Thursday, 12 November 2015

Hussein Fahmy is very much alive

TL;DR

EGP appreciates against USD in surprise move; contours of new monetary policy still not in focus. (Speed Round)

USD 1.5 bn soft loan from World Bank, says Int’l Cooperation Minister Sahar Nasr (Last Night’s Talk Shows)

El Sisi reassures the business community with strong statement from Sharm as Diabs are released on bail. (Speed Round)

Orascom Construction lands EUR 105 mn Cairo Metro contract (Speed Round)

Earnings watch: EFG Hermes, GB Auto post solid numbers despite significant national and regional headwinds (Speed Round)

Cabinet bolsters Sharm tourism companies, signs off on basket of loan agreements (Speed Round)

Hussein Fahmy is very much alive (We’re Tracking Today)

By the Numbers + Is Tarek Amer hammering speculative demand ahead of a float?

WHAT WE’RE TRACKING TODAY

Enterprise is apparently TMZ in disguise: For once, we’re incredibly pleased to be wrong: Iconic actor Hussein Fahmy is very much alive (alhamdulilah). Apropos nothing whatsoever, the writer who declared him dead in yesterday’s preview of the Cairo International Film Festival now sleeps with the fishes. He will be dearly missed. H/t to the many readers who wrote in. All kidding aside: We sincerely apologize for what was a genuine mistake.

And a reminder: The Cairo International Film Festival got underway last night. Link above if you want to check out the program.

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LAST NIGHT’S TALK SHOWS

On Wednesday afternoon, President Abdel Fattah El Sisi visited Sharm El Sheikh Airport, during which he gave a short, informal interview to Egyptian state television.

The president urged citizens not to make assumptions about what caused the crash of Metrojet Flight 9268, adding that the government’s investigation into the matter has not concluded: “We will announce the result of the investigation [soon]. The investigation will be transparent. We have nothing to hide,” said the president.

El Sisi also called on tourists to return to Egypt, saying, “Our country is safe. We welcome tourists to visit Egypt.”

The president concluded his talk with a special message to Egypt’s business community, as we note in Speed Round, below, that many in media take as El Sisi reassuring the business community in the wake of the arrest of Salah and Tawfik Diab. Watch footage of President El Sisi’s remarks. (Starting at 1:16 and running through the 2:15)

Ibrahim Eissa’s Wednesday night program on Al Kahera wal Nas focused squarely on the president’s visit to Sharm El Sheikh Airport. The host opened by Eissa praising El Sisi for the visit, stating it was necessary to convince foreigners that Sharm El Sheikh is, in fact, safe. The host also lauded the president for the words of assurance that he sent to investors and members of the business community. That said, Eissa did have some tough words for state television, which, he said failed to air the president’s message in a professional manner. “The filming and production of the footage was poor. The cameraman’s hand was shaking and the announcers hair was covering half of the lens,” said Eissa.

Amr Adeeb was off on Wednesday night, leaving Khaled Aboubakr to play lead host of Al Qahera Al Youm. Like other hosts, he spent a significant portion of his program lauding El Sisi’s visit to Sharm El Sheikh.

Midway through the episode, Tourism Minister Hisham Zaazou called-in: “Today President El Sisi sent a strong a message to both Egyptians and foreigners… He assured the outside world that the Egyptian state will work tirelessly to ensure that tourists are safe in Egypt… As part of its effort to assist the tourism sector, the government has decided to reschedule repayment of debts for tourism-related projects. Additionally, the government has decided to implement a three-month postponement on payment of electricity bills and social insurance. Furthermore, EgyptAir has decided to lower the cost of round trips flights to Sharm El Sheikh to EGP 400.”

Shortly afterward, International Cooperation Minister Sahar Nasr telephoned-in to announce that the government has reached an agreement for a USD 1.5 bn soft loan from the World Bank to back the implementation of national projects and job creation. The loan will be obtained before the end of the year, Nasr added, and an additional USD 3bn in loans are expected to arrive over the next 12 months.

On ONTV, Youssef El Housseiny, host of El Sada El Mohtaramoon, also remarked on El Sisi’s message to the business community: “The president’s comments today were meant to be an indirect message to Egypt’s business community. The president did not mention the names of any businessmen during his talk, but was obviously making a reference to the arrest of Salah Diab,” said El Housseiny. He continued: “The President today affirmed that Egypt was country that is governed by the rule of law, for both the rich and poor… I hope that everyone, regardless of how rich or poor they may be, is treated with respect and dignity, without humiliation.”

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SPEED ROUND

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EGP appreciates in surprise move; caretaker appointed as Hisham Ramez leaves governorship ahead of schedule: Whatever monetary policy stratagem is unfolding right now, it’s not what conventional wisdom would predict. Analysts had been holding out for a second rate cut following a surprise move to trim rates by 50 bps in January. Earlier this week, we saw rates at the two leading public-sector banks rise 250 bps. Bankers, importers and manufacturers alike are holding out for devaluation. Instead, the CBE allowed the EGP to appreciate by EGP 0.20 yesterday, supplying banks at a new rate of EGP 7.7301 in what bankers said was a surprise move “intended to help banks cover ballooning USD overdrafts they had opened up for clients suffering from tight currency controls and the wider USD shortage in the system. Bankers said the central bank was aiming to help banks cover 25 percent of these overdrafts,” Reuters reported.

The unanswered question, of course, is how large is the backlog they’re working to clear.

The central bank ordered lenders to strengthen the currency … without giving a reason,” reported Bloomberg, citing “three bankers familiar with the move. … Policy makers then released an an undisclosed quantity of USD to banks to address a shortage of hard currency and help them meet a quarter of the needs of their clients for imports of basic goods.”

Al Ahram cited anonymous sources as saying the decision is one in a series of actions taken over the last week that included the raising of interest rates on deposits after meeting the market’s import requirements and opening letters of credit to importers, as well as a belief held at the CBE that the EGP has dropped below its real value. We’re not buying it. Even with the parallel market effectively paralyzed by indecision yesterday, the USD was trading hands at EGP 8.60 or so, and one-year non-deliverable forwards put the EGP at 10.40 per USD.

And if that was not enough of a surprise for one day, reports floated that Governor Hisham Ramez left his position, some two weeks before the end of his term, and appointed Gamal Negm as caretaker. Sources tell us, however, that Ramez hadn’t stepped foot into his office at the CBE this week. Tarek Amer, who for the time being remains the managing director of the National Bank of Egypt’s outpost in London, is due to assume the CBE’s governorship starting 27 November.

Prior to yesterday’s news, the market was expecting a continuation in the devaluation process. CI Capital’s Hani Farahat said the effect of the move to raise interest rates on deposits to 12.5% is temporary and “does not rule out a devaluation, but rather complements it. The devaluation is inevitable.” The move was not reflected in higher yields on government borrowing, a development likely instructed by the CBE itself to absorb EGP from the market.

Bankers are speculating that the CBE is reducing pressure on the EGP so that when devaluation happens, its effect would not be as pronounced. Coupled with the intention to inject USD 4 bn into the banking sector to meet foreign currency demand, the move is expected to pacify the market in the short term, but is unsustainable in the long run. “Several months from now there will be additional demand for [USD] due to Egypt’s trade deficit so the central bank might have to repeat the same steps again or devalue the [EGP],” one economist said.

Meanwhile: Word on the street is that as much as 70% of the c. EGP 11 bn that has so far flowed into the NBE and Banque Misr’s new three-year CDs has been cannibalized from their own balance sheets. Depositors, we’re told, converted savings into term deposits to lock-in the 12.5% interest rate. What’s more, the lion’s share of the conversion is believed to have been from local currency accounts. Even at 12.5% interest, the yawning gap between between the official and parallel market rates and an expectation of significant devaluation to come saw few takers interested in converting FCY holding into LCY CDs.

The missing piece of the puzzle remains where the CBE will source the FX it needs to flood the market and spark a more significant wave of de-dollarization.

What’s next? One of the smartest observers we know put it succinctly: “There’s a strategy coming into effect one piece at a time, that much is clear. But nobody outside the CBE today can make an accurate assessment of what’s going to happen next. It’s a wait and see.” We’re on hold, ladies and gentlemen, and the next three business days could prove decisive.


Pico group founder Salah Diab and his son Tawfik have been released on EGP 60,000 in bail. Word is that the asset freeze with which Salah and his wife were hit has been lifted, with the exception of assets related to the 2011 court case surrounding New Giza. Charges that Salah and Tawfik possessed unlicensed firearms have not been dropped, Al Masry Al Youm reports.

El Sisi sends powerful message to business community: The release order for the Diabs came as Ittihadiya released a statement on President Abdel Fattah El Sisi’s visit yesterday to Sharm El Sheikh, noting that, “the President stressed the important role of the government, and of the entire Egyptian society along with businessmen, in supporting the tourism sector and coping with the pressure that Egypt faces as it makes progress. … President El Sisi also addressed the Egyptian business community and stressed that private businesses and investments will not be affected. He added that anything else being circulated is completely untrue. The President affirmed that the law governs all relations between the state and businessmen and that he will not tolerate abuses to anyone.” (Video of President El Sisi’s comments from Sharm El-Sheikh)

Orascom Construction has landed contract for the third phase of Cairo Metro line 3 from the National Authority for Tunnels. OC’s share of the contract, which it won as part of a consortium including Alstom, Colas Rail and Arab Contractors, stands at EUR 105 mn for executing electromechanical and related civil works. The full press release can be found here.

EFG Hermes reported 19% y-o-y growth in its bottom line to EGP 120 mn in 3Q2015 despite what regional investment bank called “challenging market conditions” across its footprint. Revenues advanced 14% in the same period to 668 mn, supported by a “sustained emphasis on efficiency and hitting our operational marks at the Investment Bank and Commercial Bank alike,” the firm said in a statement. Said CEO Karim Awad: “Despite the tough market conditions, there is quite a bit to like in the third quarter on the operational front: Our brokerage arm was number one in Egypt, Abu Dhabi, Nasdaq Dubai and Kuwait, and closed the period as the second-largest player on the Dubai Financial Market and in Oman. In parallel, the Investment Banking division closed three high-profile transactions during the quarter. … EFG Hermes has closed seven landmark capital markets transactions this year.”

GB Auto posts 89.9% y-o-y rise in 3Q2015 net income to EGP 102.6 mn on revenues of EGP 3.2 bn. “Nearly all our lines of business started off strong this quarter, in response to the rebound in market demand, which continues to this day,” said GB Auto Chief Executive Officer Raouf Ghabbour. “It was only later in the quarter that we began grappling with an ongoing nationwide shortage of foreign currency,” Ghabbour said, noting that the FX crunch prompted “disruptions in assembly operations [for passenger cars in Egypt] on the back of foreign currency shortages in September.” The posted strong growth across its portfolio of commercial vehicles, construction equipment, motorcycles, three-wheelers and financing products. “Management will judiciously use GB Auto’s pricing power in the market to preserve margins for as long as possible, and will control SG&A costs and preserve working capital. In tandem, the company continues to operate for the long term and explore new opportunities while advocating for legislation that will protect the entire domestic assembly industry against unfair competition from other markets,” the company said. GB Auto’s earnings newsletter is available for download here (pdf).

News circulating once more on acquisition of majority stake in Fawry at a valuation of EGP 773 mn. News of Fawry’s acquisition by a consortium including Helios Investment Partners, the Egyptian-American Enterprise Fund, and EFG Hermes’ MENA Long-Term Value Fund — which we first covered in September — is making the rounds of the local press after consortium partner EFG Hermes and the Egyptian American Enterprise Fund both released statements on the transaction. (EFG Hermes’ statement is here; EAEF’s is here as an Arabic-language pdf.)

The Ismail cabinet held its weekly meeting yesterday with a particular focus on measures to help the tourism sector rebound after the Metrojet disaster, Al Mal reports. Cabinet decided to launch an international public relations campaign, which will include drawing in celebs. The USD 5 mn campaign will be funded through the Tourism Fund. As a show of encouragement, the cabinet decided that next week’s meeting will be held in Sharm. Other decisions included:

Economic Policy:

  • Approving a USD 550 mn loan agreement with International Bank for Reconstruction and Development for a sustainable sanitation program in rural areas (Read in Arabic)
  • Approving USD 333 mn loan from Arab Monetary Fund (AMF) to facilitate structural adjustment in the financial and banking sectors. (Read in Arabic)
  • Approving funding a 300 MW expansion of the power grid, to be completed before summer 2016
  • Approving an MoU between the Egyptian Electricity Distribution Company and Lakela Power for a feasibility study on building a 250 MW wind power farm
  • Approving contracts between the Ganope and a number of companies for E&P tenders won in 2014, as noted below in the Energy Section

Social Policy:

  • Contracting Arab Contractors to build an EGP 88 mn hospital for the police force in Hurghada
  • Approved a EGP 81.5 mn contract with Arab Contractors to build an aqueduct in Matrouh

Supply Minister Khaled Hanafi reached an agreement with unnamed retailers to lower the prices on essential goods, reports Al Borsa. The minister agreed to supply these stores with goods at “much lower prices” through the Food Industries Holding Company. The agreement was struck at a meeting attended by the heads of the Federation of Chambers of Commerce, the Internal Trade Development Authority, and the Consumer Protection Agency. Efforts to reduce prices for consumers — a plank of the Ismail cabinet’s policy — led Hanafi to meet with Transport Minister Saad El Geyoushi to explore facilitating the movement of goods through the railway system and via Nile River transportation, according to Al Borsa.

The Consumer Protection Agency is tackling the issue of price controls through legislation, announcing they have drafted a new Consumer Protection Act, which includes provisions that would allow cabinet to fix prices on “strategic” consumer goods for a period of up to two years, said its head Atef Yaqoub. The 88-article bill (which would replace the current 24-clause law) has been sent to the Legislative Reform Committee for review and will be put to a vote by the incoming parliament, according to Al Borsa.

“Businessmen can now buy off parliament,” Salafi boss says: In a statement in Arabic on his Facebook page on Wednesday, tolerance advocate, paragon of reason and Nour Party chairman Younis Makhioun claimed that Egypt’s “destitute electoral system” has prompted any “businessman to buy off the parliament for himself or for third parties in Egypt or abroad with USD 100 or 200 mn.” Makhioun added: “These figures don’t even amount to a fancy building on the Nile, a tourist resort or even an Iranian missile.”

UPDATE on the crash of Metrojet Flight 9268
U.S. team to join crash investigation: Egypt will allow investigators from the U.S. National Transportation Safety Board (NTSB) “to become part of the investigative team, and they are free to incorporate any advisers they deem as necessary for them to undertake the responsibility,” Foreign Affairs Minister Sameh Shoukri said. The plane’s engines were built by American manufacturer Pratt & Whitney, CNN said.

Saudi Arabian Airlines to continue flights into Sharm in show of support: King Salman bin Abdulaziz Al Saud directed Saudi Arabian Airlines to continue running flights to Sharm el-Sheikh from Riyadh and Jeddah in support of tourism in Egypt, according to the Saudi Press Agency early this morning.

How much is Egypt is losing from the Russian and U.K. bans on flights to Sharm El Sheikh? EGP 2.2 bn a month, according to Tourism Minister Hisham Zaazou. That’s equivalent to around two-thirds of the monthly Suez Canal revenues — this is how critical tourism is for Egypt economically. We can, however, take comfort in the fact that Russians have begun searching the internet for a means to get to their favorite holiday destinations without direct flights. Yandex, Russia’s biggest internet company, reported 11,000 search engine requests concerning sea and land travel to Egypt, reports RT.

The Civil Aviation Ministry is lowering ticket prices for EgyptAir flights to Sharm El-Sheikh from 14 November to mid-December, Al Mal reports, as announced by the minister of tourism (see Last Night’s Talk Shows, above).

Tarek Amer is scheduled to meet with the Tourism Investors Association of South Sinai and the Federation of Egyptian Banks on Sunday to discuss strategies to help the ailing tourism sector, Al Borsa reports. Deferring loan payments for over a year and the extension of fresh credit facilities will be at the top of the meeting’s agenda.

As noted above in the Speed Round, President Abdel Fattah El Sisi visited Sharm El-Sheikh yesterday as a show of support for the resort city. He inspected security measures at the airport, according to a post on the president’s official Facebook page cited in Al Mal. Commenting on the travel bans that have hit Sharm, the president said, “I had hoped that [they] don’t jump to conclusions, and await the results of the official inquiry into the crash”. El Sisi expressed his confidence on Egypt’s ability to rebound from this crisis, in a statement to an Al Nahar Al Youm reporter on the scene.

EGYPT IN THE NEWS

Countries and international media outlets sympathetic to Egypt have staged what can only be described as a polite intervention.

Egypt needs to win back tourists’ trust: UAE-state owned The National editorial board exhorts Egypt to “increase its vigilance to thwart those who seek to damage” Egypt’s tourism industry, with regard to perception about its safety. In addition: “ While the probe into the crash obviously needs to be thorough, it also needs to be quick. Clarity is needed, especially if the cause turns out to be from a breach in airport security because it means such a tragedy could occur again.” (Read)

Sisi arrests the press: The Wall Street Journal, whose coverage toward Egypt has largely been positive, features an opinion piece on the release of Hossam Baghat and the jailing of businessman and Al Masry Al Youm founder Salah Diab. Describing Cairo as “increasingly hostile towards independent media,” the article argues that El Sisi “has his hands full” with Islamists and should instead “be making friends of Egypt’s liberals, not throwing them in jail”. (Read, paywall)

DIPLOMACY + FOREIGN TRADE

Cairo, Riyadh launch new investment, military coordination council, implementing Cairo Declaration: President Abdel Fattah El Sisi met with King Salman bin Abdulaziz in Riyadh, where the two leaders established the Egyptian-Saudi Council for Coordination, which is a fulfillment of the first two articles of the Cairo Declaration signed in July 2015. “The new Council will oversee initiatives, agreements, and memoranda of understanding, as well as executive programs in areas stipulated in the Cairo Declaration, and oversee their implementation,” according to an emailed statement from Ittihadiya.

Riyadh Declaration: The fourth summit of Arab-South American countries (referred to by its Portuguese and Spanish acronym ASPA) concluded in Riyadh on Wednesday, Arab News reported, with the issuance of what’s being called the Riyadh Declaration. The declaration is mainly focused on political issues, calling on its members to stand in support of the Palestinian cause and also calling on Iran to stop interference in the internal affairs of neighboring states. The declaration also designates that the next ASPA summit will be held in Caracas, Venezuela.

Egypt reiterated its commitment to lift all fuel subsidies by 2020 as part of its Intended Nationally Determined Contribution to the United Nation Framework Convention on Climate Change. (Read, pdf)

Egypt’s Commercial Service said it intends to open three new offices in sub-Saharan Africa in 2016, bringing its representation in the region to nine offices, Al Borsa reported. The new offices will be opened in Uganda, Tanzania, and Ghana. According to the Service’s website, it is already represented in Ethiopia, South Africa, Senegal, Nigeria, Zambia, and Kenya.

Ethiopia and Egypt eliminate double taxation; seek increased trade exchange
Ethiopia seeks to increase trade with Egypt by up to USD 500 mn in the next five years, Ethiopian ambassador to Egypt, Mahmoud Dirir, said on Wednesday, according to Youm7. Further, Dirir announced both Egypt and Ethiopia reached an agreement to eliminate double taxation and announced a pact that aims to encourage trade between the two countries.

Fattah Allah Fawzy, head of the Egyptian-Lebanese Business Association, urged both governments to end protectionist policies that stifle the flow of goods into the counties, in a not-so-subtle attack on Egypt’s Domestic Goods Protection Law and moves to raise tariffs on imports, Al Masry Al Youm reports. Speaking at the Egyptian-Lebanese Business Forum, Fawzy announced that the Association will organize a business tour of Ghana, Togo, and Senegal in the first quarter of 2016 to open these markets to Egyptian and Lebanese goods, the newspaper reports.

UN human rights experts welcome release of Egyptian journalist and rights defender Hossam Bahgat: The UN Special Rapporteur on freedom of expression David Kaye and the Special Rapporteur on the situation of human rights defenders Michel Forst issued a joint statement on Wednesday welcoming the release of activist and investigative journalist Hossam Bahgat. They noted, however “even after his release, his detention sends a signal of disrespect for the very principles of freedom of expression that [Egyptian] President [Abdel Fattah] Sisi only days ago claimed his Government upheld.” Bahgat released a statement in Arabic yesterday translated by Mada Masr in which he described his detention.

New MFA blog post: Intentional defamation, Galal Nassar, Editor-in-Chief of Al-Ahram Weekly. Nassar argues there is “a systematic campaign by the UK and US media against Egypt. This campaign is bolstered by other measures for escalation, including the evacuation of nationals, the suspension of flights and the cancellation of reservations … Centuries ago, the West had its own revolutions, and managed for the most part to separate church and state. Why do they think that we cannot do the same?”

ENERGY

Cabinet approves four E&P agreements between Ganope and oil companies
The cabinet approved four E&P contracts signed between Ganope and four different IOCs that were awarded the concessions, Al Masry Al Youm reported. The pacts are worth USD 32 mn and range between five to six years. The concessions are in the Gulf of Suez, West Delta, North Al Baraka, and North West Fayed. Trident Petroleum, Cameron, IPR Group, and Mediterra Energy were awarded the agreements. (Read in Arabic)

Israel expects gas exploration to accelerate, antitrust waiver to be signed in 2015
Offshore natural gas exploration in Israel is expected to accelerate in the next few months, Energy Minister Yuval Steinitz expects. “Steinitz said he recently met officials from ENI and 20-30 other energy firms … in a bid to entice them to invest in Israeli fields off its Mediterranean coast,” Reuters reports. He added that he wants “to reopen Israel’s economic waters for exploration” but that he development of Leviathan remains a top priority. After antitrust concerns were mitigated after the resignation of the antitrust regulator and the Economy Minister, Steinitz expects the Prime Minister to sign a waiver to bypass the impediments before the year’s end. He expects Leviathan to begin production in “2018 or 2019” and to begin supplying gas to Egypt and Israel. (Read)

INFRASTRUCTURE

Arab Contractors consortium begins digging EGP 8 bn Port Said tunnels
The Arab Contractors-Orascom consortium has begun digging the three tunnels connected East and West sides of the New Suez Canal at a total cost of EGP 8 bn, said Sayed Farouk, the company’s first vice chairman. The three tunnels include one designed for rail traffic; the project is supervised by the Armed Forces Engineering Department. (Read in Arabic)

Fayoum governorate to issue tenders for road and bridge development
The governorate of Fayoum intends to issue four tenders for the paving of roads this month. The governorate has earmarked EGP 110 mn for bridge and highway projects for the current fiscal year, said Mamdouh Ahmed Abdallah, head of the governorate’s Roads and Bridges agency. These funds will be used to develop 10 road and bridges projects, as well increase the efficiency of existing roads. (Read in Arabic)

HEALTH + EDUCATION

Tuition fees at eight universities can now be paid electronically, e-Finance says
e-Finance said it struck agreements with seven universities to allow students to pay tuition fees electronically. The agreements, which abides by CBE and Finance Ministry rules allows for payments through mobile and prepaid cards as well. e-Finance has provided electronic payment solutions since last school year with the German University in Cairo after activating an agreement with CIB. (Read in Arabic)

Training institute IBDL to invest EGP 20 mn in Egypt during 2016
The International Business Driving License (IBDL), a training and professional development outfit, plans to invest EGP 20 mn toward expanding operations in Egypt during 2016. The institute plans to develop two head offices, one at a tech zone and the other at the Suez Canal Economic Zone. The company grew its training contracts 70% since January the back of expanding its business with the government. Leading customers include the Defense Ministry and its IT divisions. The company plans to train 10,000 officers in IT by 2022, said IBDL CEO Khaled Khalaf. (Read in Arabic)

First shipment of Harvoni vaccine to arrive before the end of November
The Health Ministry has completed its registration of Hepatitis C vaccine Harvoni. The ministry previously entered into an agreement with Gilead Sciences to import 90,000 dosages of Harvoni at a total cost of EGP 275 mn. The first shipment is expected to arrive before the end of November. (Read in Arabic)

BANKING + FINANCE

NBE extends Edita an EGP 100 mn credit facility
National Bank of Egypt (NBE) agreed to extend Edita an EGP 100 mn credit facility, sources tell Amwal Al Ghad. The credit will be used to finance Edita’s working capital and daily running costs and will include funds in EGP or foreign currency equivalent, depending on the need. The source hinted that the facility is a short-term one. (Read in Arabic)

NATIONAL SECURITY

Family murdered, car bomb in Arish
A group of masked gunmen stormed an apartment late Wednesday evening, executing a family of eight or nine, according to conflicting figures in media reports. The assailants then blew up a vehicle outside the building, with the resulting explosion being widely reported. Authorities are still not sure if this was a terrorist attack or the result of a tribal feud, according to an interview with North Sinai Governor Abdel Fattah Harhour. At the time of dispatch, the search for the assailants was ongoing.

ON YOUR WAY OUT

Arabtec posts Q32015 loss of AED 944.8 mn, fourth consecutive quarterly loss: Dubai-listed builder Arabtec reported losses for a fourth straight quarter, reporting a loss of AED 944.8 mn on Wednesday, down from a net profit of AED 68.7 mn y-o-y, as reported by Reuters. on Wednesday as it took provisions, reversed some previously recognized claims and warned the regional construction sector would remain difficult into 2016. Arabtec made a net loss attributable to equity holders in the parent of AED 944.8 mn, as noted by the company in a disclosure to the DFM. (Read, pdf)

Campaign to secure temporary release for detainee to attend father’s funeral: A social media campaign has taken off on Twitter and Facebook calling on Minister of Interior Magdy Abdel Ghaffar to order a temporarily release for Ayman Moussa to allow Moussa to attend his father’s funeral this Friday. Moussa, a 21-year old British University in Egypt student, was arrested in October 2013 on charges of illegally protesting, attempted murder, and other charges along with 62 alleged members of the Muslim Brotherhood. All 62 were acquitted in February 2014 with the except of Moussa.

Stealing Egyptian antiquities will soon come with penalties that reach up to a fine of EGP 1 mn and life imprisonment, Antiquities Minister Mamdouh El Damaty said according to Al Ahram. He also added that a project is underway to catalogue all artefacts digitally and to be able to track them if they are moved.

BY THE NUMBERS
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QUICK FACT: Dredging the New Suez Canal consumed EGP 21 bn out of the EGP 64bn collected for the megaproject in 2014.


USD CBE auction (Wednesday, 11 November): 7.9301 (unchanged since Sunday, 18 October)
USD parallel market (Wednesday, 11 November): 8.70 (+0.1 from Tuesday, 10 November, Reuters)

EGX30 (Wednesday): 6801.9 (-0.33%)
Turnover: EGP 571.7 mn (31% above the 90-day average)
EGX 30 year-to-date: -23.8%

THE MARKET ON WEDNESDAY: After three days of heavy selling that saw the benchmark index tumbled by 9.5%, the EGX closed in the red again yesterday despite gains in early trading when the CBE decided, in a surprise move, to strengthen the EGP against the USD. Most stocks closed at or near their daily lows with the benchmark index posting a 0.3% loss at the closing bell. Strong y-o-y earnings growth didn’t save CIB, EFG Hermes, or Madinet Nasr from the late selloff. Elsewedy Electric and Pioneers Holding were yesterday’s most notable losers as they plunged 10.0% and 6.5%, respectively.

Foreigners: Net Short | EGP -68.5 mn
Regional: Net Long | EGP +37.5 mn
Local: Net Long | EGP +31.0 mn

Retail: 51.4% of total trades | 48.6% of buyers | 51.3% of sellers
Institutions: 48.6% of total trades | 48.4% of buyers | 48.7% of sellers

Foreign: 33.6% of total | 27.6% of buyers | 39.6% of sellers
Regional: 9.9% of total | 13.2% of buyers | 6.6% of sellers
Domestic: 56.5% of total | 59.2% of buyers | 53.8% of sellers


***
PHAROS VIEW

Hammering Speculative Demand, Ahead of Floatation

The CBE strengthened the EGP against the USD by EGP 0.2 on Wednesday. The current official average bid/ask rate is 7.73. The move came to the surprise of many, who — including the house — believe that an aggressive EGP devaluation has long been overdue, especially on a day considered a non-FX-auction day. However, it seems that the CBE has opted to adopt what we had earlier denoted as a ‘Shift from a Crawling Peg to a Two-Way Volatility with No Predefined Path.’

Indeed, the policy mix of higher rates plus sudden EGP appreciation was adopted in 2004-05 by the former CBE governor Dr. Farouk El Oqda and his deputy back then – Mr. Tarek Amer, the CBE’s upcoming governor effective later this month. We remind readers that on 22 October 2015, we had argued that “the experience of the current governor coupled with limited resources suggest that the end game for the de-facto peg is in sight”. So, we already see the invisible hands of Mr. Amer in the current moves. Most importantly, as argued in our May 2015 note quoted above, we believe that Mr. Amer will eventually escort the EGP to a more flexible regime. This should largely facilitate negotiations with the IMF on securing a standby arrangement to bridge the funding gap of 2016.

Based on the above, we rule out that the recent move in the EGP is a move towards an unsustainable equilibrium. Instead, it is a transition phase during which speculative demand is punished and after which fundamental demand/supply balances determine the equilibrium rate. Hence, we advise equity investors to start building long positions in anticipation of a major reform in the FX regime. Tap here for the full background.

***

WTI: USD 43.19 (+0.61%)
Brent: USD 46.14 (+0.72%)
Gold: USD 1,087.90 / troy ounce (+0.28%)

TASI: 7,128.3 (+2.0%)
ADX: 4,211.7 (+0.3%)
DFM: 3,315.8 (+0.5%)
KSE Weighted Index: 395.9 (+0.2%)
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Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.