Tuesday, 20 January 2015

Al-Ahly Football Club to list? IMF revises global growth forecast to 3.5-3.7%. Pound continues to slide. EBDR ups growth forecast for Egypt. 2014 IPO value up 4x from previous year. Nestlé to invest USD 138 mn in Egypt. Qatar to attend Sharm.

WHAT WE’RE TRACKING TODAY

The IMF’s update to its World Economic Outlook was released today at 5:00 CLT. The report is available here, but we’ve not yet had the chance to digest it in full. The link includes video of the launch and the full text in PDF. Bottom line: “Global growth in 2015–16 is projected at 3.5 and 3.7 percent, downward revisions of 0.3 percent relative to the October 2014 World Economic Outlook” as a boost from lower oil prices is offset as “diminished expectations about medium-term growth continues in many advanced and emerging market economies.”

Late tonight (or, more properly, in the wee hours of tomorrow morning), US President Barack Obama will give his sixth state-of-the-union address, set against the backdrop of an improving economy, better public approval ratings and a deepening divide with hardline Republicans heading toward the next presidential election. The business community in the U.S. (and globally) will be looking for details on hinted statements on tax reform (read: higher taxes on financial firms and the wealthy) and energy policy. The rest of it looks set to be a fairly domestic agenda, the Washington Post suggests.

LAST NIGHT’S TALK SHOWS

Lamees El Hadidy contacted Hany Genena, Head of Research at Pharos Holding for commentary on the depreciation of Egyptian pound.

“This is a very positive step which couldn’t have taken place at a better time,” said Genena who expects further devaluation of the pound ahead of the Sharm El Sheikh conference and an additional drop to as low as 8 pounds to the dollar by the end of the year. “It is good for investment and good for exports, I really see no negative impact.”

Genena — who Reuters notes as the only analyst it surveyed who correctly predicted the CBE’s surprise move to cut interest rates (more below in Speed Round) — also commended the CBE for cutting interest rates by half a percentage point last week. “These courageous and timely steps taken by the government are definitely sending the right signals to investors,” he said.

Amr Adeeb asked an important question: Where are the new governors? “New appointees were supposed to have been announced this month, but we are nearing the end of January and we have no clue what’s going on.” He speculates that the government is still in a pinch as there are allegedly no qualified candidates willing to accept the posts.

Adeeb proposes that each governorate holds a competition to select the new governor. “We need to have a clear job description and clear set of qualifications that we are required. Qualified candidates can then apply through a transparent process.” (He was only half joking.)

Youssef El Housseiny interviewed Dr. Mustafa El Fikki who presented an insightful analysis of the state of affairs in the Middle East today.

SPEED ROUND

Egypt’s central bank let the pound weaken on Monday for the second consecutive day to an auction rate of EGP 7.25 from EGP 7.19, a move some say is aimed at stamping out a thriving black market as inflation concerns ease, as reported by Reuters. “Hany Genena, head of research at Pharos Securities Brokerage, was the only economist of five polled by Reuters last week to forecast a rate cut and devaluation. ‘We see the both the Egyptian pound and interest rates going down further in 2015. We comfortably see the official exchange rate converging to the parallel rate,’ Genena said on Monday. ‘The parallel rate is a very reliable proxy of the equilibrium exchange rate given that a significant bulk of transactions, particularly private sector transactions, are executed at this rate.’ Al-Ahram, meanwhile, carries largely neutral-to-positive views from its go-to business sources — chambers of commerce — beneath the blaring headline “Dollar jumps 10 pt in 48 hours”. Bloomberg notes that while Naeem Holding says they see the official rate dropping to EGP 7.5 to the dollar, Genena sees it going as low as 8 to the dollar by the end of the year.

President Abdel Fattah El Sisi opened the World Energy Summit with a call for global action against climate change: President El Sisi called upon world leaders in his speech during the opening ceremony of the 8th World Future Energy Summit in Abu Dhabi yesterday to “Look after your nations. It is change, not destruction, that is needed.” Egypt would do its part, he said, by aiming for 20% of all energy to come from renewable sources by 2020. He also noted that “as part of the strategy, Egypt plans to build a 4,300 megawatt source of solar and wind power over the next three years.” Diversification of the nation’s energy resources, eliminating energy subsidies, the development of Egypt as an energy trading hub and improving the investment climate in the industry also featured in the president’s speech. While in the UAE, El Sisi was also honored with the Zayed Award of Future Energy by Crown Prince of Abu Dhabi Mohammed bin Zayed Al Nahyan. Read more about the speech in The National or Al-Masry Al-Youm or watch the video.

The EBRD released yesterday its Regional Economics Prospects 2015, a forecast for the 35 countries in which they invest: “In Egypt, economic conditions have stabilized thanks to financial support from the GCC countries, policy reforms and a more stable political situation … The upwards revision to our FY2014/15 forecast to 3.8 per cent (from 3.2 per cent in September) reflects the strong start to the year, better-than-expected investment performance and the expected boost to domestic demand from lower oil prices.” (Download the 22-page report as a pdf)

Al Ahly Club plans to list shares of its football team on the stock market: A meeting of the club’s general assembly agreed to list 24% of the football team’s shares on the stock market to finance the building of a new football stadium in Sixth of October. CI Capital and CFH are advising on the IPO. EFSA has yet to receive any official documents from the club regarding the potential listing. (Read in Arabic)

Companies in MENA raised USD 11.5 bn via 27 IPOs last year, according to media coverage of the EY MENA IPO Eye for the fourth quarter of 2014. That’s about 4x the USD 3 bn raised via 25 offerings in 2013. KSA and the UAE together accounted for nearly USD 10 bn of the total, EY said, noting that “industrial manufacturing was the most active sector in 2014 with five IPOs, followed by three IPOs each in food and beverages, oil and gas and real estate sectors.” The report hasn’t hit the EY website yet, but we’ll have a link to you folks as soon as it does. In the meantime, catch their Press Release here alongside coverage in the FT,FastFT and CPI Financial.

Nestlé to invest USD 138 mn in Egypt in next few years, says regional CEO: “Certainly the kind of investments we have made over the last three to four years are the kind of vision that we would have for this market also going forward,” Nestle regional CEO Suresh Narayanan told Reuters. (Read)

Qatar to attend Sharm El-Sheikh conference in March? At least three media reports are claiming Qatari Emir Tamim Bin Hamad Al Thani will attend the critical economic summit, which enjoys strong backing from the United Arab Emirates and Saudi Arabia. Al-Masry Al-Youm cites a report in a UAE newspaper, but Reuters appears to have broken the news, with the UAE paper and AMAY picking up the news second and third hand. Says the newswire: “A formal invitation letter has been presented from Egypt’s president to the Qatari emir to attend the economic summit in Egypt,” said an Egyptian official source in the Gulf. A source close to Qatar’s Emir Sheikh Tamim bin Hamad said the invitation has been accepted.”

El Sisi to state entities: Buy Egyptian. President Abdelfattah El-Sisi passed yesterday a decree that will obligate ministries, public companies and other state agencies to include a minimum of 40% local content in any contract for products or services into which the state enters. The decree goes into effect three months following its publication in the Official Gazette, Al-Borsa suggests.

President El Sisi meets with Egyptian press in Abu Dhabi: El-Sisi met with Egyptian journalists yesterday in Abu Dhabi following the opening ceremony of the World Future Energy Summit. He explained that his international visits are an effort to market the upcoming Egypt Economic Development Conference in Sharm El Sheikh, and to introduce the world to the newer and stronger Egypt. He revealed that the delay of the expected gubernatorial shuffle was due to candidates refusing their appointments because they weren’t interested in putting up with scrutiny from the media. He then revealed that his cabinet is implementing a national program to prepare youth for senior positions within the government, and lastly that a ceremony will be held on the 25 January to include multiple prisoner pardons. (Read in Arabic, or watch Ahmed Moussa’s summary of the speech on AMAY)

No injuries, no significant damage at Suez Canal: Suez Canal Authority Mohab Mamish confirmed yesterday there were no injuries and that dredging work at the New Suez Canal and navigation on the Suez Canal continued unimpeded following the partial collapse of a sedimentation basin, Al-Ahram reports this morning. All 11 sedimentation basins will now be subject to inspection, Al-Mal notes Mamish as saying.

Ministry of Foreign Affairs: “No rest until hostages in Libya return safely” Assistant Minister of Foreign Affairs Yasser Reda met yesterday the families of Egyptians who were abducted in Libya a few weeks ago, reassuring them that MOFA is working day and night to bring their loved ones back. Twenty-one Egyptians, all of them Copts, were taken in two separate incidents remain hostage and are believed to be in the hands of a Libyan Daesh affiliate. (Read in Arabic)

Wait, we have a Supreme Council on Cybersecurity? Prime Minister Ibrahim Mehleb passed expanded membership in the cabinet-affiliated policy that directs national cybersecurity policy with the addition of the ministers of planning and finance to the roster, which already included the so-called “sovereign” ministries of defense, foreign affairs, interior as well as the intelligence service and the ministry of communications and information technology. (Read)

MOVES: Orascom Telecom Media and Technology announced the appointment of Tamer Al-Mahdi as Deputy CEO and COO in a statement to the EGX on Sunday. (Read)

Never underestimate the ingenuity of a trader: Oil traders are buying cheap oil and parking it offshore in supertankers — and selling futures contracts to lock in expected higher future oil prices. The Wall Street Journal has the story: “The oversupply has given rise to a so-called contango in the market, when the current price of a commodity is lower than prices for delivery in the future. That makes it attractive for buyers to purchase oil now at the cheaper rates, store it and strike sales agreements at a higher price in the future, locking in profits.”

“I might get out of this dead.” Alberto Nisman, the Argentine prosecutor who accused his nation’s president of colluding with Iran to undercut a probe into a 1994 terror bombing, was found dead in his police-guarded apartment the day before he was due to testify before the Argentine Congress about the crime, which remains unsolved. Officials there are working hard to position it as a suicide, but the New York Times reports that many Argentines are skeptical.

LinkedIn is working to broaden its appeal to blue-collar workers, the FT reports this morning.

If you, like us, were taken by surprise by the Swiss National Bank’s surprise move on Thursdayand scrambled to find an adequate explanation to why they’d abandoned the currency peg, Gavyn Davies offers the best explanation behind their drivers on his FT blog, and they hinge on the SNB being owned partly by private shareholders (yes, that’s right, 45% of a country’s central bank is privately owned).

WORTH WATCHING

Given the way many of our moms mangle names in general — and celebrity names in particular — nearly everyone could use the Mom Translator, by SNL. Running time: 1 minute 56 seconds (Watch)

Transformers talking trash. Running time: 15 seconds (Watch) (Parental guidance is suggested. This episode may contain strong language and adult situations.)

DIPLOMACY

President El Sisi holds meetings in with Emirati and Egyptian investors in Abu Dhabi: Ittihadiya released a statement covering the President’s meetings with the United Arab Emirates political and business leadership in Abu Dhabi yesterday. After a formal reception with the political leadership, President El Sisi held two meetings: one with Emirati investors and the other with the Egyptian business community in the UAE. During the first meeting, the President held a dialogue with UAE business leaders where they were able to directly express their concerns to him regarding Egypt’s investment climate and the challenges that Emirati investors have faced in doing business in Egypt.

In the second meeting with expatriate Egyptian business leaders, President El Sisi suggested that now was the time to invest in Egypt, and also floated the concept of establishing training centers in Egypt for Egyptian workers who intend to work abroad, in order to improve their skill set and qualifications, an outgrowth of existing training policies. He also expressed his hope regarding their attendance at the March summit.

Following his stop in Abu Dhabi, President El Sisi flew to Riyadh to personally relay his wishes for the recovery of King Abdullah, according to the AFP. According to several releases by the Saudi Press Agency, the President met with the Crown Prince and Deputy Crown Prince, as well as other senior Saudi officials, beforedeparting the same day.

Meanwhile, the Turkish Foreign Minister Mevlüt Çavuşoğlu (which is pronounced as an extended gurgling) slammed Egypt during his recent state visit to Kuwait according to several sources in the Turkish press, saying, “We object to the current state Egypt is in today. The current administration in Egypt is harmful to the country’s stability and security…”

EGYPT IN THE NEWS

The two lead stories on Egypt in the foreign press early this morning was news of a woman and a child, each in different governorates, dying from bird flu, making them the fourth and fifth people to perish from the disease in Egypt this month. A total of five people have died in Egypt from H5N1 this flu season, with six others having recovered and nine still being in treatment. (Read in Reuters, whose story was picked up Al Arabiya and theKhaleej Times.) Meanwhile, the Ministry of Health reports that it has distributed over 250,000 bottles of Tamiflu in all governorates to help fight the disease.

The other lead item was the news regarding President El Sisi’s state visit to the UAE and his participation and at the World Future Energy Summit in Abu Dhabi, along with related evaluations of his presidency and Egypt’s turnaround. A piece in The National (separate from the story mentioned above in the Speed Round) noted that President El Sisi promised to expand its exploration wells and refineries to meet burgeoning energy demands, and expressed a vision for Egypt to become a regional energy hub given its geostrategic position near energy producers and consumers. (Read)

‘Egypt: Back from the brink’ is the title of an at-times highly critical piece that at the very least notes that a number of Egypt observers had predicted nothing but a dim outlook for the country. (Read)

The National’s editorial board declares: Egypt project is really just too big to fail. (Read)

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Fuel subsidy bill down 30% in first half of fiscal year
Al Borsa | 19 Jan 2015
The cost of fuel subsidies in the first half of the fiscal year decreased by 30% to EGP 45 bn from EGP 64.5 bn in FY 2013/14, according to a source at the Ministry of Petroleum speaking to Al Borsa. The cost savings are attributable to the decrease in oil prices as well as the government’s initiatives to reduce the fuel subsidy to motorists and factories. If international prices continue with their slump, the Minister of Petroleum expects the 30% saving to carry through to the whole year. (Read in Arabic)

Egypt discussing more fuel imports with the UAE
Al Shorouk | 19 Jan 2015
An unnamed source told Al Shorouk that Egypt is currently seeking new agreements with UAE companies that are similar to the agreement with ADNOC to provide fuel shipments. The agreement sought is to provide fuel starting from September with some relaxed payment option to ensure continuity after the deal with ADNOC expires. The Egyptian delegation in the UAE now is also seeking Emirati investment in renewable energy projects amongst a few other sectors. (Read in Arabic)

Onera Systems to invest USD 100 mn in 2015
Al Mal | 19 Jan 2015
Onera Systems is preparing to begin investing USD 100 mn in 2015 in solar energy projects in Egypt. The projects are expected to commence in 1H15 and include building a solar power station in Upper Egypt with a capacity of 50MW. Onera was also awarded a bit to power 1,000 government buildings using solar energy. (Read in Arabic)

OIL & GAS

Merlon Petroleum pumps USD 81 mn to dig nine new wells
Al Borsa | 18 Jan 2015
US-based Merlon Petroleum will, through its domestic subsidiary Petrosilah Petroleum, invest USD 81 mn in 2015-2016, according to the Chairman of Petrosilah. A 3D seismic survey will be conducted on a 270 square kilometer area, encompassing the company’s concession area in Seila. The company targets six production wells and two exploration wells in its drive to increase its production levels of 8,500 bpd. (Read in Arabic)

Source of oil spill in Ras Gharib remains unknown
Al Borsa | 19 Jan 2015
The Ministry of Environmental Affairs is coordinating with the military and EGPC to identify the source of an oil spill on the shores of Ras Gharib, according to Minister Khaled Fahmy. Fahmy said that the ministry completed cleaning the Ras Gharib beaches and took samples from the oil spill to be tested. The area has a history of oil spills, but currently there are no major activities in the area, Al Borsa reports, nor does it constitute a tourist attraction. (Read in Arabic)

Assiut Oil Refining Company aims to increase capacity to 4.5 mn tons
Al Mal | 19 Jan 2015
Assiut Oil Refining Company (ASORC) announced a planned increase in capacity to 4.5 mn tons annually from 4.2 mn tons. ASORC will also add a line butane gas production line along with another line to produce high grade octane. ASORC currently supplies 75% of Upper Egypt’s fuel demands. Separately, EGPC is currently assessing bidders for a EGP 3 bn contract to develop ASORC’s refineries. (Read in Arabic)

MANUFACTURING

Ezz Steel signs EGP 1.7 bn debt restructuring deal
Amwal Al Ghad, Al Ahram | 19 Jan 2015
Ezz Steel signed a long-term EGP 1.7 bn deal to restructure its existing debt facilities. The funds will be provided by NBE and AAIB and are scheduled to be repaid on a quarterly basis over seven years. Ezz Steel ran a loss of EGP 142.5 mn in 1H14, the newspaper reports. (Read in Arabic and here)

ECHEM considering seven new projects to increase petrochemicals’ production
Al Mal | 19 Jan 2015
The Egyptian Petrochemicals Holding Company (ECHEM) is considering engaging in seven new projects, according to the company’s managing director. The projects aim to increase petrochemicals’ production and include a plant to produce ethanol with a capacity of 100 thousand tons and a USD 1.5 bn project to produce propylene amongst other projects. ECHEM will undertake those project in collaboration public and private companies. (Read in Arabic)

REAL ESTATE

ITDA meets with SODIC to allocate plot of land in place of Mansoura plot
Amwal Al Ghad | 19 Jan 2015
The head of the Internal Trade Development Agency (ITDA) said he will meet with representatives with SODIC to discuss granting the company a different plot of land instead of the one they have the rights for in Mansoura. SODIC’s plot in Mansoura was partly taken over by illegal developers after January 2011. ITDA will offer SODIC approximately 50 acres by the International Coastal Road in Dakahliya and will the settle the difference between the two plots’ prices. (Read in Arabic)

TELECOMS

Government may create investment fund to buy Telecom Egypt’s stake in Vodafone Egypt
Al Borsa | 19 Jan 2015
A government committee is considering the creation of an investment fund to buy Telecom Egypt’s stake in Vodafone Egypt in a bid to keep the stake in the hands of Egyptian shareholders, according to Al Borsa, citing an unnamed source. In addition, the source also said that the government is negotiating with Vodafone Group to waive its right of first refusal to allow it to purchase Telecom Egypt’s shares once they are put on sale. The Ministry of Defense is mediating between the sides and, according to Al Borsa’s source, will finance any transaction if necessary. (Read in Arabic)

Mobinil’s Shaker: We are investing 18-20% of revenues in network infrastructure
Al Borsa | 19 Jan 2015
Mobinil makes investments equivalent to c. 18%-20% of its top line in network upgrades and infrastructure, Mobinil vice-president Yasser Shaker told Al-Borsa in a wide-ranging, mid-length interview. (Read in Arabic)

AUTOMOTIVE

GB Auto launches eight-passenger Karry Minivan
Daily News Egypt | 19 Jan 2015
The nation’s largest distributor of passenger cars is launching an eight-seat Karry minivan with an EGP 67,000 sticker price, the sister publication of Al-Borsa claims, adding that GB Auto took over from Modern Motors as local agent for the Chinese brand six months ago. “Karry cars sold 496 cars worth EGP 34.2m in the period between January and November 2014,” it notes. (Read)

OTHER BUSINESS NEWS OF NOTE

Egyptian National Railways projecting a loss of EGP 4.1 bn for FY2014-15
Al Mal | 19 Jan 2015
The Egyptian National Railway company is projecting a EGP 4.1 bn loss during the current fiscal year. The state-owned company is blaming this on the government’s decision to increase fuel prices in 2014. The company’s fuel budget increased to EGP 1.7 bn from EGP 1 bn y-o-y as a result. (Read in Arabic)

ON YOUR WAY OUT

Alexandria is currently studying the viability of building 18 solar power stations with a total production capacity of 442 kWh, according to Al Mal.

Daesh-affiliate Ansar Beit Al Maqdis claimed they bombed the Sinai pipeline carrying gas to Jordan yesterday, allegedly over Jordan’s role in their fight against Daesh, as reported by the AFP. Isn’t the accepted dogma that terrorism is due to state repression? These terrorists don’t seem to understand that. They should read Brookings Doha papers more often in order to be better informed about their terrorism.

Egypt will temporarily re-open the Rafah border crossing today for three days, as reported by the AFP.

BY THE NUMBERS

USD (CBE auction): 7.24 (+0.05)
USD (parallel market): 7.97 (up 13 pts)

EGX30 (Monday): 9,599.10 (+0.72%)
Turnover: EGP 696.5 mn (3% above the 90-day average)

WTI: USD 47.45 (-2.55%)
Brent: USD 48.80 (-0.08%)

TASI: 8,482.9 (0.6%)
ADX: 4,567.3 (0.3%)
DFM: 3,893.5 (0.2%)
KSE: 443.5 (0.4%)
QE: 11,891.5 (0.2%)
MSM: 6,655.3 (1.0%)

 

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