onshore drilling unit.

^^We’ll cover these stories and more in tomorrow’s EnterpriseAM.

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

• Importers, get your letters of credit ASAP: Documentary collection from exporters will no longer be accepted by banks to facilitate the import of goods into Egypt from the beginning of March, according to a decision by the Central Bank of Egypt taken over the weekend.
• Fintech Act is the law of the land: President Abdel Fattah El Sisi ratified the Fintech Act, which regulates robo-advisory, nano-finance, insurtech, and (tech-enabled) consumer finance, among other sectors.
• Alameda Healthcare will purchase four surgical robots from British medical robotics firm CMR Surgical, under an MoU signed between the two companies.

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HAPPENING NOW-

President Abdel Fattah El Sisi is in Brussels ahead of the two-day EU-AU Summit, which kicks off this Thursday, 17 February, according to an Ittihadiya statement. El Sisi is set to meet with Belgium’s Prime Minister Alexander De Croo to talk diplomatic relations and regional issues. The president is also scheduled to meet a group of Belgian business leaders to discuss growing economic cooperation, trade, and investments between Egypt and Belgium.

On the agenda for the summit: Look for El Sisi to speak at the summit about integrating African states in the global economy, ramping up foreign investments to Africa, and supporting developing countries in their green transition — all of which are key action points for COP27 in Sharm El Sheikh this November.

It’s the final day of the Arab sustainable development week. Some 400 participants including the EU, World Bank and other institutions are chewing over how to tackle in a sustainable way the development challenges of the Arab world.

AND- Orange Ventures’ deadline to receive applications from seed-stage fintech startups for its seed challenge is also today.

THE BIG STORY ABROAD

Russia v. Ukraine denouement? Russia is pulling some of its troops back from the Ukrainian border, the Russian defense ministry announced today, after conducting war games in neighboring Belarus. The move took place hours before German leader Olaf Scholz’s scheduled meeting with Vladimir Putin in Moscow, as part of ongoing shuttle diplomacy efforts to avoid an invasion.

Ukraine’s reaction was guarded, with Foreign Minister Dmytro Kuleba saying Kyiv would “believe in de-escalation” when it sees a full pullout.

Investors had a stronger response, with markets rallying on the news: European stocks and US futures rose on signs of the easing tensions. Shares of Tesla, Apple, Amazon, and Microsoft all rose between 1.6% and 3.0% in premarket trading, Reuters reported, along with travel stocks. This largely contradicts yesterday’s trading, when major equities markets were hit by invasion fears. Russia’s RUB also rose 1.5% against the USD.

Not having such a good day? Oil. Brent crude prices fell after reaching seven-year highs on fears that a Russian invasion of Ukraine could disrupt supplies.

The story is everywhere this afternoon: Bloomberg | Reuters | Financial Times | BBC | CNN

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???? CIRCLE YOUR CALENDAR-

A call for tech startups: The Information Technology Industry Development Agency (ITIDA) and US-based VC firm Plug and Play have launched an incubator and accelerator program for digital transformation-focused startups in partnership with our friends at USAID. The newly launched “Smart Cities” innovation hub will select 20-30 Egypt-based companies for its inaugural three-month program, which starts in March. Startups can apply here before applications close on 28 February.

PSA- Your commute is about to get worse. Public universities begin the second term of their 2021-2022 academic year this Saturday, 19 February.

The Nebu Expo for Gold and Jewelry 2022 kicks off this Saturday, 19 February and wraps on Monday, 21 February.

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

☀️ TOMORROW’S WEATHER- The mercury will rise to 21°C during the day tomorrow before falling to 11°C at night, our favorite weather app tells us.

Is autonomous shipping the solution to all our global supply chain woes? The world’s first autonomous container ships have landed in Japan, with the launch of two fully autonomous container ships, the Mikage and the Suzaku, over the past few weeks, reports Quartz. Japan’s nonprofit Nippon Foundation and freight industry partners Mitsui Lines and Japan Railway Construction have ramped up construction and testing of autonomous cargo ships, ferries, and amphibious trucks in efforts to reduce labor requirements. Although these developments are important in Japan because of the country’s aging population, labor shortages are a key factor behind the global supply chain issues of the past two years.

The development could be significant for the freight industry, but it doesn’t seem like it’s going to really take off anytime soon. Shipping lines such as Maersk think that regulatory approval for autonomous freight will be a long time coming, suggesting that it won’t be a game changer for efficiency in the near future. Rolls-Royce Holdings’ marine unit began focusing on “autonomous shipping as a future business to address a downturn in the offshore oil industry,” but the unit was put up for sale in January after failing to generate net income.

Speaking of Rolls-Royce: The holding company expects to see a fully-electric small aircraft powered by its battery electric system by 2025, top exec Rob Watson said, according to Bloomberg. This will be the first commercial application for the company’s electric system, P-Volt, which will allow as many as eight people to fly as far as 80 nautical miles. Rolls-Royce expects to extend that range to 400 km in the next decade, Watson said, but the new system is not going to be used anytime soon for narrowbody aircraft, which includes Airbus and Boeing, citing limitations due to the battery’s energy density and its weight.

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Watch out, SpaceX — you’ve got some competition from the EU: The bloc is planning to launch a EUR multi-bn satellite internet system as it looks to move away from dependence on US and Chinese-built systems, EU officials said, according to the Financial Times. The encrypted system could also provide internet coverage for Africa and is being positioned as an alternative option in the event of cyberattacks, which are on the rise as of late, an EU official said.

Not as keen on the plan: The EU’s internal watchdog, which reportedly sees the initiative as a waste of money and a competition with commercial services, EU officials say. It has rejected the impact assessment twice, two people familiar with the situation told the paper. But some amendments have been pushed following the rebuff, including a commitment to include small businesses at home with the design and building of the system. Such businesses will be required to provide EUR 2 bn of the initiative investment in the public/private partnership.

???? ON THE TUBE TONIGHT-

(all times CLT)

The Bridge: A thrilling post-apocalyptic series: Available on regional streaming platform Shahid, the show depicts the end of the world as we know it due to wars, with the post-apocalyptic world consisting of colonies battling for survival. The six-episode series sees protagonist Noah (Amr Saad) attempting to reach what is seen as the safe haven, the Bridge, for his son Nagui. Saad uses his previous war experience and manufactures bombs to get his basic living necessities as he tries to reach the Bridge, the exact location of which is unknown. Meanwhile, Dalida (Nelly Karim) leads a colony with an iron fist, imposing harsh living conditions on hundreds of people. Any mention of “The Bridge” or any attempts to escape from the colony is considered treason for Dalida, who spares no effort to consolidate her power in the colony.

⚽ The knockout stages of the Champions League start today and the first-leg matches of the round of 16 will continue for two weeks. Today, Paris Saint-Germain will compete against Real Madrid and Sporting Lisbon against Manchester City, with both matches to start at 10pm.

Manchester United and Brighton are playing today in the last match of gameweek 25 in the English Premier League at 10:15pm tonight.

In the Egyptian League: El Zamalek goes out to meet Smouha at 5:30pm, while Ghazl Al Mahalla’s match against Al Mokawloon is ongoing as we dispatch.

PSA- You can cheer on the Pharaohs at their FIFA World Cup qualifiers match against Senegal here at home next month, Egyptian Football Association (EFA) member Helmi Mashhour confirmed to Kingfut. The EFA will allow a minimum of 50k fans to attend the match, and could let more fans into the stadium. The match is scheduled for 25 March at the Cairo International Stadium.

???? EAT THIS TONIGHT-

Burgers are the pinnacle of midweek comfort food — and Sweden’s Max Burgers truly hit the spot. Now open in Sheikh Zayed’s West Mark, Max Burger’s second branch in West Cairo is home to mouthwatering burgers and irresistible appetizers. We love their Grand Deluxe Mushroom & Swiss (their double is not for the faint-hearted), but make sure not to miss their mozzarella sticks for the full satisfactory experience. Max Burgers also has vegan and vegetarian options for the picky and diet-restricted among you.

???? OUT AND ABOUT-

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An art exhibition featuring work from marginalized children is ongoing at Townhouse Gallery until Saturday. The event is organized by the Sawiris Foundation for Social Development, AlexBank, Townhouse Gallery, Al Ismaelia for Real Estate Investment, and Ubuntu Art Gallery.

Safarkhan Art Gallery is hosting an art exhibition Adam by artist Ibrahim Khatab. The exhibition opens at 6pm tonight and runs until Wednesday, 9 March.

???? UNDER THE LAMPLIGHT-

A heart-wrenching story of Zambia’s street children that doubles as commentary on socioeconomic disparities: Walking the Bowl by Chris Lockheart and Daniel Mulilo Chama with one of the main characters, 11-year-old waste collector Lusabilo discovering the corpse of a 10-year-old beggar, who becomes known as Ho Ho Kid, among piles of garbage in Lusaka. The incident is based on real events, as Lockheart and Chama began an anthropological information-gathering quest in Zambia, and followed the police’s investigation into the boy’s mysterious death. As the story unfolds in the back streets of the city, other main characters are introduced, including a 17-year old hustler, an 8-year-old sent to the city alone, and a 16-year old [redacted] worker. Their worlds collide and their roles in the death of the Ho Ho Kid are unraveled. The book, a “novelistic nonfiction narrative,” has the rare combination of “a clean arc of ascending action, a handful of vivid characters, an ending that snaps shut like a purse,” the New York Times says in a review.

OUR ANALYST OF THE WEEK- Ahmed Hesham, associate director of equity & quantitative strategy at Beltone Financial (Linkedin).

My name is Ahmed Hesham and I’m the associate director of equity & quantitative strategy at Beltone. I studied economics at Sadat Academy for Management Sciences and then received my masters from Kyung Hee University in South Korea. In the time in between, I was working as an economist at the Financial Regulatory Authority. When I came back from South Korea, I worked as an economist at ElSewedy Electric and then at Mubasher. I then made the leap and joined the quantitative research team at EFG Hermes where I stayed for almost nine years. From there, I moved to CI Capital as part of their quantitative and equity research team and finally took on my position at Beltone in 2018.

My job revolves around purely quantitative-driven research. We collect data from stock exchanges all over MENA, including stock prices, investment participation, and investment ownership. We then analyze these data points to try and spot trends and answer basic questions such as how a market, stock, or sector will react in certain circumstances. We also use the data to publish quantitative research products that tackle the market from a different perspective, issue index-related research that looks at the MSCI, FTSE, and local indices for each market, and answer questions from our clients using our database.

Using quantitative research is still somewhat new in Egypt. It’s common in global banks and is gaining traction in Egypt. EFG was one of the first that began to heavily invest in this kind of department and when I moved to CI Capital, I began to establish a similar one. When I joined Beltone, the department had already been launched, but it was still at a smaller scale. We took it to the next level with a lot of support from management, who understood the importance of data in investment decisions.

The best part of my job is that it’s ever-evolving and ever-changing. I like to analyze and connect the dots and my job allows me to find a correlation between sectors in MENA stock markets in terms of performance, momentum, and liquidity. I also like to come up with new products and hearing the appreciation from clients.

The worst part of my job is the cliche answer: The pressure [laughs]. There are also a lot of surprises that can throw you off. However, I’ve spent 20 years in the field and I’ve learned that you need to be quick, calm, and efficient. It’s also a matter of having been put in the situation so many times, that you now know how to react.

My theory of investment is based on my work. I’m a big fan of momentum investing, which looks at volumes, index inclusion, and end conclusions. If done correctly, you can get massive returns.

The most important factor I look at before I decide on a recommendation is the data, of course [laughs]. I check that there aren’t any outliers or anything that seems off. Our database at Beltone is fully automated and uses algorithms and methodologies that help us make recommendations. These algorithms help us look at the market from a fourth dimension to determine where the momentum is at any given period. We also look at investor participation, liquidity, and volumes all over MENA to link the numbers to events and compare markets to each other.

I think 2022 will be a good year for Egypt, pending one main factor: The state privatization program. These are crucial for the local market to increase liquidity and volumes. If it proceeds as planned, I think it could be the trigger for Egypt’s next bull cycle. However, a lot of momentum in the region will still go to GCC countries, mainly UAE and Saudi Arabia, as they issue a lot of listings and benefit from the high oil prices.

Since the beginning of the year, foreign and institutional investors were net sellers and the EGX30 saw a lower than usual turnover. I attribute this to the supply of shares being limited. Investors have already invested in all the buzzworthy companies in the market and are awaiting new stories, hence the need for more IPOs.

I recently binge-watched The Fear Index. It follows a hedge fund type who gets roped into this massive scheme — it’s really good. But my favorite show of all time is Bns. Even though it portrays the greedy part of the financial field, it’s still really amazing to watch something you can relate to in your own life.

The last great thing I re-read was When Markets Collide by Mohamed El Erian. He’s my number one author and I read anything he releases.

When I’m not on the clock, I like to disconnect from work, whether it’s through working out or going out with friends. I try to find a balance between work-life and home-life. I also love to travel, but covid has made the options very limited.

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EARNINGS WATCH- Heliopolis Housing and Development Company (HHD) reported a net income of EGP 91.26 in 4Q2021, reversing from net losses of EGP 43.35 mn in 4Q2020, according the company’s financial statement (pdf). The company’s revenues saw a 248% y-o-y increase to record EGP 152.93 mn.

MARKET ROUNDUP-

The EGX30 rose 1.4% at today’s close on turnover of EGP 744 mn (28.6% below the 90-day average). Foreign investors were net buyers. The index is down 3.2% YTD.

In the green: Qalaa Holdings (+7.9%), Sidi Kerir Petrochem (+2.8%) and Ezz Steel (+2.7%).

In the red: Madinet Nasr Housing (-4.1%), Cleopatra Hospital (-1.5%) and Mopco (-0.9%).