Monday, 22 December 2014

El-Sisi heads to China today • Electricity Ministry to announce details of 2 GW of new generating capacity “within days” • National Bank of Egypt looks to hike its paid-in capital • Interpol cannot “arrest” YBG, Rachid, and Salem • restoring barter economy with Russia?

Note to Readers: We’re trying a new template this morning to tweak legibility on a couple of devices. Let us know your thoughts on editorial@enterprise.press.

FX WATCH

The Egyptian pound held steady at the CBE dollar sale on Sunday at the auction rate of 7.1401, but weakened since Thursday’s sale on the unofficial market from 7.78 to 7.80, according to traders who spoke to Reuters and Enterprise. The Sisi administration is considering issuing a moratorium on gold imports prop-up the EGP on the parallel market, according to an anonymous source talking to Amwal Al Ghad. (Read in Arabic)

WHAT WE’RE TRACKING TODAY

President Abdelfattah El-Sisi departs today for China, where he will meet with China’s President, Prime Minister and key government ministers in addition to academics and business leaders. It’s Egypt’s first major push on relations with China since then-Minister of Trade and Industry Rachid Mohamed Rachid’s very solid efforts in 2007. El-Sisi will ink MOUs in multiple files including economic cooperation, transportation, medical equipment, civil aviation, education and environment, said Ittihadiyya spokesman Alaa Youssef in a statement out overnight, saying the visit in the run-up to the Sharm investment summit underscores the “importance Egypt accords to China’s active participation. In addition it reflects the importance attached to attracting Chinese investments to many of the projects that will be proposed at the conference.” The president will also tour Chengdu, a Chinese hub in the energy and technology industries.

Quick facts on our trade relationship with China, per the presidency:

  • USD 10.3 bn in total bilateral trade in FY13
  • Egyptian exports to China in FY13: USD 1.9 bn — a 50% rise, Ittihadiyya says
  • Egyptian imports from China in the same year: USD 8.4 bn
  • Total Chinese investment in Egypt to date: USD 450 mn

Trade and Industry Minister Mounir Abdelnour spoke with Al-Shorkouk last night from China, emphasizing the need to redress the trade imbalance and highlighting opportunities for Egyptian agricultural companies to grow their market share in China. Abdelnour also sees potential in the inbound market for Chinese tourists and expects Chinese companies to be very interested in opportunities in the New Suez Canal zone. The Egyptian Businessmen’s Association, speaking with Al-Masry Al-Youm, is also throwing its weight behind the president’s trip.

Beji Caid Essebsi declared victory in yesterday’s presidential run-off vote in Tunisia. The official count won’t be released until later today and his opponent, Moncef Marzouki, has thus far refused to concede defeat. (Read in Reuters)

Traffic alert: If you’re heading toward the October 6 bridge entrance or the Autostrad from the direction of Nasr City this morning, please be advised that Nasr Street is closed off a little ahead of Tiba Mall, as the burst water line from yesterday early afternoon is still under repair.

VACATION REMINDER

Enterprise is off on 24 and 25 December for some quiet time with family — and to catch up on sleep. We’ll be back on Sunday, 28 December.

LAST NIGHT’S TALK SHOWS

Now that Egyptian media has been told to stop hating Qatar, talk show hosts are at a bit of a loss on how to proceed. After more than 18 months of Qatar bashing, it’s proving difficult for them to change their tune overnight.

Amr Adeeb decided to swallow his pride and give Qatar the benefit of the doubt last night by declaring a one-month truce until 25 January 2015. He called on all Egyptian media to follow his lead.

“The ball is now in their court during this trial period. We are heading into a very critical period as we near the fourth anniversary of the 25 January Revolution and I am biting my tongue as I say this, but let’s stop the war,” said Adeeb. “We were never really clear on why we started this war of words with Qatar in the first place. There has never been a clarification on why they chose to take this stance against Egypt. Let’s just hope that they have finally come to their senses.”

“The U.S. has a new ambassador in place and the Apaches have arrived. The Americans have accepted the status quo, and it is high time that Qatar does the same,” added Adeeb.

Adeeb’s co-host Khaled Abu Bakr disagreed.

“Just 45 minutes ago, Al Jazeera tweeted that there are mass demonstration going on against the military coup in Egypt. Does it sound like Qatari media has any intention of playing nice?” said Abu Bakr. He went on to say that Al Qahira Al Yawm would start its own Al Jazeera Meter like the one that Youm7 has to monitor the Qatari network’s attacks on Egypt.

Ibrahim Eissa agreed with Abu Bakr that not much is likely to change in terms of the Qatari news channel’s attitude towards Egypt.

“Just because the heads of state decided to resume relations doesn’t mean that we can forget the past and forget the belligerent tone that Qatar has been using with us for over a year now,” said Eissa. “I have every faith in the leadership of President El-Sisi, but the Egyptian public has not been told on what basis this reconciliation was made. We really don’t know why we broke up in the first place and why we are getting back together.”

Lack of transparency was Eissa’s pet peeve for the night as he also criticized the manner in which the new Head of General Intelligence Service was appointed.

“We need to hear Gen. Khaled Fawzy’s voice. We need to know more about him and about the circumstances surrounding his appointment. We know that there are national security issues involved here, but at the very least this story deserved more than just four lines in the newspaper,” said Eissa.

SPEED ROUND

The EGX30 closed up 3.5% on Sunday at 8,690 on total turnover of EGP 1.2 bn; setting aside EGP 529 mn related to a special transaction, that’s about 3% below the 90-day average. Regional markets were also up yesterday: KSA’s Tadawul added 2.5%, the MSM surged 5.5%, Kuwait gained 4.0%, Qatar gained 7.6%, ADX added 3.5% and the DFM posted the day’s biggest gain, rising 9.9%.

That special transaction? Al-Mal says it was Fairfax Holding adjusting its position in CIB. The block trade involved 11.5 mn shares representing 1.2% of Fairfax’s 6.76% stake in the bank; the financial newspaper says the trade involved “redistributing” the shares over some of its other holdings. (Read in Arabic) CIB closed yesterday at EGP 46.83 per share, according to Reuters, up 0.6%.

Both Brent and West Texas Intermediate crude were each up more than 1% in early trading this morning in Asia, perBloomberg, as were Asian markets this morning. Reuters is reporting a consensus that Brent should now remain above USD 62 per barrel through year’s end.

Michelle Dunne, who was deported earlier this month from Egypt after arriving to attend a conference hosted by the Egyptian Council on Foreign Affairs, has a piece out this morning in the Washington Post headlined “Egypt is open for business, but not for reform.”

The best take to-date on the origins of KSA’s current oil policy is in today’s Wall Street Journal, and as they tell it, it’s a decision that is helping re-shape relations with Washington, Riyadh’s traditional ally: “But the story of Saudi Arabia’s new oil strategy, pieced together through interviews with senior Middle Eastern, American and European officials, isn’t one of an old alliance. It is a story of a budding rivalry, driven by what Saudi Arabia views as a threat posed by American energy firms, these officials said.” (Read)

Saudi Arabia says it won’t cut oil output: Saudi Oil Minister Ali al-Naimi: “If they [non-OPEC nations] want to cut production they are welcome: We are not going to cut, certainly Saudi Arabia is not going to cut.” (Read in Reuters) Qatar and the UAE echoed similar statements: Qatar’s energy minister said the international market is oversupplied by two million barrels per day and his UAE counterpart concurrently called for non-OPEC producers to cut their output – calling their production levels “irresponsible” and the reason behind the drop in oil prices. (Read in Bloomberg)

Bloomberg View: Ready for USD 20 Oil?: “Developing countries that depend on commodity exports for hard currencies to service foreign debt will produce and export even at prices below their marginal cost. Until some major producer chickens out and cuts production, oil prices should remain low. They could decline a lot more than the 50 percent drop so far … The Saudis also seized the opportunity to damage their opponents, especially Iran and what they see as Iran-dominated Iraq, in the Syria conflict. They also want to help allies Egypt and Pakistan reduce expensive energy subsidies as prices fall.” (Read)

Meanwhile, falling oil prices are having a deleterious effect on Bahrain’s dollar-denominated sukuk, according to Bloomberg. (Read)

EGYPT IN THE NEWS

Earning wide attention again today are pickups of wire stories covering Itihadiyya’s announcement that Maj. Gen. Khaled Fawzy has been appointed as the interim head of General Intelligence following the retirement of Gen. Mohamed Farid Al-Tohamy. Al Tohamy, whom Reuters describes as a “consistent advocate of the fierce security crackdown on Mursi’s Muslim Brotherhood” was awarded the Order of the Republic of the first degree by President El Sisi in recognition of his services.

The New York Times’ David Kirkpatrick holds forth on Al-Tohamy’s retirement; the Wall Street Journal has gone with the AP’s version of the story.

Reuters‘ coverage of what could prove to be a thaw in relations between Egypt and Qatar is also getting quite a bit of pickup this morning, and the FT’s Heba Saleh had a brief piece on the issue out last night.

A handful of international outlets and multiple GCC publications have picked up the AFP’s piece about the statement from Qatar pledging “full support” to Egypt: “The security of Egypt is important for the security of Qatar… the two countries are linked by deep and fraternal ties,” said a statement from the office of Qatari Emir Tamim bin Hamad Al Thani. Notably, Qatari outlet The Peninsula ran a story hailing the thaw, and every Saudi news agency in English also praised the reconciliation, with a focus on King Abdullah’s intervention. Sadly, whoever is responsible for the home page of Al Jazeera Englishand whoever wrote this piece on Mubasher Misr of Al Jazeera have yet to hear the news of the reconciliation.

The New York Times, Salon and ABC News are just three of several dozen media outlets in North America and Europe to have run with the AP’s story on the Egyptian Initiative for Personal Rights deciding to register under “a restrictive law it and other organizations have decried as an attempt by the government to silence them. … ‘Our work was always extremely difficult. I don’t expect it to be easier under the law,’ said Khaled Mansour, the group’s executive director. ‘We decided to call the (government’s) bluff.’” The Cairo Institute for Human Rights Studies had earlier decided to relocate outside Egypt rather than register under the new NGO law. (Read)

The AP wrote on Sunday: Egypt official says nearly 10,000 detained this year, with the NYT picking up the story. The article references an interview conducted by state news agency MENA with Major Gen. Abdel-Fattah Osman, from the media affairs office of the Interior Ministry. “Osman said security forces have foiled about 400 terrorist attacks since January. He said the security forces also arrested 460 suspected members of terrorist cells, 6,400 rioters, 50 wanted militants, and some 2,600 accused of attacking police stations.”

Spider-Man of Cairo is still going strong, with a belated pickup from The Guardian. The brief article features two new photos from the set (if one hasn’t viewed them already on the photographer’s Facebook page) including a smoking Spider-Man hanging up his laundry. Thankfully, The People have yet to turn on Spider-Man as they usually do at some point in the movie. Side note: Spider-Man movies continued to be made and rebooted as stipulated by the agreement by Sony and Marvel. If Sony doesn’t produce a new Spider-Man movie, or if Fox doesn’t produce new X-Men movies, the rights revert to Marvel. So expect them forever or until people tire of superhero movies.

PUBLIC SERVICE ANNOUNCEMENT

Have you ever said something on email you wouldn’t want made public? A snarky remark about a boss, colleague or client? Details of your negotiating strategy on an upcoming transaction? Medical information? If you’re using email, iMessage or Whatsapp, all of this and more can be made public, as the North Korean hack of Sony Pictures has shown. Even companies in Egypt are at risk of hackers, whether they’re acting for political reasons, to make a profit or just to be malicious. The first step in setting a corporate defense is to make it a priority for your institution; the second is to read up on the basics before having a conversation with your chief information officer or whoever handles security for you. Start with the WSJ’s “Are You Sure You Want to Use Email? Companies Rethink Policies About Deleting Messages in Wake of Sony Leaks.” Security guru Bruce Schneier has a great overview on his blog (it’s also been published in the WSJ’s CIO and syndicated elsewhere).

ICYMI

Abraaj’s Mustafa Abdel-Wadood was on Bloomberg’s “Countdown” with Mark Barton last Monday, 15 December. Below are edited excerpts from the appearance (watch here) following an introduction that takes note of Abraaj having invested USD 750 mn and generated USD 480 mn from 17 exits in the last year:

Barton: What does the horizon look like?

Abdel-Wadood: We’re investors in long-term trends, from Latin America to Asia and the Middle East, and more important than the macro is our own selection process: The sectors we’re excited about and the businesses in which we can make a difference over our holding period.

Barton: You’re investing along lines of domestic consumption, demographics and urbanization, not natural resources.

Abdel-Wadood: We look to avoid volatility or situations in which our ability to influence outcomes is limited. That’s why we invest in the growth of the middle class, which is driven by demographics and the trend toward urbanization. Ultimately, we see consumption patterns converging with global norms, and this is a very defensive strategy in many markets — growth of the middle class is widely spread out and consistent over time. That’s why we’ve done a lot in healthcare and FMCG, manufacturing, logistics and retail.

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Agreements with two companies to generate 2 GW of electricity in the summer
Al Borsa | 19 Dec 2014
The government has reportedly reached agreements with two companies to generate 2 GW of electricity during the summer of 2015, Ministry of Electricity spokesman Mohamed El-Yamani said yesterday. El-Yamani also said new production units and a new power plant were slated to enter into service in May 2015, saying the government was undertaking large investments to avoid a repeat of last summer’s recurrent blackouts. He said more details would be shared with the public over the next few days. (Read in Arabic)

Egypt’s Nuclear Materials Authority studying uranium exploration with the military
Al Borsa | 21 Dec 2014
The Nuclear Materials Authority (NMA) is now finalizing feasibility studies to create a company to search for uranium in Egypt’s Western and Eastern deserts. The project is a joint effort with the military (which will have a 50% stake) with other shareholders including Kafr El Sheikh governorate (20%), and the NMA and the National Investment Bank (both 15%). The head of NMA has ruled out tendering exploration licenses to international companies, noting that the new company will be responsible for exploration and extraction. (Read in Arabic)

27,500 tons of petroleum coke to arrive at the Port of Safaga
Al Mal | 21 Dec 2014
A spokesperson for the Red Sea Ports Authority said 27,500 tons of petroleum coke would be delivered to the Port of Safaga today on board of the “Yamadora Pearl” vessel. The shipment is being made for the benefit of Misr Aluminum Company. The spokesperson explained that the Port of Safaga was equipped with special silos for coal, which makes it possible to transport the coal without unloading it on the pier, thereby minimizing pollution. (Read in Arabic)

New tender to establish 2 solar power plants
Al Mal | 21 Dec 2014
The Ministry of Electricity and Renewable Energy is planning to announce in January the terms and conditions of tenders for two new solar stations in the New Valley governorate. The two 10 MW plants would carry a total investment cost of c. USD 28 mn. (Read in Arabic)

OIL & GAS

ENI-KOGAS fails to find natural gas off the southern coast of Cyprus, will explore a new site closer to Egypt
Global Post | 19 Dec 2014
ENI-KOGAS’ exploratory drilling failed to find gas off the southern coast of Cyprus. The consortium will move into an area closer to Egyptian natural gas wells to continue drilling. ENI-KOGAS already has concessions in three Cypriot fields and plans to conduct six drillings campaigns. (Read)

BASIC MATERIALS & COMMODITIES

Wheat reserves sufficient through April 2015, price confirmed for local harvest — Minister
Reuters | 21 Dec 2014
Egypt’s wheat supply is sufficient to last through April 2015, at which time the state will start buying an expected 3.6-3.7 mn tons of local wheat during the April-June harvest season, said Minister of Supply and Domestic Trade Khaled Hanafi yesterday. Hanafi confirmed the state would pay c. USD 59 per ardeb (about 150 kg) of wheat, the same price as last year and USD 100 per ton more than it pays on the international market. The minister’s comments come after our report yesterday that the General Authority for Supply Commodities had bought a combined total of 300 ktons of wheat from France and Russia for delivery 21-31 January 2015. (Read)

Saudi’s ASIC hopes to receive license for Suez gypsum plant, start sales by year-end 2015
Amwal Al Ghad | 21 Dec 2014
A company identified as “Saudi ASIC” (which we presume is Abahsain Specialized Industrial Company) has obtained licenses and permits from the North-West Gulf of Suez Development Co. to begin construction work on an EGP 700 mn gypsum plant, reports Ahmed Sabry Darwish, Secretary-General of the Saudi-Egyptian Businessmen’s Association. Production could begin as early as the end of 2015. (Read in Arabic)

RETAIL

Amer Group signs agreement with Saudi Arabia’s Othaim Markets
Al Mal | 20 Dec 2014
Amer Group (AMER on the EGX) announced that it has signed an agreement with Saudi Arabia’s Othaim Markets to develop an entertainment park at Amer Group’s Porto Cairo Mall. Othaim’s Chief Executive Officer, Fahad Al Othaim, was quoted by Al Mal saying that his company is pleased to have its first venture in Egypt at one of Amer Group’s developments with an estimated investment cost of EGP 60 mn. (Read in Arabic)

TOURISM

Government mulls proposal to barter tourism in exchange for Russian products, technical assistance
Al Borsa | 21 Dec 2014
The Egyptian government is mulling a proposal by Tourism Minister Hisham Zaazou that would allow Egypt to welcome Russian tourists in exchange for commodity imports from Russia, said Cabinet spokesman Hussam Gawish. The Egyptian government is fearful that a plunge in the value of the Russian ruble will result in lower numbers of Russian tourists to Egypt. The Chairman of the General Union of Chambers of Tourism said the number of Russian tourists to Egypt has already dropped by 30% in the last month on the back of a weaker ruble, which lost 42% of its value against the USD since the beginning of the year. About 2.9 million Russian tourists visited Egypt as of the end of November, very close to the government’s target of 3 million Russian tourists in 2014. The tumbling ruble has also resulted in less Egyptian agricultural exports to Russia, said Ali Eissa, President of the Export Council for Agriculture. Meanwhile, the Director General of the Chamber of Metallurgical Industries, Mohamed Hanafy, called on the government to approach Russia for its services in helping to upgrade old public sector factories, such as the steel and iron factories, aluminum plans in Helwan, the Nasr Automotive factory and a coal coke plant. However, Mostafa El-Naggari, Chairman of the Businessmen’s Exporters Association, warned that a barter agreement may violate free-trade pacts of which Egypt is a signatory. He also urged the government to ensure that Russia has a sufficient reserve of US dollars in order to guarantee payment to Egyptian exporters. (Read in Arabic)

BANKING & FINANCE

NBE seeks capital increase, expands financing of public and private sector projects
Al Shorouk, Al Mal, Amwal Alghad | 20-21 Dec 2014
The National Bank of Egypt (NBE) is seeking the Ministry of Finance’s approval of a capital increase to EGP 30 bn from its current EGP 20 bn. NBE plans to release around EGP 5.8 bn from retained earnings over the last four years to increase its paid-in capital to EGP 15 bn from EGP 9.2 bn with a view to expanding its financing of public and private projects in 2015. The bank will join forces with Banque Misr to extend an EGP 1.5 bn syndicated line of credit to El Canal Sugar Company, an affiliate of the UAE’s Al Ghurair Group, to build a new sugar factory in Minya that is expected to begin production by 2017. This follows NBE’s decision to renew credit facilities for Egypt’s cotton and sugar sectors, with some EGP 1.5 bn earmarked for the cotton sector and EGP 1.1 bn for sugar. Moreover, following news covered in the 18 December issue of Enterprise about the Armament Authority’s deal with OCI and GE to build a power station in Assiyut, NBE said it will join Arab Bank in providing USD 700 mn in guarantees for the project, which is expected to add approximately 3,400 megawatts to the national grid before the end of May 2015. (Read about the planned capital increase and El Canal Sugar Company’s loan in Al Shorouk, the credit facilities to the cotton and sugar sectors in Amwal Alghad, and the loan to the Armaments Authority in Al Mal)

EGYPT POLITICS + ECONOMICS

Interpol cannot “arrest” Ghali, Rachid, and Salem
Al Masry Al Youm| 22 Dec 2014
In an interview on Al Nahar’s “Akher Al Nahar,” Egypt’s liaison with Interpol, Maj. Gen. Gamal Abdel Bary, said Interpol cannot arrange the arrest of two former ministers who left Egypt after the 25 January 2011 Revolution. Former Trade and Industry Minister Rachid Mohamed Rachid, who the piece says resides in London, is now a Qatari national, and there is no extradition treaty in effect between England and Qatar. Former Minister of Finance Youssef Boutros-Ghali entered the United Kingdom seeking asylum and now lives there under the protection of the Geneva Convention. Extradition is also not an option for businessman Hussein Salem due to his Spanish passport, as there is no extradition treaty between Spain and Egypt. Abdel Bary also noted that about 95% of the Muslim Brotherhood members who fled currently reside in Turkey, and cannot be arrested even with an extradition treaty, as Turkey has proven more than once its full support for the Brotherhood. (Read in Arabic)

70.9% y-o-y increase in September 2014’s trade deficit
Al Masry Al Youm | 22 Dec 2014
The trade deficit rose 70.9% year-on-year in September, according to CAPMAS, to EGP 27.9 bn compared to EGP 16.3 bn the same time last year. CAPMAS also revealed that the value of exports decreased by 12.9% to reach EGP 14.6 bn, compared to EGP 16.6 bn, while the value of imports rose by 28.8% reaching EGP 42.5 bn, compared to EGP 32.9 bn. (Read In Arabic)

ON YOUR WAY OUT

Suez Canal revenues were flat year-on-year and down 8.2% month-on-month in November, Ahram Online reports. (Read)

Egyptian mothers married to Palestinians can pass citizenship on to their children, an administrative court ruled yesterday. (Read)

Yesterday we covered a report from the Saudi Embassy in Cairo in which they claimed Saudi Arabia is the largest importer of Egyptian products in 11M14. This is dubious barring the unlikely possibility of Saudi Arabia having imported an extremely large amount of products from Egypt from July to November of 2014, with Italy reducing their imports significantly at the same time.CBE data shows that as of FY 2013/14, Italy still is Egypt’s largest export market with USD 4.07 bn worth of products sold there and Saudi Arabia just bought USD 928.4 mn.

EFSA issued a clarification today to note that its decision to unfreeze the Saudi Egyptian Investment Company and Adham Inc’s holdings of Arab Dairy shares was just to allow the companies to respond to the potential takeover offers. (Read in Arabic)

What had seemed to be a “lone wolf” terror attack in France last night seems to be the work of a mentally ill individual with a long police record for minor incidents and had spent time in a psychiatric ward. As the BBC reports: “A driver shouting the Islamic phrase “God is great” in Arabic has run down pedestrians in Dijon, France, injuring 11, two seriously, French media say. He was arrested after targeting pedestrians in five different parts of the city in the space of half an hour. He is said to be “apparently imbalanced” and to have spent time in a psychiatric hospital.” (Read)

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