El-Sisi: Parliamentary elections before Sharm summit, EGP 8.5 bn in PPP projects announced for infrastructure + services sectors, Abraaj ups Bisco bid, Orascom and GE in power deal, South Africa overtakes Egypt as best-branded African tourism venue

FX WATCH

The Egyptian pound held steady at the CBE dollar sale yesterday trading at 7.1401 pounds to the dollar. The rate in the official market remained unchanged from Tuesday’s 7.70 according to a trader who spoke with Reuters, stronger than the 7.76 quoted to Enterprise by another trader.

WHAT WE’RE TRACKING TODAY

Will markets snap their losing streak? Egypt and regional markets have been hammered since 8 December, with the EGX30 down 15.2% in that period. The selloff has been so nasty that exchange officials across the region have taken to reassuring retail investors that, no, folks, there’s nothing “broken” at the bourses. US, Asian and some regional markets were up yesterday, and Asian shares are also doing well in early trading again this morning, as is oil. The swing in sentiment this morning comes after US Federal Reserve chair Janet Yellen said yesterday at her last news conference of the year that it will not be before “at least the next couple of meetings” that the Fed begins its rate-hike process. It should be good news for emerging markets.

It seems we may have elections before the Sharm El-Sheikh investment summit following remarks yesterday by President Abdelfattah El-Sisi. See “Speed Round” (below) for details.

That good news for emerging markets? It’s counterbalanced in the medium-term by the meltdown in Russia, and the WSJ has a piece out today you need to read: 5 Reasons for Investors to Care About Russia’s Market Turmoil, among them

1. Debt market contagion: “Its biggest corporations continued to borrow heavily in dollars, which means they are now at risk of defaulting on those bonds as their ruble-based earnings plunge in line with the currency’ slide. … Holders of those bonds will face losses and … will dump other risky bonds to cover those losses, widening the market fallout. Those in line for contagion include the sovereign bonds of emerging-market countries from Africa to Eastern Europe…”
2. Currency market contagion: A currency doesn’t fall in isolation. Its effects are felt far and wide by the competitive challenge it creates for other countries. … A few currencies in particular are in line to become the next domino. One is Turkey’s lira, which is also hitting record lows … The more currencies get dragged into this contagion, the wider the matrix of affected trading partners becomes, which means that the dollar will simply rise further and further…”
3. Further declines in oil prices: “Economists originally viewed the collapse in oil prices as a net positive for the global economy … But a chaotic decline of more than 45% in less than six months is now showing its negative side. Russia’s economic woes could make the imbalance in crude markets even more extreme.”

You can dive deeper into the ruble crisis below after Speed Round.

Good news for water security: An Ethiopian delegation led by the speaker of the Ethiopian parliament Abdulla Gemeda will meet with Foreign Minister Sameh Shoukry today according to Ahram Online. The group will also hold meetings with the Egyptian Council for Foreign Affairs and the Al-Ahram Centre for Strategic Studies. Both are encouraging signs that Addis is committed to pursuing diplomacy after talks centered on the Renaissance Dam reportedly broke down, as we noted yesterday.

The Markit Flash US Services PMI will be released today.

LAST NIGHT’S TALK SHOWS

Last night was a slow, largely non-informative and non-entertaining evening of Egyptian television — in other words, a typical Wednesday. Amr Adeeb was off, leaving his show in the incapable hands of his co-hostsKhaled Abu Bakr and Rania ElBadawy, who seem to be in an unspoken competition as to who has the most unbearable voice. The only two segments of value included a clip of President Abdelfattah El-Sisi’s inauguration of the renovations undertaken at Hurghada International Airport and a welcome criticism about how other government officials define “inaugurations.”

ElBadawy rightly pointed out that El-Sisi attends actual inaugurations, while the media feel a little burned by a few ministers in particular for being dragged out to events that are billed as ribbon cuttings, such as that for the Grand Egyptian Museum a.k.a. the Giza Museum, only to find out that these facilities are not yet open to the public and all that was done was some expansion work on the garage and storage area.

Ibrahim Eissa lambasted a number of advisors to Al-Azhar, highlighting their past and very public statements of support to the Muslim Brotherhood. He then shifted gears in the latter half of his program to host an official from the Ministry of Housing, with the two discussing social housing programs, highlighting that the main two preconditions for eligibility of participants be that they do not own real estate and have not previously taken part in government housing programs.

In place of Lamees El Hadeedy was the usually affable Khairy Ramadan, who was stuck for hours (HOURS) with some English teacher from some governorate accompanied by her young students who she’d encouraged to write letters to God. Hours of this.

SPEED ROUND

The EGX30 was down 4.59% to close at 8,124.7 points with turnover of EGP 964.3 mn, 39% above the 90-day average. Regional markets gained for the most part: Tadawul up by 4.2%, ADX up 5.1%, Qatar 1.1% and Muscat 1.4%. On the other hand, Kuwait was down 0.8% and the DFM off 1.6%.

U.S. markets were up: DJIA up by 1.69%, S&P 500 2.04% and Nasdaq 2.12%.European markets were up for the most part: FTSE 100 by 0.07%, CAC 40 by 0.46% and the DAX down slightly by 0.20%. Asian markets closed up overall yesterday: Shanghai Composite by 1.31%, Nikkei by 0.38% while the Hang Seng closed down 0.42%. As of this morning, Asian markets were broadly up.

Brent crude was up 0.64% at USD 60.65 / bbl while WTI crude was down slightly by 0.05% at USD 55.68 / bbl. The US Energy Information Administration expectsOPEC (excluding Iran) net oil revenues to fall by 14% y-o-y in 2014, and then drop by 46% in 2015 compared to 2013 as it projects Brent crude to trade at an average of USD 68 / bbl.

President Abdelfattah El-Sisi assured investors that parliamentary elections in Egypt will take place before the investment summit on March 2015 yesterday during the opening of the newly renovated Hurghada International Airport. PM Mehleb added that candidates will be allowed to submit their documents to run in the next few days. The news comes after the final version of the electoral districts law was submitted yesterday to the prime minister by Transitional Justice Minister Ibrahim El-Heneidi after it was reviewed by Maglis Al Dawla (Read in Arabic).

Fitch Ratings maintains a stable outlook for GCC / Middle East banks. GCC banks’ perceived stability is backed up by the probability of sovereign support and while regional unrest had a negative effect on bank in Jordan, Lebanon, and Egypt, Egypt’s banks have managed to rebound back to stability. Read Fitch’s press release on Reuters.

Abraaj Capital increased its bid for Bisco Misr over Kellogg’s by 2.99% to EGP 84.66 / share, according to Al Mal. Abraaj also said it intends to keep the Bisco Misr trademark and (capitalizing on the nationalistic attacks on Kellogg), appeared to pledge no layoffs, and promised the company will remain EGX-listed. In another story, Al-Mal reports that the Egyptian Financial Supervisory Authority (EFSA) says it will accept additional takeover bids for Bisco Misr for an extra five days, with the window extending to 24 December. So far only two companies are in contention: Abraaj (which launched its bid at EGP 73.90 per share) and Kellogg (starting offer of EGP 79.00 per share). A very short bidding war has since transpired, and the paper suggests Kellogg may be the winner. (Read in Arabic)

The Financial Times has a special report out this morning headlined “Year in the Arab World” with no less than 14 stories posted covering everything from how Daesh funds itself to Morocco’s ambitions to position itself as a finance hub for sub-Saharan Africa and “Egyptians rail against rising fuel costs.” It you’re a subscriber, the package is a must-read and the list of stories ishere.

The General Court of the European Union issued a decision yesterday to remove Hamas from the EU’s terror list on procedural grounds, but stated that it would still temporarily maintain measures regarding their classification to keep a freeze on funds in effect for three months or until an appeal is closed if one is brought before the court. (Read the court’s release here).Hamas wasted no time gloating over the decision, with UK-based Ikhwani online publication Middle East Monitor (MEMO) carrying a brief interview with Khaled Meshaal: “We, the leadership of the Islamic Resistance Movement Hamas, welcome the decision of the General Court of the European Union to remove Hamas from the European Union’s terrorist list and we consider this to be a step in the right direction and a means of making right a position that was wrong. This past position was not based on objective facts. In addition to this, it was in violation of and contradictory to international law as well as legal and humanitarian norms that guarantee the right of nations to resist occupation.” (Read)

Will cheap oil dim the future for renewable energy? Not really, appears to be the consensus, but it could slow development. The FT, Guardian and Scotland’sHerald all have pieces on this today, signaling a forthcoming wave of coverage.

Once upon a time, we would have cared: Blackberry has a new phone out. It’s called the Classic. It has a bigger screen — and a real touch keyboard. (Read the Global and Mail’s coverage of the announcement or check out the review onCrackberry.)

EGYPT IN THE NEWS

We can only hope international coverage of Egypt could be this mellow every day: A focus on Egypt’s rich archeological heritage to help renew interest in Egypt’s cultural tourism, which has taken a particularly strong hit in recent years. News on Egypt’s tourism was led by a number of pickups of the million-mummy burial site story we noted yesterday — it’s making appearances today in the Mail Online,RT, International Business Times, Fox News and The Economic Times.

The potential for increased interest travel to Egypt as a result of the flurry of upcoming ancient Egypt-themed movies, (which we’ve noted in the past) as well as those already out in theaters was picked up by The New Straits Times.

All of this positive coverage was capped off by the supportive comments and constructive criticism provided by Deborah Lehr, Senior Fellow of the Paulson Institute, a think-tank focused on US-China relations, andChair of the Antiquities Coalition. Lehr comes from a background of law and finance with a focus on emerging markets, and is a founding member of the International Coalition to Protect Egyptian Antiquities. “As the security situation improves, now is the time for Egypt to consider new opportunities to promote — and protect — its cultural and aesthetic patrimony. This must be an essential part of its economic revitalization plan. And there are lessons to be learned from another great ancient civilization, China … To date, China is tied with Italy as the world’s largest World Heritage destination, with 47 designated sites. Egypt, equally well known for its rich historical treasures, has a mere six. So what can Egypt learn from China?” Lehr goes on to list four primary recommendations:

• Actively pursue UNESCO World Heritage designations.
• Build up the tourism infrastructure.
• Site preservation and management.
• Strategic public relations campaigns to promote tourism in key markets.

The last of Lehr’s suggestions has already been in play for some time now by the extremely active and competent Egypt Tourism Authority and Ministry of Tourism, but a stronger focus on the first three points is clearly called for:Digging Out of Tourism Downfalls: Egypt’s Archaeology Takes the Stage (Read)

This week also witnessed the release of Bloom Consulting’s Country Brand Rankings, as reported by Skift, with news that South Africa has overtaken Egypt’s top spot as best-branded African country. For more on the story and a link to the rankings, see our entry in the Tourism section below.

US scholar Robin Wright is back in the WSJ today, this time with a quick take for the Washington Wire headlined “Assessing the Arab Spring Uprisings After Four Years.” Shockingly, she finds it unfolded as nicely as everyone had once hoped. (Read)

WORTH READING

Before its latest move where it eased accounting rules to reduce banks’ need for dollars, Russia’s central bank spent USD 1.96 bn on Monday defending the ruble, according to a statement. This brings the total amount spent by Elvira Nabiullina’s central bank to over USD 10 bn in its attempt to stop the ruble’s collapse, including USD 4.3 bn just during 12-15 December. The ruble dropped by more than 30% against the USD over the past month. While the two-sided movement of the ruble shows the dichotomy of the situation as the government remains willing to splash dollars saving the currency while the public is gripped by fear of capital controls, the situation is far more grim for Russia’s super-rich as the 20 wealthiest people in the country lost USD 10 bn in just two days. Internationally, Politico asks if Barack Obama’s policies have role in what’s happening and attempts to explain how US sanctions might be driving Moscow’s financial crash.

You can keep track of the erratic exchange USD/RUB exchange rate here.

WORTH WATCHING

If you’ve ever reached the point where you have so many tabs open you can no longer tell what’s what, or have calculated the number of tabs you can have open on your desktop or laptop while still being able to sort of make them out, and / or if you are notorious for going off on tangents and never finishing anything — this video is for you. Will Tabless Thursdays ever catch on? Probably not. But MD and senior editor at The Atlantic James Hamblin suggests you give it a try to improve productivity: Single-tasking is the new multitasking (Watch)

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Armaments Authority signs deal with Orascom and General Electric for 1,000 MW of electricity
Al Mal | 17 Dec 2014
Eight units at the Assiyut power plant will be built with a total capacity of 1,000 megawatts following an agreement signed between the Armament Authority and an alliance between Orascom Construction and General Electric (GE). The project is part of a government plan to create an emergency power plan for 2015 at a cost of EGP 16 bn and will include 68 new power stations in Assiyut, Ataka, Mahmoudia, Sharm El Sheikh, Hurghada, Port Said and other locations in Upper Egypt. The new power plants are expected to start generating in July 2015. Other projects include alliances between El Sewedy Electric, Ansaldo of Italy, Siemens, GE and Orascom Construction. (Read in Arabic)

Oil price drop will not reduce the cost of electricity generation – Ministry of Electricity
Al Mal | 17 Dec 2014
A source at the Ministry of Electricity told Al Mal the oil price drop will not affect the prices paid to generate electricity because the fuel prices and quantities are set years in advance. The ministry’s fuel consumption costs run to EGP 800 mn a month and fluctuations in international prices will only affect the Ministry of Petroleum, according to the head of East Delta Electricity Production Company. (Read in Arabic)

OIL & GAS

Apache and Shell sign Egypt’s first fracking agreement
Al Borsa, Reuters | 17 Dec 2014
With an initial investment of USD 30-40 mn, Apache Corporation and Shell Egypt are undertaking Egypt’s first project to produce gas from shale in north east Abu Al Gharadiq in the Western Desert, Al-Borsa says. The concession agreement has the companies digging three horizontal wells at the site and the project, according to oil minister, opens up a new horizon in oil production from the Western Desert. Overall, this is — as we see it — just a rehash of the news we noted back on 10 November. (Read in Arabic on Al-Borsa or in English on Reuters)

EGPC to tender three sites for oil exploration
Al Shorouk | 17 Dec 2014
An unnamed source at EGPC told Al Shorouk the company is going to tender three sites for oil exploration in the Western Desert in January or February 2015. The early 2015 tenders will also include four potential shale oil extraction. (Read in Arabic)

Oil at USD 60 could save Egypt USD 7.1 bn — Pharos
Al Mal | 17 December 2014
Pharos Holding suggests the Egyptian economy might very well benefit in 2015 from lower oil prices, Al-Mal says, noting that as Egypt is not an oil producing country like its GCC counterparts, it meets most of its needs through a combination of local and international sources. Its import bill for 2013 was at EGP 15.9 bn, which put the average price per imported barrel for that year at USD 108.60. Pharos, the paper says, suggests that should oil remain at current prices USD 60, and should Egypt’s oil imports remain more or less constant at 276.3 million barrels per year, Egypt in 2015 could get a 45% cut its oil spending bill, which could come in as low as USD 8.8 bn. (Read in Arabic)

Kuwait Energy makes a new discovery in East Ras Qattara
Al Borsa | 17 Dec 2014
Kuwait Energy issued a statement saying that the exploration well Shahd-4 on the East Ras Qattara site in the Western Desert discovered oil and gas. Tests showed that the site, which Enap Sipetrol owns 50.5% of the rights for, has flow rates of over 2,400 bbl / day of condensates and 25 mcf / day of gas. According to Kuwait Energy’s Managing Director, this is the biggest discovery in the Ras El Qattara area. (Read in Arabic)

BASIC MATERIALS & COMMODITIES

Lactalis submits mandatory purchase offer to acquire Arab Dairy
Al Mal and EGX disclosure | 17 Dec 2014
Lactalis has filed with EFSA its offer to acquire 100% of Arab Dairy at EGP 66 per share for a total deal value of EGP 348 mn. The offer will be conditional upon the acceptance by shareholders owning at least 51% of the company’s total outstanding shares. (Read in Arabic in Al Mal and in the EGX disclosure)

TOURISM

South Africa overtakes Egypt as best-branded African country — Bloom Consulting
Skift and Bloom Consulting | 17 Dec 2014
Travel news and views site Skift reports on the results of Bloom Consulting’s 2014 / 2014 Country Brand Rankings. Bloom’s focus is on creating branding strategies at the country and city level. The big news in the Africa section of the report is that for the first time, South Africa has knocked Egypt out of the number one spot. Skift, citing the report, explains: “The report cites the country’s political instability, a decrease in tourism receipts, weak branding strategy, and negative online presence for its fall from the number one spot. Those myriad of factors seem fitting for a much larger fall.” (Read on Skift and download the report from Bloom as a pdf)

BANKING & FINANCE

NBE leads coalition to establish solar panels factory
Al Borsa | 16 Dec 2014
The National Bank of Egypt (NBE) is leading a coalition to establish a new solar panel factory to be build on 30,000 sqm piece of land located in Assiyut with investments worth EGP 365 million. NBE will hold a 50% share of the new factory, 25% will be allocated to  German and Chinese companies willing to make investments in the field of solar energy and the remaining 25% will be owned by local companies. (Read in Arabic)

EGYPT POLITICS + ECONOMICS

EGP 8.5 bn in PPP projects announced — Prime minister
Al Ahram | 18 Dec 2014
Prime Minister Ibrahim Mehleb short-listed seven new potential public-private partnership projects, Al-Ahram reports this morning. The projects will be focused on infrastructure, public services and facilities, and should hover around EGP 8.5 bn in value. The government is still conducting research on advisors they will bring in to assist in the offering mechanics, according to Director of the PPP central unit at the Ministry of Finance Atter Hannoura. Tenders will open starting January and end in March, according to Hannoura, to give a chance to investors that will be in the country during March investment summit. The projects are centered around Nile transportation, the Maadi tech park, the automation of the real estate registration office, and the industrial port of Safaga (all in phase one of the process) and a water desalination plant at Safaga, upgrading Helwan’s sanitary works, and another water desalination plant in Sharm El Sheikh (all in phase two). (Read in Arabic)

District redistribution doesn’t matter, elections are a go — Political parties
Al Ahram | 18 Dec 2014
Following the redistribution of voting districts for upcoming parliamentary elections, Al Ahram writes that most of the local political powers they have spoken with say they do not really care about losing or gaining seats (of course), or even having their districts wiped off the face of the electoral ticket; all they want is to move forward with elections. (Read in Arabic)

Lower oil prices neutral-to-positive on the whole for Qalaa Holdings
Investor Brief | 17 Dec 2014
Qalaa Holdings has issued an investor brief staking a neutral-to-positive stance on lower oil prices for the company, which it says will also be positive for the Egyptian economy as a whole. The brief states that even a range of trading as low as USD 40 – 65 / bbl will be good for the company. In Qalaa Holding’s macro outlook for the national economy, the brief cites that the potential positives of lower oil prices are an easing of the budget deficit, BoP and possibly commodity prices, as well as an added impetus to take advantage of the reduced price to continue subsidy reform. Downside risks include the low-probability on the short and medium term of a withdrawal of GCC fiscal support and investment as well as the downward pressure on the ruble cutting into Russian tourist inflows to Egypt, highlighting Russians as the leading source of visiting tourists. The brief then examines the impact of lower oil prices on three of the firm’s five core sectors: energy, cement, and transportation and logistics. The brief takes into account how the new oil normal will affect Qalaa Holdings’ operations in Egypt and beyond, including its Algerian, Sudanese, Kenyan and Ugandan operations. The brief finds that these new prices are positive for almost all of Qalaa Holdings’ subsidiaries and operating markets, with the exception of Algerian operations in which the company does not believe any impact will be felt.

REGIONAL

China on track to become biggest export market for GCC by 2020
Zawya | 17 Dec 2014
Zawya cites a report by the Economist’s Intelligence Unit (EIU) that projects China as the largest export market for the GCC by 2020, followed closely by India and other developing Asian states. The EIU report ‘GCC Trade and Investment Flows’ notes that over the past few years,  GCC-China trade grew faster than with any other major GCC trade partner. With regard to India, India, the report notes that GCC exports to India grew at an annual rate of 43% over the last decade at a current total of 11% of total GCC exports. (Read)

Brazilian subsidiary of OnixOil seeks business in MENA countries
ANBA | 17 Dec 2014
Brazil’s subsidiary of OnixOil wants to operate in the MENA region providing chemical cleaning of oil tanks. According to the company’s commercial director, Tiago Faierstein, “there is no other company that provides the same kind of service offered by OnixOil and that’s the main reason for wanting to be in those markets offering this portfolio.” OnixOil became a member of the Arab Brazilian Chamber of Commerce to look for clients in the region. (Read)

Saudi Arabia’s 2015 budget to fund massive development projects
Bloomberg | 17 Dec 2014
The Saudi Press Agency cited the KSA’s finance minister, Ibrahim al-Assaf, in saying that the budget will fund “massive” development projects. The budget will focus on health care, education, social services, and security spending but will have to account for the drop in the oil prices. By increasing public spending substantially, the finance ministry aims to achieve positive GDP growth rate during the year and account for any shortfall in private spending. (Read)

ON YOUR WAY OUT

“Egypt’s foreign ministry is working towards release of detained pilots in Sweden” reads Ahram Online’s headline this morning. Seems an Egyptian charter flight is alleged to have carried 10 Syrians with false papers into Sweden. (Read)

“Egyptian civil servant could lose job for promoting Atheist beliefs” on Ahram Online also drew our attention this morning. Coming as it does on the heels of the “Atheist Cafe,” the headline will draw the attention of human rights observers (and State Department types) concerned with freedom of belief and expression. Expect more headlines on this topic next week. (Read)

26 men have been referred to trial for doing things in a Downtown Cairo bath house that we can’t write about without being blocked by computer algorithm from your inboxes, the AP reports. (Read)

McDonald’s in Japan is limiting the size of fries it sells customers to as a precautionary measure as its stock of frozen French fries runs short due to a labor dispute on the US West Coast.

US will re-establish diplomatic relations with Cuba, Obama to ask Congress to review the embargo: After a 53-year freeze in relations, the US and Cuba are willing to work it out and give things another try. Speaking from the White House at what people are now calling an historic moment for Cuban-American relations, Obama said, “We will end an outdated approach that for decades has failed to advance our interests and instead we will begin to normalize relations between our two countries.” From another viewpoint, it would be wise to not buy any cigars or rum, as both of these items are going to see a probable decline in price within the next year. Bacardi, though, not really: It’s still USD 15 a bottle, considered cheap, corporate, non-artisanal and — most of all — not really Cuban rum.

Best roundups: Washington Post and New York Times.

Best headline: The UK’s Spectator with “Restoring diplomatic ties with Cuba? What’s with all this eruption of sanity in Washington?” (Read)

(Oh, and as much as we welcome the resumption of diplomatic ties, Che Guevara? He’s still a murderer of the pre-revolutionary elite, dissidents, Jehovah’s Witnesses, Afro-Cuban priests… Really.)