PM — The bulls are back

Good afternoon, wonderful people, and happy almost-THURSDAY to us all. We have another brisk news day here at home as the lead-up to COP27 brings with it plenty of fresh energy and investment news.

THE BIG STORY TODAY

The Electricity Ministry is in talks with six Saudi firms over more than USD 3 bn worth of renewable energy projects, Bloomberg Asharq reports, citing unnamed sources at the Egyptian Electricity Transmission Company (EETC). Electricity Minister Mohamed Shaker is currently in Riyadh holding meetings with companies including Al Fanar, FAS Energy and ACWA Power, with which he signed an agreement on a 10-GW wind farm earlier this week, the sources said. Shaker is also reportedly meeting with Saudi financing institutions to help drum up financing for the projects.

THE BIG STORY ABROAD

Ukraine’s wheat export pact is back on after Russia agreed to rejoin the agreement, following days of shuttle diplomacy from Turkey. Moscow had backed out of the agreement over the weekend after claiming that Ukrainian forces used the safe corridor used to ship grains out of Ukraine to attack Russian naval vessels. The story is on the front pages of Reuters, the Financial Times, Bloomberg, CNBC, and the Wall Street Journal.

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

• ACWA Power could build one of the world’s largest wind farms in Egypt: Saudi renewable energy developer ACWA Power will build a 10-GW wind farm in Egypt after signing an MoU with Egypt’s New and Renewable Energy Authority and the Egyptian Electricity Transmission Company yesterday.
• Qatar’s sovereign wealth fund might want in on our green hydrogen ambitions: The Qatar Investment Authority is considering investing in a green hydrogen and ammonia project in the Suez Canal Economic Zone.
• Camel Flour acquires struggling flour producer: Al Moatabar Group’s Camel Flour Mills has acquired a majority stake in the distressed high-end flour producer Five Stars.

FOR TOMORROW-

The always-on-point Charlie Robertson is doing a talk on his new book, The Time Traveling Economist tomorrow (Thursday, 3 November) at 5pm CLT. The chat will “outline what has held Egypt back in the 20th century and why we should expect a boom time for the economy from about 2025-30 onwards,” Charlie says. The talk is being hosted by the Egyptian Private Equity Association’s Sara Badran and you can sign up here.

???? CIRCLE YOUR CALENDAR-

It’s PMI day tomorrow: We’ll know how Egypt’s private sector fared in October tomorrow when S&P Global releases the latest purchasing managers’ index at 6:15 CLT. A 22-month contraction in private sector activity didn’t show signs of abating in September as high inflation continued to weigh on demand and output.

Key news triggers coming up over the next week:

• Foreign reserves figures for October will be released next week.
• Inflation: Capmas and the central bank will release October’s inflation figures on Thursday, 10 November.

SPX to open for international flights next month: Sphinx International Airport will begin operating international flights to several European and Arab countries starting 1 December, state-owned Al Akhbar Al Yom reported yesterday. The airport is opening to domestic flights this month and yesterday received the first flight operated by Air Cairo from Sharm El Sheikh, Al Ahram reported.

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 27°C tomorrow and a nighttime low of 20°C, according to our favorite weather app.

It’s been a no good, horrible year for equities — but the bulls are here to play: More than half (59%) of investors are bullish about short-term stock market performance, while over half predict a recession is coming or has already started, according to a UBS poll cited by Bloomberg. That’s 9 percentage points higher than three months ago when markets sank after a short rally. Nearly 3k high net-worth investors were polled, with 69% of European investors showing optimism about the region’s economy in the coming year. 62% of Asian investors expressed positive prospects for their region over the next year as well, while American investors were less optimistic with only 51% reporting a positive outlook. Nearly two-thirds of global investors are expecting inflation to keep rising, leading 50% of investors to curtail expenditures, according to the poll results.

Top ranked women at companies are quitting their jobs at the highest rate in years, according to a report by the McKinsey & Co. and LeanIn.org. For every woman at the director level who gets promoted, two women directors are choosing to quit, according to data collected from 333 US organizations employing over 12 mn people.

Women are just as ambitious, but find it harder to advance: Three main reasons drive women to quit including “microaggressions” that compromise their authority and judgment or having their gender or being a parent affect chances for a promotion or a raise. Other reasons include being overworked and under-recognized, despite doing more to support employees in the workplace and demands of flexibility.

???? ON THE TUBE TONIGHT-
(all times CLT)

Learn more about the jazz legend Satchmo: Louis Armstrong: Black & Blue documents the world-famous trumpeter’s accomplishments and introduces him to a younger audience that may not know much beyond his name. The Apple+ documentary takes a revealing look at the music icon through archival material, including radio and television interviews, reel-to-reel audio recordings of private discussions, and old newspaper clippings. Several music titans, including Miles Davis and Leonard Bernstein, contribute their best Armstrong stories, and there are several random nuggets of trivia including how he bought 300 bags of coal for people the first time he played in Baltimore when it was particularly cold and how he performed in brothels in his youth.

⚽ The Egyptian Premier League continues with Al-Dakhilia hosting Al-Ahly at 5pm, while Zamalek will face Enppi at 7pm.

Over in the Champions League, Real Madrid plays Celtic at 7:45pm.

Here’s a roundup of the rest of today’s matches:

Man City v Sevilla (10pm)

Copenhagen v Borussia Dortmund (10pm)

Milan v Salzburg (10pm)

Chelsea v Dinamo Zagreb (10pm)

Juventus v Paris Saint-Germain (10pm)

Shakhtar v Leipzig (7:45pm)

Maccabi Haifa v Benfica (10pm)

???? OUT AND ABOUT-
(all times CLT)

Musical icon Mohamed Mounir is performing at the Cairo Opera House tonight at 8pm.

Rapper Marwan Moussa takes the stage at CJC 610 tonight at 9pm followed by Karim Enzo plays some and Jaadu plays the closing set.

The Cairo Jazz Festival is on-going at AUC Tahrir through this Thursday, 4 November. Tonight’s lineup: Veronika ChiChi and Dimitri Golovanov (Lithuania) is performing at 6pm, followed by Santa Driver (Hungary) at 8pm, Joao Pedro Brandao Quartet (Portugal) at 9:30pm, and finally Green Jazz with Gouda-Bar by Aly Eissa (Egypt) at 10:30pm.

???? UNDER THE LAMPLIGHT-

The mother of all market meltdowns: When Genius Failed chronicles the rise and fall of hedge fund Long-Term Capital Management, headed by Nobel Prize laureate economists and renowned Wall Street traders, was wildly successful for four years and in its heyday, with annualized returns of around 40% its second and third years, before it suddenly incurred enormous losses (USD 4.6 bn) in less than four months in 1998. The nosedive endangered the stability of not just Wall Street's largest banks but the entirety of the financial system, forcing the US government to step in to prevent financial markets from collapsing brokering a USD 3.65 bn bailout from 14 banks. Drawing interviews with key individuals and confidential internal notes, journalist Roger Lowenstein explains how Long Term’s partners’ personalities, the hubris of their mathematical certainty, and Wall Street culture played a part in the fund’s staggering success and eventual downfall.

EARNINGS WATCH-

Prime Holding’s losses after one-offs and minority interest widened 62% y-o-y in 3Q 2022 to EGP 20.9 mn, according to the company’s earnings release (pdf). Revenues jumped 6% y-o-y to EGP 27.6 mn.

MARKET ROUNDUP-

The EGX30 fell 1.7% at today’s close on turnover of EGP 1.27 bn (15.7% above the 90-day average). Foreign investors were net sellers. The index is down 5.9% YTD.

In the green: Ezz Steel (+3.7%), Alexandria Containers and and Cargo Handling (+2.6%) and Telecom Egypt (+1.2%).

In the red: Fawry (-4.5%), GB Auto (-4.3%) and Madinet Nasr Housing and Development (-4.1%).

Why are ESG investors turning their back on EMs? Worries about risk in emerging markets is leading ESG investors to shun them, according to the Financial Times. In theory, ESG investors should care about improving environmental and ethical standards in emerging-market business practices and production lines. But in practice, many have chosen simply to avoid the hassle of figuring out where standards lie and how to raise them, opting instead to reduce their exposure to EMs and cut out risk, the salmon-colored paper writes.

Emerging economies desperately need investment: The financing gap for developing countries to meet UN sustainable development goals is now estimated at USD 4.3 tn annually, An additional USD 2 tn per year is required to help EMs face climate change alone — and that’s excluding China, Nigel Topping, the UK’s climate change champion, tells the FT. “We know that 70 per cent plus of that needs to be private finance,” he said.

Some pension funds and sovereign wealth funds are taking an “active” investing approach — but not so much when it comes to EMs. Many big funds take the stance that it’s better to hold minority stakes in ESG non-compliant companies — oil and gas, for example — so that they can have a seat at the table and push these firms towards better practices. But that logic hasn’t extended to EMs, where fund managers cite fewer protections for minority stakeholders and more fragile institutions as barriers to this ‘impact investment’ approach.

Norway's sovereign wealth fund — the world's largest — last year added no new EM assets, citing a plan to apply uniform ethical and environmental standards to all its investments. “Some of the pension funds and sovereign wealth funds are really concerned to avoid headlines about exposures they have, whether to poor labor practices or government corruption,” said Stuart Theobald, co-founder of research consultancy Intellidex.

Lack of data is another barrier: Over half of investors polled by the FT said a lack of data was an obstacle to ESG investing in EMs, and all of them said they were not satisfied with corporate disclosure on EM ESG risk. EM companies can struggle to comply with differing local and international standards for social and environmental impact assessments, and universal standardization for ESG disclosures is still a long way away. Even where companies provide all the necessary data, wrong formatting, a lack of knowledge on how to approach ESG disclosures, or a mismatch in contextual considerations can mean they’re unfairly screened out on the basis of ESG criteria.

If the ‘good guys’ don’t invest, the other guys will: Where EMs can’t find ESG investors, stakes in their companies and projects could be snapped up by players who are more apathetic about sustainability. “What it does is shift companies from investors who have a concern about these issues to those who are largely indifferent to them,” Colin Mayer, professor at Oxford University’s Saïd Business School, tells the FT.

That could dangerously limit financing sources for some developing countries, says Alison Taylor, a specialist in ethical business at New York University’s Stern School of Business. “This is arguably worse than divestment out of oil and gas, because if you divest from a country, you leave it to organised crime, terrorist financing and violence,” she tells the FT.