Thursday, 29 October 2015

FX crunch weighs heavily on domestic auto assemblers

TL;DR

CBE expected to leave rates on hold today. (What We’re Tracking Today)

Cabinet Roundup: Ministers approve regulatory body for gas market (Speed Round)

FX crunch weighs heavily on automotive assemblers. (Speed Round)

What kind of governor will Tarek Amer be? (Speed Round)

Tourism, civil aviation ministries look to set up tourist-focused airline (Speed Round)

Misr Qena shareholders approve ASEC Minya acquisition (Speed Round)

By the Numbers + CBE Watch: Facing the Moment of Truth

WHAT WE’RE TRACKING TODAY

The CBE’s Monetary Policy Committee meets today to make a decision on interest rates. All five economists surveyed by Reuters expect the CBE to keep interest rates on hold. Only two of five surveyed by Ahram Online believe the CBE will leave policy rates unchanged, the third expects a raise in interest rates, the fourth thinks it is difficult to predict and the fifth predicts a cut.

The Tax Authority and SIS are holding a forum on the value-added tax today, AMAY reports. The forum will be headed by Dr. Safwat Nasr, a Tax Authority representative, at the SIS Nile Media Center. The Finance Ministry has sent amendments to the tax law to Cabinet for further review following input from stakeholders.

President Abdel Fattah El Sisi is set to arrive in Bahrain today from New Delhi, according to state-owned Bahrain News Agency, concluding what’s been billed as an “Asian tour” that kicked off on Tuesday in the UAE.

International talks on the crisis in Syria are being held today and tomorrow in Vienna: For the first time, Iran said it will attend the meeting, Iranian Foreign Minister Mohammad Javad Zarif said. The talks will also include foreign ministers from the US, Russia, Saudi Arabia, and Turkey. “The main round of talks is expected to take place on Friday, but diplomats say some preparatory meetings could happen [this] evening,” the BBC says. The Foreign Affairs Ministry said that Foreign Minister Sameh Shoukry is flying out of New Delhi to Vienna today to attend the meeting (Read in Arabic).

ON THE HORIZON

The Emirates NBD Purchasing Managers Index for Egypt, Saudi Arabia and the United Arab Emirates will drop on Tuesday, 3 November at 7:30am CLT here.

The Reuters Middle East Investment 2015 Summit officially gets underway from 2-6 November (pdf), however an Arabic interview with Tourism Minister Hisham Zaazou under the auspices of the summit was released Wednesday morning. For readers unfamiliar with Reuters Summits, they are not held at venues but are rather a series of interviews organized around a particular region and or theme.

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LAST NIGHT’S TALK SHOWS

Ibrahim Eissa began Wednesday night’s episode of his eponymous program by once again warning the government of the impending danger it faces as a result of voter apathy.

Eissa: “The Egyptian people sent a clear message to the government: ‘We have lost faith in the democratic process.’ … This is a dangerous development. Will the government address the people’s grievances or will it instead listen to the Matabilatiya (sycophants) and hypocrites who claim that everything is fine?”

Eissa was also critical of “the government” for its inability to prioritize goals and execute plans, focusing much of his criticism on the new administrative capital. “The government stated that the construction of the administrative capital is one of its primary priorities. That said, all of the information we [the public] have on this envisioned capital is vague and lacks any detail. For instance, the government has claimed the project will attract bns in investments. Where are these investments and why would an investor be attracted to this project?… You failed to reach an agreement with your initial partner and now you’re looking to the Chinese for a solution. But they will not build you this infrastructure for free; you will have to pay them for these services. Where will you get the money? … I am not here to claim that the administrative capital is unnecessary, but this government needs to learn how to prioritize. Several of our current cities lack proper sewage systems and electricity networks. Shouldn’t these problems also be considered high-priority?”

Amr Adeeb and co. continued coverage of the run-off phase of the first round of parliamentary elections. Adeeb opened the program with tongue-in-cheek commentary on the state of the first round of parliamentary elections. “I was quite saddened when I heard that 38 voting centers had opened later than scheduled. There were mns out on the street today, waiting in long lines in anticipation of the opportunity to cast their vote. They, unfortunately, were unable to exercise their democratic right because of these delays.” He continued, this time in a more serious tone: “There are two takeaways from these elections: 1) voter turnout was low in every stage of the first round of parliamentary elections. 2) There were no surprises. Any party or individual that was a favorite to win has won.”

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A MESSAGE FROM SODIC

Come run against cancer with SODIC and the Cairo Runners this Friday

SODIC is proud to partner with Cairo Runners for a special 6 kilometre charity run this coming Friday, 30 October 2015. All funds raised will benefit Baheya Cancer Hospital, the first hospital in Egypt and the Middle East to specialise in the early detection and treatment of breast cancer. All services at the hospital are free and are extended to all women who enter the premises.

TO PARTICIPATE: Runners of all ages are welcome. Registration is at 7:30am at Westown Hub, with the run getting underway at 8:00am sharp. Meet at Westown Hub at 7:30am sharp on Friday, 30 October 2015. Donations can be made at that time or anytime prior at SODIC Headquarters in SODIC West. Tap here to learn more.
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SPEED ROUND

Speed Round is presented in association with

GB Auto’s assembly facilities non-operational for 20 days in September due to FX shortage -Chairman: GB Auto’s assembly facilities were offline for more than two weeks in September due to the CBE’s policy of prioritizing FX expenditures for essential imports, said the company’s chairman Raouf Ghabbour, according to remarks carried by Al-Masry Al-Youm. “Banks have not issued us letters of credit in February, March and from August onwards,” Ghabbour said. The auto industry leader suggested that the pound is overvalued in view of the steep fall-off in emerging market currencies this year and again called on the government to move on legislation designed to help domestic assemblers face competition from Turkish, Moroccan and European Union imports. Al Mal also quotes GB Auto Chief Investment Officer Mena Sadek as noting that the passage of the legislation would trigger new investment in the sector and help cushion the industry’s impact on the nation’s FX position. Any move into manufacturing with higher domestic content minimums will curb component imports, and local players are eying export opportunities.

Veteran finance writer Patrick Werr tries to foretell what kind of central bank governor Tarek Amer will be once he succeeds Hisham Ramez. Werr says Tarek Amer “has earned the reputation of reformer, but at the same time he is considered to be extremely cautious, and may well be reluctant to let the pound fall too much if the political powers in the country disapprove.” This is in contrast to Ramez who “believed in a strong pound whose problems were temporary, and that demand for it would increase as security and stability were restored after the political turmoil of the past four years.”

FEI chief meets Amer to discuss industry and FX crunch: Federation of Egyptian Industries (FEI) head Mohamed El Sewedy met with the central bank governor-designate Tarek Amer to discuss industry’s concerns with the inability to obtain letters of credit for the import of production inputs. Amer promised to review existing CBE policies, Al Mal quotes El Sewedy as saying.

Eni is selling its stake in the pipeline and services company Saipem to move EUR 5.1 bn in debt off its balance sheet. The Financial Times (paywall) says the agreement “also chimes with efforts by Claudio Descalzi, chief executive of Eni, to refocus the company on its upstream business” especially after discovering the Zohr gas field off the coast of Egypt. For Eni, “the sale of the stake in Saipem … will remove what has increasingly been seen as a burden on Eni’s finances. Eni has been under growing pressure from analysts and rating agencies to reduce the size of its debt, so the Saipem deal could help allay some concerns.”

The Tourism and Civil Aviation Ministries are considering setting up an airline carrier specific to tourism, said Tourism Minister Hisham Zaazou. In an interview with Reuters ahead of the Reuters MENA Investment Summit, which will be held from 2-6 November, Zaazou stated that the new airlines would provide favorable pricing to encourage tourism. He also announced that a new promotional campaign is in the works. (Reuters has also tagged the Nissan expansion story we noted yesterday as being part of the summit. We’ll continue to track it next week — it’s generally a package of stories that’s very much worth reading.)

Oil Minister, APICORP in talks over USD 6 bn petrochemicals complex: Oil Minister Tarek El Molla is engaged in talks with the Arab Petroleum Investments Corporation (APICORP) to discuss the establishment of petrochemicals complex in the Suez Canal Axis zone. The project would carry an investment cost in the range of USD 5-6 bn, Amwal Al Ghad reports. APICORP is an affiliate of the Organization of Arab Petroleum Exporting Countries (OAPEC).

A general assembly of Misr Qena Cement shareholders has approved the company’s bid to acquire both the 2.0 MTPA ASEC Minya Cement Co. and ASEC Ready Mix from Qalaa Holdings. The EGM also approved taking out financing of up to EGP 1.4 bn, presumably to fund the acquisition. Arabian Cement has also expressed interest in acquiring at least ASEC Minya, according to reports in recent weeks. (Read in Arabic)

President Abdel Fattah El Sisi has ordered the Defense Ministry, in coordination with the Local Development Ministry, to check the readiness of Alexandria Governorate’s flood prevention infrastructure, Al Mal reports. The president gave the ministries two weeks in which to draft a comprehensive report. This move comes as part of the government’s emergency flood prevention plan for the governorate.

Huawei targets 15% of Egypt’s smartphone market: The Chinese equipment maker aims to control 15% of the market for smartphones in Egypt by the end of the year, Amwal Al Ghad reports. The company currently claims to have a 12.2% market share, making it the second-most popular handset on the market. Huawei’s smartphone sales in Egypt grew by more than 146% in 2015 after the launch of its new G8 smartphone, the company claims.

The Ismail cabinet held its weekly meeting yesterday, with an agenda that focused on infrastructure development in Upper Egypt, poverty alleviation programs, improving government services, and upcoming recycling programs. Cabinet stressed the importance of implementing a law protecting local goods from foreign competition, reports Al Ahram. The cabinet reviewed the progress on the new administrative capital, with Housing Minister Madbouly stating that the project would achieve a profit of no less than EGP 10-12 bn over the coming 30 years. The meeting also looked into crisis management procedures in light of the Alexandria floods. Among the decisions taken at the meeting:

Economic Policy:

Approving drafting a law to regulate the gas market, including provisions for a new regulatory body. The law had been promised at the EEDC.
Awarding a tender to a “consortium of urban development consultants” to devise a development plan for the new administrative capital. (Media reports do not specify who makes up to consortium.)
Approving the installation of air conditioning systems cars running on Cairo Metro Line 3. The project will be handled by phase two development consortium of VINCI, Bouygues Travaux Publics, Orascom and Arab Contractors.
Issuing EGP 261.7 mn in subsidies to market the 2015 season cotton harvest – with a suggestion from the Agriculture Minister to form a ministerial committee to manage these subsidies.
Allocating a four feddan plot of land to the General Company for Electrical Projects (Eleject) to build a power plant that would run on waste.

Social Policy:

Rolling the presidentially-mandated Consultative Council for Egyptians Abroad into the Ministry of State for Immigration under a new draft Immigration Law.
Allocating five feddans to El Ittihad Alexandria club to build pitches.

Al Ahly in talks to build football stadium with UAE backing: Al Ahly president Mahmoud Taher and his administration have been in negotiations with several UAE investors for nearly 18 months to build Ahly’s first official football stadium for its Sheik Zayed branch, Al Ahram writes. An Emirati delegation reportedly flew to Cairo to deliver architectural designs and conduct site visits, according to the state-run daily. The unnamed source said that Al Ahly’s budget cannot support the construction of the stadium on its own, leaving the team open to another round of negotiations “soon.” (Read in Arabic)

BP released 3Q2015 earnings on Tuesday (pdf), posting a net profit on the basis of underlying replacement cost at USD 1.8 bn, a steep drop from USD 3 bn for the same period last year. In a conference call with analysts, BP chief executive Robert W. Dudley noted “the futures market was now forecasting oil prices of USD 60 to USD 70 per barrel into the 2020s,” the New York Times reports.

Turkey’s public enemies #1 and 2: Two children aged 12 and 13 to face two years each in prison for tearing down an Erdoğan poster, according to Turkish news site Radikal as reported by Hurriyet. “We did not care about whose posters they were. We just wanted to remove them in order to sell them to a junk dealer,” one of the boys is quoted as saying.

EGYPT IN THE NEWS

In a piece for Huffington Post, travel writer John Nicholson asks if Monaco is ‘The Most Disappointing Destination in Europe?,’ noting: “Looking out across the narrow road, the first thing you see are yachts, but not nearly as many as I thought and certainly not as many as I had seen in Cannes earlier in the year or even in El Gouna on Egypt’s Red Sea coast.”

‘A gas discovery in Egypt threatens to upend Mideast energy diplomacy‘: Stanley Reed writes for the New York Times a good introductory backgrounder on the potential for regional energy cooperation between Egypt, Israel and Cyprus. There isn’t much new here for those who have closely followed the story in Enterprise and or the Egyptian and Israeli press, but it does serve as a solid primer on the subject.

That’s it for today’s edition of Egypt in the News: Be grateful it was short. That means, for once, there were no PR catastrophes.

DIPLOMACY

Kabil, Beecroft discuss trade: Implementation of the Trade and Investment Framework Agreement between the U.S. and Egypt featured prominently in a sit-down between Trade and Industry Minister Tarek Kabil and U.S. Ambassador Robert Beecroft. Talks centered on the elimination of trade barriers as well as ways of promoting private-sector partnerships, according to Al-Ahram.

El Sisi meets with Indian President Pranab Mukherjee in India: President Abdel Fattah El Sisi met with Indian President Pranab Mukherjee in India on Wednesday. The two leaders discussed means of enhancing bilateral ties and cooperation between their countries, Al Ahram reports. El Sisi welcomed recent increased trade between the two countries as well as Indian business activity in Egypt, and extended an invitation for President Mukherjee to visit Egypt, according to an emailed statement from Ittihadiya.

Customs Authority signs cooperation agreement with Russian counterpart: The Egyptian Customs Authority signed a cooperation agreement with Russia’s Federal Customs Service which aims to boost exports to Russia and help clamp down on customs evasion. The two bodies also signed cooperation protocols to determine value of exports. (Read in Arabic)

ENERGY

Government gives OC-led consortium three weeks to finalise contracts for Suez wind project
The Electricity Ministry gave the OC-led consortium a three week deadline to complete their contracts to built a 250 MW wind energy project in Suez. The ministry went into talks with a consortium including Orascom Construction and Engie (formerly GDF Suez) after talks with the Lekela Power and Actis consortium reportedly fell through when they couldn’t complete the procedures and meet the conditions set by the Ministry despite presenting the lowest bid at 3.9 cents per KW, sources told Al Borsa. (Read in Arabic)

Electro Tharwat and El Sewedy win tender for electrical works at Al Shabab power plant
Electro Tharwat and El Sewedy Electric won an EGP 140 mn tender to install two 250 MW steam generators at the Al Shabab power plant in Ismailia. The consortium beat out a number of companies including Kuwait’s Kharafi National. Funding for the project came primarily from the European Investment Bank. (Read in Arabic)

Eni will restart aggressive exploration cycle when crude hits USD 70
Eni plans on restarting an aggressive exploration cycle once crude hits USD 70 per barrel, Chief Exploration Officer Luca Bertelli told an African oil and gas conference in Cape Town, Reuters reports. “Maintaining exploration excellence in the current low price is our priority,” he added, noting that his company has six bn barrels of oil equivalent of resources in around 600 undrilled prospects in its key African region. (Read)

Scatec Solar announces launch of field activities in Egypt
Photovoltaic system integration specialists Scatec Solar announced the launch of field activities in Egypt, including engineering- and procurement-related activities in Benban and Zafarana, Reuters reports. The company has begun raising project finance from banks, but are pending authorities issuing bankable contractual documents and permits. Scatec Solar inked 250 MW projects under Egypt’s Feed-in Tariff photovoltaic program and are planning on investing more than USD 600 mn in Egypt’s solar energy program over the next two years. (Read)

Electricity ministry signs with Al Nowais to build first coal power plant
The Electricity Ministry plans to sign a BOO (build-own-operate) contract with Abu Dhabi-based Al Nowais Investments to build Egypt’s first coal power plant in Ayoun Moussa in Sinai next March — a year after announcing the project at the EEDC — according to Ministry sources speaking to Al Mal. Environmental Impact Reports for the project are currently being completed ahead of establishing a construction timetable. According to ministry officials, Al Nowais is now exploring means to finance the project.

EGEMAC wins contract to build to transmission stations
The Egyptian Electricity Transmission Company (EETC) signed contracts with the Egyptian German Electrical Manufacturing Company (EGEMAC) to construct two transmission stations in Upper Egypt. These include building a 66 KV electrical substation for the Middle Egypt Electrical Distribution Company (MEEDCO). MEEDCO stations distribute power across five governorates including Minya, Beni Suef, Assiut, and Fayoum. (Read in Arabic)

INFRASTRUCTURE

EGP 220 mn allocated to heavy rainfall damage prevention
The Minister of Irrigation and Water Resources Hossam Moghazi held a meeting with representatives of the concerned ministries on the status of rainfall damage prevention projects. His ministry allocated EGP 220 mn to issue new projects in the governorates of Aswan, Sohag, Assiut, Minya, Red Sea and South Sinai. in this fiscal year’s budget, in addition to existing uncompleted projects from FY 2014/15 worth EGP 149 mn and EGP 21 mn in projects already issued this year. (Read in Arabic)

BASIC MATERIALS + COMMODITIES

Trade and Industry Ministry aims to increase agri exports in the short-term
Egypt can substantially increase its agricultural exports in the upcoming period, Trade and Industry Minister Tarek Kabil told members of the Agricultural Export Council (AEC) on Wednesday. The ministry, in coordination with the Agricultural Minister, will work to remove all the unnecessary legal and operational obstacles that stand in the way of the sector, he added. According to Aly Eissa, head of the AEC, agricultural exporters have faced difficulties increasing exports due to the shortage of nitrogen fertilizers supplies. Egypt’s agricultural exports stood at USD 4.7 bn in FY 2014/15, Eissa added. (Read in Arabic)

MANUFACTURING

Sidpec inks gas separation unit agreement with Uhde Engineering
Sidi Kerir Petrochemicals Company (Sidpec) inked a USD 26 mn contract with Uhde Engineering to build a gas separation unit. The unit will bring ethane-propane mixtures coming in from the Gasco complex up to contractual standards, according to Ahmed Helmi, Chairman of Sidpec. The project is set to be completed in 17 months and will supply the domestic market, and will export any excess petrochemicals produced will be exported, Helmi added. (Read in Arabic)

HEALTH + EDUCATION

GE Marine upgrades AAST training facility in Egypt
The Arab Academy for Science, Technology & Maritime Transport (AASTMT) announced that the AAST-GE DP Centre will be upgraded with a GE Marine’s Class A training simulator. The AAST-GE DP Centre joins a group of only 12 centres in the world that are qualified by the Nautical Institute (NI) to offer Sea Time Reduction courses. “This means that trainees are credited with 30 days of sea time when they complete five days of intensive training in the Class A Dynamic Positioning (DP) simulator.” The centre will also get a Class A offshore crane simulator, the first of its kind in the Arab world. (Read)

REAL ESTATE + HOUSING

EGP 200 mn in renovations of 17 informal settlements ongoing -Cairo governor
17 informal settlements in Cairo will continue to undergo renovations worth nearly EGP 200 mn allocated from the Informal Settlements Development Facility (ISDF), Cairo Governor Galal Saeed said, as reported by Amwal Al Ghad. Among the targeted urban areas for upgrade work: Shobra, Dar Al Salaam, Ezbet Khairallah, Ein Shams, and Al Qoba, among others. Infrastructure work includes installation of new sewage systems, clean drinking water, street paving, lighting, fire hydrants and local market areas. The Military Works Department will implement the projects, Saeed said. (Read in Arabic)

TELECOMS + ICT

Etisalat Misr 9M15 revenues drop 6.5% y-o-y
Etisalat Misr’s 9M15 revenues fell 6.5% year-on-year to EGP 7.2 bn, down from EGP 7.7 bn during the same period last year, accounting for 8.4% of revenues for its UAE-based parent company. Etisalat had paid dividends to investors this year after losses it incurred since entering the Egyptian market in 2007. (Read in Arabic)

BANKING + FINANCE

Visa issues 500k cards for government employees
Visa has finished the issuance of 500k payroll ATM cards to government employees as part of the state’s programme to automate the government’s payroll. Eleven banks are involved in the project, Visa’s regional manager said. (Read in Arabic)

Private equity industry association to release an investment plan to grow SMEs
The Egyptian Private Equity Association (EPEA) is developing a strategy to draw investments and attract financing for Egypt’s SMEs, said the organization’s Secretary General Mohamed Mohy. This strategy will include awareness and educational seminars offered to investors and government agencies to familiarize themselves with investment prospects and strategies for investing in this sector of the economy. (Read in Arabic)

LEGISLATION + POLICY

Civil Service Law does not apply to university staff or public sector companies, says Cairo Governorate’s financial advisor
The Civil Service Law apparently does not apply to members of the Teaching Staff Association or to the workers at public universities, according to a reading of the law by Dr. Mahmoud Al Naghy, billed by Al-Masry Al-Youm as a financial advisor to the governorate of Cairo. State-owned businesses are also exempt, he claims, meaning that by his interpretation, striking workers at Misr Weaving and Spinning are indeed entitled to the 10% bonus promised by the president. Al Naghy criticized the lack of clarity in both the executive regulations and the rolling out of the Civil Service Law.

EGYPT POLITICS + ECONOMICS

State-employed preachers get raises
The Finance Ministry has agreed to increase the salaries of registered preachers, according to the Religious Endowments Minister Mohamed Mokhtar Gomaa. Gomaa added that the decision will now be passed to the Prime Minister for his approval, Al Borsa reported. Not mentioned by the minister is the issue of ‘fake mosques’: “vacant premises bearing the name of a mosque. No prayers or any religious rites are practiced in them; they are rather constructed to justify appointing salaried workers paid by the Ministry of Religious Endowments,” according to Al Monitor.

Four officials at Water Resources Ministry under investigation on corruption charges
Water Resources Minister Hussam Al Moghazi has opened a corruption investigation into four officials in his ministry for allegedly accepting bribes in exchange for permits to bduild facilities that polluted the Nile river. AMAY reports this is part of a wider campaign to clean up the river, which first began in January. A report was sent to President Abdel Fattah El Sisi lodging 60K different environmental violations against the Nile’s waters, said Ministry sources. (Read in Arabic)

OTHER NEWS OF NOTE

Top official at weapons manufacturer Yugoimport detained at Cairo Airport
Unnamed sources at the Cairo Airport said the Vice President of Yugoimport SDPR, a Serbian state-owned company specializing in trade of armaments, defense and transfer technology, was detained on Wednesday, according to AMAY. The unnamed source said that the Yugoimport VP arrived from Turkey on a Serbian passport without a visa. (Read in Arabic)

Russia’s Energia to start constructing new Egyptian satellite by the end of the year
S.P Korolev Rocket and Space Corporation ‘Energia‘ announced it will sign a contract with Egypt to start construction of a new Egyptian satellite by the end of the year, chairman Vladimir Solntsev said, according to Amwal Al Ghad. Solntsev was quoted on RIA Novosti News Agency saying that the satellite will be used for remote sensing. (Read in Arabic)

NATIONAL SECURITY

El Sisi extends state of emergency in North Sinai regions for three months
President Abdel Fattah El Sisi issued a decree extending the state of emergency in areas of North Sinai for three months as of 27 October. The extension imposes a curfew in the designated areas from 7 pm until 6 am and punishes its violators by imprisonment. (Read in Arabic)

REGIONAL

Helicopter shoot-down in Libya triggers fighting west of Tripoli
At least three military commanders from Tripoli’s Islamist government were killed after their helicopter was shot down by militias from the nearby town of Warshefana, sparking clashes outside Tripoli, the Guardian reports. No group has claimed responsibility for the attack, but that didn’t stop the Tripoli faction from issuing a statement that read, in part: “We firmly condemn the incident and, of course, we accuse elements of the so-called tribal army of Gaddafi’s followers. We will respond strongly at the right time and place,” Colonel Mustafa Sharkasi said in the statement, in an implicit reference to the Warshefana militia. The original statement in Arabic may be found here, along with an embedded video of a press conference by the Tripoli faction (Watch in Arabic, running time: 2:35).

UAE to reduce gasoline prices from November
The UAE is reducing its gasoline prices following the drop in international energy prices. 98-Grade octane’s price will be reduced by 4.7% to AED 1.81 per litre and 95-grade octane by 5.02% to AED 1.7 per litre. Diesel prices will also be reduced by 1.05% in November to AED 1.87. (Read in Arabic)

Oman’s sovereign wealth fund SGRF and Japanese banks to form USD 400 mn agribusiness fund; SGRF seeks international arbitration over failed Bulgarian bank.
Oman’s sovereign wealth fund, the State General Reserve Fund (SGRF) and Japan will form a USD 400 mn fund to invest in the food sector, said Omani officials to Reuters on Sunday, with an aim of investing in agribusiness in GCC states by Japanese firms. The SGRF will own 37.5% of the Gulf Japan Food Fund. “State-run Oman National Investments Development Co and Gulf Investment Corp, owned by the six GCC states, will hold a combined 12.5%. Japan’s Mizuho Bank and Norinchukin Bank will provide the remaining half of the capital,” according to Reuters.

…Meanwhile, the Bulgarian government on Tuesday rejected as “groundless” a claim by the SGRF at the International Centre for Settlement of Investment Disputes for an estimated EUR 150 mn over the collapse of Corporate Commercial Bank (Corpbank) last year, Reuters reports. The SGRF owned 30% of Corpbank, which a Bulgarian parliamentary commission accused of being run as a pyramid scheme before being stripped of its license by the Bulgarian central bank. Two-thirds of its assets were written-down following an audit.

SPORTS

Zamalek handball team reach African Cup finals
The Zamalek first handball team has reached the African Cup finals after beating Tunisian Al Taraji 34-33 in the semi-finals of the competition on Wednesday, Al Shorouk reports. Ahmed Al Ahmar, Zamalek’s superstar left wing, scored a club high seven goals in the game. Zamalek had defeated arch rivals Al Ahly in the quarter-finals on 26 October and will await the winner of the other semi-final game between Tunisian clubs Sporting and Club Africain in the final. (Read in Arabic)

David Nakhid excluded from Fifa Presidential race, leaving only one former footballer in the race — and even he is suspended from all football-related activities pending a disciplinary hearing into a GBP 1.3 mn payment signed off by outgoing president Sepp Blatter in 2011. The man in question is Michel Platini, the UEFA president. This leaves seven men contending, after David Nakhid, the Former Trinidad and Tobago player was excluded from the list on account of one of his nominators breaking the rules and supporting a second candidate, The Guardian reported. The remaining candidates are Prince Ali bin al-Hussein of Jordan, the UEFA general secretary Gianni Infantino, Liberia’s FA president Musa Bility, the Asian Football Confederation president Sheikh Salman bin Ebrahim al-Khalifa, the former diplomat Jérôme Champagne, and the South African businessman Tokyo Sexwale.

** Further reading in Sports: Watching the FIFA [redacted]-ocracy fall to pieces is a beautiful game in itself, by Marina Hyde for The Guardian.

ON YOUR WAY OUT

Following the discovery of a Saudi woman and her daughter found murdered and thrown down a well in Minya, “Saudi Arabia has warned its citizens in Egypt to follow official protocols and communicate with embassy personnel when conducting financial dealings in Egypt,” Al Arabiya reported. “It is imperative that people take this not as a warning against financial dealings but more so to take precautions when dealing with real estate purchases here and to keep an open communications with the embassy,” the Saudi Ambassador said. An investigation into the killings is ongoing currently.

Ahram Online has an interview with the first potential Egyptian candidate for a NASA space flight: Akram Amin Abdullatif. Don’t get your hopes up just yet; there’s a catch: “His nationality may indeed affect his bid for space travel in 2017 … NASA offers work opportunities to international astronauts only from countries that have signed space cooperation deals with the US agency, such as Canada, Japan, Russia, Brazil and some European countries. NASA does not have any space agreements with the Egyptian government,” Ahram Online notes.

Thirteen days of Halloween Day Eleven – An Inhabitant of Carcosa, a short story which would go on to inspire both H.P. Lovecraft and his Cthulhu mythos, as well as inspire Robert W. Chambers to write The King in Yellow, which was heavily referenced in the first season of True Detective. An Inhabitant of Carcosa was first published in the San Francisco Newsletter in 1886 by Ambrose Bierce, author of An Occurrence at Owl Creek Bridge and The Devil’s Dictionary. (Read) For more pre-Cthulhu mythos, see The Kraken, by Lord Alfred Tennyson.

BY THE NUMBERS
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QUICK FACT: Where does the $ symbol come from? The U.S. Bureau of Engraving and Printing claims it dates to the 1700s, when the Spanish peso was the basic currency in colonial America. The peso was abbreviated “PS” and was eventually written with the P superimposed on the S, morphing after 1800 into $. It was first used on a U.S. bill with the introduction of the paper dollar in 1875.

USD CBE auction (Tuesday, 28 October): 7.9301 (unchanged since Sunday, 18 October)
USD (CBE market rate): Buy: 8.0071 | Sell: 8.0301
USD parallel market (Tuesday, 28 October): 8.30 (+0.05 since Sunday, 25 October, Reuters)
EUR (CBE market rate): Buy: 8.8719 | Sell: 8.8998

EGX30 (Wednesday): 7,470.59 (-0.72%)
Turnover: EGP 569.0 mn (31% above the 90-day average)
EGX 30 year-to-date: -16.2%

Foreigners: Net Long | EGP +1.6 mn
Regional: Net Short | EGP -6.7 mn
Local: Net Long | EGP +5.1 mn

Retail: 56.2% of total trades | 58.0% of buyers | 54.4% of sellers
Institutions: 43.8% of total trades | 42.0% of buyers | 45.6% of sellers

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PHAROS VIEW

Facing the Moment of Truth: Cost of a Rate Hike will be only Justified if Accompanied by an Outright Floatation

It is becoming increasingly difficult to project the next move of the MPC in the absence of information on 1) Egypt’s FX policy under the new governor, 2) timing / scope / magnitude of the next steps in fiscal consolidation and 3) the outlook for international commodity prices. Yet, it is becoming evident that the government and the CBE have been caught off guard by the recent plunge in FC reserves, which has likely worsened in October. Hence, draining the system from excess EGP liquidity to increase the allure of EGP denominated assets will likely be on the cards. The net benefit of a 50-100 bps rate hike, however, is unclear given that the CBE has already drained the market from sizable excess EGP balances.

Out bottom line is this: The 1) delay in funding the BoP gap, 2) October devaluation round, 3) the aforementioned widening in the official/parallel market gap and 4) absence of exceptional FX auctions (> USD 40m per auction) suggest that reserves are at a critical floor. This will be particularly the case if Egypt plans to repay the USD 1.0 bn owed to Qatar before end October. In the absence of reserve firepower, we believe a Big Bang approach to FX policy (floatation + removal of the FC daily / monthly cash deposit limit + temporary interest rate defense + social safety net) is an optimal mix. Yet, history suggests that the likelihood of executing this mix is at best 50.0%, given its potential socio-political ramifications. Tap here for more background, including where we see some industries setting the USD in the FY2016 budgets and how the gap between the official and parallel markets is already sending prices up.
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WTI: USD 45.98 (+0.09%)
Brent: USD 49.05 (+4.79%)
Gold: USD 1,159.00 / troy ounce (-1.45%)

TASI: 7,118.4 (+0.3%)
ADX: 4,321.9 (-1.6%)
DFM: 3,486.8 (-0.9%)
KSE Weighted Index: 389.3 (-0.5%)
QE: 11,643.6 (-0.6%)
MSM: 5,933.3 (-0.1%)