Wednesday, 18 November 2015

Russia says Metrojet Flight 9268
taken down by bomb


Russia says Metrojet Flight 9268 taken down by bomb (Spotlight)

Central bank mulls how to help prop-up tourism industry (Speed Round)

Electricity Ministry prodding banks for EGP 16 bn to double transmission capacity (Speed Round)

Are Egypt-Sudan tensions rising over border beef or GERD? (Diplomacy + Foreign Trade and Egypt in the News)

U.S. Fed will make interest rate intentions clearer tonight (What We’re Tracking Today)

A guide to the new 2015 electricity law (Energy)

Vodafone Egypt aims to create 3,500 new jobs over three years (Telecoms + ICT)

Egypt’s 2018 World Cup hopes alive after national team notches 4-0 win over Chad (Sports)

By the Numbers + How much natural gas does it take to make steel?


The Red Sea governor imposed a state of emergency for Hurghada on Tuesday in preparation for expected heavy rain storms and flooding.

Raouf Ghabbour, Salah Diab and Tarek Tawfik are among those due to speak today at Nile University’s “Towards University Industry Partnership, Mechatronics X, A Success Story,” which gets underway this morning with registration at 10am at NU’s FACT Center in Smart Village.

Emerging markets watchers will turn their eyes to the United States this evening when the U.S. Federal Reserve will release at 9 pm CLT the minutes of its most recent meeting. CNBC notes that the expectation is that the minutes will show “the central bank is finally ready to raise rates next month — barring any negative surprises in the economy. ‘Hopefully, they’ll make their intentions to raise rates a lot clearer in the new set of minutes,’ said Jack Ablin, CIO of BMO Private Bank.”

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The second stage of elections for the House of Representatives are set to begin on Saturday and will run until Monday. Voters in Cairo, North and South Sinai, and 11 other governorates will head to the polls. Find your polling station here and navigate the drop-down menus here to find the list of candidates in your voting district. About 28.2 mn citizens are eligible to cast ballots in this phase.


PwC and N Gage Consulting are partnering to host an open discussion on the impact of possible changes in monetary policy. As the organizers put it: “The CBE’s hesitancy to let the Egyptian pound fall faster comes from a fear of fuelling inflation. Egypt imports plenty of staples, which would see a spike in prices is there was a sudden depreciation of the pound, therefore leading to social unrest. The country is seeking Foreign Direct Investments, but the capping of USD deposits hinders profit repatriation, hence discourages investors. The country is seeking economic production, yet the structure of the Egyptian market is not flexible and strong enough to benefit from a devalued currency.” Monetary Policy and Foreign Exchange Challenges Workshop (pdf), will take place at the Four Seasons Nile Plaza, at 9:00 am CLT on Monday, 23 November.

SPOTLIGHT on Metrojet Flight 9268

Russia has made a pre-emptive claim of a bomb downing Flight 9268, and the Ismail cabinet held a press conference in Sharm El Sheikh.

“It can be unambiguously said that this is a terrorist act” said Russian Federal Security Chief Alexander Bortnikov, who asserted that a homemade explosive device brought down Flight 9268, per Russian state news agency TASS. A “self-made explosive device with its power of up to 1 kilogram in TNT equivalent went off aboard the airliner, due to which the plane broke up in the air and this explains the spread of the plane’s fuselage parts over a large distance,” added Bortnikov. Russia’s Federal Security Service pledged a USD 50 mn reward for information about whoever is responsible for the plane crash. Russian President Vladimir Putin called it “one of the bloodiest crimes” against Russians, vowing to step up military strikes in Syria: “We will hunt them everywhere, wherever they’re hiding. We’ll find them anywhere in the world and we’ll punish them,” he said, reports Bloomberg.

Reuters then reported that Egypt’s security forces had detained two Sharm airport employees from on suspicions of “helping whoever planted the bomb on the plane,” citing two unnamed sources. Interior Minister Magdy Abdel Ghaffar denied these claims, AMAY reports. Sources told Al Mal that the committee investigating the plane crash still does not have conclusive evidence that a bomb was the cause of the crash.

The interior minister reiterated his claims at a press conference that took place later in the day on Tuesday, with attendees including Prime Minister Sherif Ismail, Civil Aviation Minister Mohammed Hassan Kamal, and Abdel Ghaffar.

The press conference began with Ismail offering condolences on behalf of the Egyptian government to the Russian people and their government. Ismail said that the investigative committee would continue to cooperate with Russia and its other international partners in ascertaining the cause behind the crash of Metrojet flight and would take into consideration any findings presented by Russia. The government also affirmed it would continue to coordinate with Russia in their fight against terrorism. (Watch in Arabic, running time: 1:46)

Subsequently, the Civil Aviation Minister stated that the government has yet to reach a definitive conclusion regarding the cause of the tragedy and that the investigation was ongoing. “Investigations into flight crashes can take up to 1 to 3 years… The technical investigation into the crash must stay its course… Up to this point, the committee has not come across any evidence to suggest that a criminal act has been perpetrated. If we find any evidence pointing to the contrary, we will release it immediately. This committee has nothing to hide.” (Watch in Arabic, running time: 2:03)

The Interior Minister, who was also in attendance, provided a rundown of the updated security measures his ministry was implementing across Egypt’s airports following the crash. These include a thorough review of passenger and baggage screening procedures and the formation of a committee to investigate whether a security lapse led to the crash of the flight. The Interior Minister also stated that Egypt would continue to cooperate with security bodies from around the globe to determine the cause of the crash. Reuters updated their coverage of the alleged detention of the airport employees with reporting from the press conference.

Finally: Believe it or not, Ittihadiya actually came out with a statement denying rumors online that the staff from the presidency were somehow involved in the alleged downing of Metrojet 9268, Al Mal reports.


Tuesday night’s talk shows focused squarely on the Kremlin’s announcement on the Metrojet Flight 9268.

“The Egyptian government was late in holding a press conference on the crash. They only decided to release a statement today,” said Lamis El Hadidy at the top of Tuesday night’s episode of CBC Egypt’s Hona El Assema. She continued: “We should not shy away from admitting that there was negligence at Sharm El Sheikh Airport, if this proves to be the case… We should be transparent and learn from the French example… There is evidence that we must confront. We cannot appear to be indecisive and weak,” El-Hadidy then turned her arsenal toward the government, “Why do the Prime Minister and his ministers look confused and shaken? Why aren’t you projecting strength in this important moment? If you don’t know how to do it, there are professionals who can show you how.”

Shortly afterward, Russian Middle East analyst Andrei Stepanov telephoned-in to beat President Vladimir Putin’s war drum and note, as an side: “Russian-Egyptian relations will continue to be strong.”

Ibrahim Eissa, on the other hand, criticized the government for its weak and careless handling of the investigation. The host also called on the state to mend its ties with Russia, which the host referred to as one of “Egypt’s strongest and most important allies.”

Eissa: “Russia’s decisions to preemptively announce its conclusions regarding the causes behind the Metrojet Flight indicates that they are no longer relying on Egypt for information. Additionally, its shows that they did not believe it was necessary to consult with the Egyptian before releasing the statement. This indicates that the relationship between the two states is not as strong as it once was… It is of utmost importance the Egyptian government fix its ties with Russia…”

Finally, Khaled Abubakr played lead host of Tuesday night’s episode of Alqahera Al Youm. The host praised the government for it handling of the investigation, and called on government officials to refrain from providing “unnecessary” information to citizens.


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SPOTLIGHT on the government’s response to challenges facing the tourism industry

The Ismail cabinet held its eighth meeting in Sharm El-Sheikh yesterday, with a focus on shoring-up the ailing tourism industry in light of yesterday’s declaration by Russia that the Metrojet crash was a terrorist attack. The cabinet also reviewed the latest developments on the country’s negotiations with the World Bank for a USD 3 bn loan, which were concluded successfully, according to International Cooperation Minister Sahar Nasr, Al Mal reports. Key tourism decisions include:

  • Providing tourism companies a three-month extension on loan payments;
  • Suspending any ongoing litigation against tourism countries for the next three months;
  • Approving requests to pay loans in installments without preconditions for the next three months.

The Central Bank of Egypt is still assessing ways it could intervene to support the tourism sector, an unnamed source told Al Masry Al Youm. No bank is expected to be forced to abide by certain measures, the source noted, but the CBE will likely set some guidance relating to providing the sector with liquidity, amending interest rates, or postponing debt repayment. Former Governor Ismail Hassan expects the central bank to resort to non-banking measures. The CBE could resort to financing the sector employees’ payrolls, he says. Hassan noted, however, that promoting domestic tourism would come short as it would not generate foreign currency-denominated income.

Tourism Ministry mulls subsidy for charter flights: Tourism Minister Hisham Zaazou said his ministry remains committed to supporting operators of charter flight to Egypt, Al Mal reported. Zaazou added that the Ministry is also considering increasing its financial support to the flights given the drop in bookings. Zaazou had already allocated USD 20 mn to support charter flight operators. Subsequent to the Russian plane crash in Sinai, he has said he expects the tourism sector to lose up to EGP 2.2 bn a month.

The Finance Ministry is allocating an additional EGP 1 bn to the Holding Company for Water and Wastewater (HCWW) to improve its responsiveness to recurring flash floods, Al Masry Al Youm reported. The additional funds bring up the total allocation to the company to EGP 1.75 bn. The Ministry also denied it refused a request from Alexandria’s branch of HCWW to prepare for the winter season, saying that the EGP 75 mn were requested to meet social security obligations.

Electricity Ministry prodding banks for EGP 16 bn to help double transmission capacity: The Electricity Ministry is in talks with a number of domestic banks to finance what Al Mal calls the Ministry’s most ambitious plan ever to expand the national electricity transmission grid. The ministry is reportedly looking to secure EGP 16 bn in funding, sources said, and will look to award part of the project on an EPC-plus-finance basis. The project aims to increase the national grid’s transmission capacity to 50 GW from 27 GW and includes building 38 transformer stations. (Read in Arabic)

German companies are interested in investing in renewable energy projects in Egypt, especially after the introduction of the Electricity Law (more on the Law from the Sharkawy & Sarhan law firm in our Energy section below) and reduced energy subsidies, CEO of the German-Arab Chamber of Industry and Commerce, Rainer Herret, said. Currency concerns are still an obstacle for potential investors, however. Herret added that Germany’s investments in Egypt are estimated to be around USD 6 bn, mostly in the oil and gas sector.

Five US companies win tender to import 2K tons of chicken: Five US-based companies won a tender to import 2K tons of frozen chicken parts, said the head of the General Authority for Supply Commodities (GASC) Mamdouh Abdel Fattah. The tender has won the ire of the domestic poultry industry, with the Egyptian Poultry Association sending an official notice to the Supply Ministry on the “catastrophic” ramification of the move. Importing poultry products threatens a EGP 25 bn domestic industry, said Mohamed Al Shafi’y head of the Meats and Poultry Division of the FEI. As we noted yesterday, grain merchants were also displeased with the Ministry’s move to supply the private sector with wheat. The case against the move seems to be stronger in poultry, as there is a sizeable domestic industry. (Read in Arabic)

Once you get past the standard-issue, breathless Business Insider headline, “Everyone on Wall Street is talking about this dark new China report“ is absolutely worth a read. In sum: China’s economy is cooling, and you can pretty much guess what that means for growth in emerging markets, particularly those dependent on export of resources to China and Chinese funding for infrastructure projects. “The report predicts 4.5% gross domestic product growth on average between 2015 and 2020, and 3.6% on average from 2015 to 2020 if the government is able to stave off disaster through policy mechanisms. It continued: ‘While we believe the government will pull enough policy levers to prevent full-blown economic crisis, the danger remains that China is facing a protracted period of declining growth.’”

While you’re over on Business Insider, and if you have about 45 seconds to burn, check out “The richest person in their 20s, 30s, 40s, and up.

Vox has created a map of the 26 states where governors in the United States have said they will refuse Syrian refugees. “Republican presidential candidates Ted Cruz and Jeb Bush … suggested that the US should limit refugee admissions to Christians,” Vox notes.

A father and his young son are interviewed on French television outside the Bataclan theater. “Do you understand what happened? Do you understand why those people did that?” (Watch in French with English subtitles, running time: 1:18)


Naturally, the top story on Egypt in the foreign press was Russia’s announcement on Tuesday of its certainty that a bomb had brought down Flight 9268, with reports in the New York Times, The Guardian, The Wall Street Journal, among others. Neil MacFarquhar’s report for the New York Times notes: “Egypt’s position has become harder to maintain in recent days as the Russian government, one of its closest allies, gave increasing indications that it believed a bomb was the most likely cause … On Tuesday, after hours of silence following the Russian announcement, Egyptian officials seemed to be gingerly walking back their denials.” The report then goes on to quote Cairo University political science professor Mustapha Kamel al-Sayyid, who incorrectly notes that “This is the first time that the Egyptian authorities admit the possibility that whatever happened to the Russian plane was a terrorist attack.” Readers will recall that the press conference on Saturday, 7 November where the head of the investigative committee Ayman El Mokadem clearly stated that all scenarios were being considered.

Nubian elders worry about disillusionment among the young and the threat of unrest on Egypt’s southern border with Sudan, Reuters’ Mahmoud Mourad writes. Nubian efforts to gain political influence “have brought them next to nothing” over the years, and in the upcoming parliament, they are expected to hold just one of 568 elected seats. “Egypt’s latest constitution, enacted last year, said the state “should work” toward the resettlement of Nubians to their ancestral lands within 10 years… But the reality is the community has little clout and electoral laws have only weakened its position,” Mourad writes. He adds “the concern within Egypt’s security establishment is that if Nubians repopulate the border area with Sudan, it could stoke separatist tendencies, even if there have never been credible calls for a standalone Nubian state.”


The Organization Man, by William H. Whyte, 1956. Former Fortune magazine editor William Whyte drew on extensive interviews with CEOs of major firms to produce his best-selling defense of individualism over collectivism, especially with regard to organizational behavior. The opening pages of Chapter 12 make for interesting reading (click on the first search result with page number 151) “Of all the organization men the true executive is the one who remains most suspicious of The Organization. If there is one thing that characterizes him, it is a fierce desire to control his own destiny and, deep down, he resents yielding that control to The Organization, no matter how velvety its grip. He does not want to be done right by; he wants to dominate, not be dominated.”


The second-most important outcome of the recently concluded G20 Summit in Antalya, Turkey (aside from the video of stray cats running around onstage) is this photograph of Recep Tayyip Erdoğan affectionately stroking US President Barack Obama’s face. (View image, Photo credit: Berk Ozkan, Anadolu Agency)


37th Cairo International Film Festival: As part of the Tribute to Omar El Sherif, Dr. Zhivago will be screened tonight. Dr. Zhivago is ranked as the 39th greatest American film of all time by the American Film Institute, and won five Academy Awards following its release in 1965. Omar El Sherif plays Dr. Yuri Andreyevich Zhivago, whose tale of love and loss is told against the backdrop of World War I through the Russian Civil War. The following scene takes place between Russian military officer Strelnikov and Zhivago, with Strelnikov telling the doctor / poet that he once had admired his work, but that now, “The personal life is dead in Russia. History has killed it.” (Watch, running time: 2:02)


Egyptian and Sudan got beef (and not the good kind that requires a tender)? The Sudanese press and social media users alike have been in an uproar over the past few days with claims that Egyptian security personnel have ‘harassing’ Sudanese residents and visitors to Egypt in recent weeks. The head of the Sudanese Parliament’s Foreign Relations Committee, Mustafa El-Daw, called the move “unacceptable” and a “violation of historic ties and agreements” between the two countries in a statement in Arabic on Sunday. He urged Egyptian authorities to investigate the alleged abuses, saying, “All options are open to defend the dignity of Sudanese people in Egypt.” A Sudanese hashtag has emerged called “Egypt is not my sister” as a result of the reports. Egypt has denied any such policy exists, saying the government will work with the Sudanese embassy to clarify the situation, according to Egyptian Foreign Ministry spokesperson Ahmed Abu Zaid. Some analysts have speculated that any security clampdown could be a response to Sudan reopening the issue of the disputed region of Hala’ib, as Sudanese President Omar Al Bashir has reportedly sought Saudi mediation to resolve the issue. The tiff also comes after the failure of the ninth round of talks on the Grand Ethiopia Renaissance Dam, an issue on which Sudan is increasingly adopting a more independent and conciliatory tone with Ethiopia. (Read)

Israel outlawed the northern branch of its own Muslim Brotherhood, the Islamic Movement in Israel, on Tuesday, according to a statement from Israeli Prime Minister Benjamin Netanyahu’s office, Haaretz reports (paywall). The Islamic Movement in Israel is a direct offshoot from the Muslim Brotherhood (pdf) and is considered one of its factions. According to Haaretz’s Barak Ravid, the group is split into “the more radical northern branch and the southern faction, [the latter of which] participates in mainstream Israeli politics.” The ban was put in place by a declaration signed by Israeli Defense Minister Moshe Ya’alon under their country’s Emergency Regulations. Ya’alon said the decision to ban the Islamic Movement was taken because the group “endangers the State of Israel and cooperates, according to data gathered, with Palestinian terror groups including Hamas, in effort to inflame the region and cause violence.” Amnesty International condemned the decision, saying it was taken solely due to some “remarks made by individual members” of the northern faction of the Islamic Movement, without elaborating further on what those remarks were, exactly.

New MFA blog post: Islam does not condone terrorism: Condemning the Paris terror attacks, Shawki Allam, Grand Mufti of Egypt. The Grand Mufti issues a standard condemnation of the recent Paris attacks, writing, “I wish to stress categorically and unequivocally our complete solidarity and unwavering support for the French people in their plight and their determination to combat terror.” The mufti goes on to place blame on the attack on “self-proclaimed ‘preachers,’ without a sound foundation in religious learning, [who] have attempted to set themselves up as religious authorities… If we wish to tackle this problem however, we must make an effort to properly understand the many factors that provide a rationalization for terrorism and extremism of all kinds in the modern world.” The piece is largely a re-working of one the mufti penned after the Charlie Hebdo attacks. (Read)

Palestinian Authority official: Gaza border agreement bypassing Hamas reached with Egypt: An agreement was allegedly reached recently in Cairo whereby the Palestinian Authority will oversee the Rafah border crossing between Egypt and Gaza, which would be set to allow freer movement, Azzam al-Ahmad, an aide to Palestinian National Authority (PA) President Mahmoud Abbas, said on Monday according to the AP. The agreement would come despite a complete lack of presence or authority by the PA over the border crossing and Hamas’ objections. “Any arrangement in Rafah cannot be done without proper coordination,” said senior Hamas official Ghazi Hamad in response to news of the agreement. Egyptian officials have yet to comment on the agreement, but the issue was discussed on 8 November between President Abdel Fattah El Sisi and Abbas.


Egyptian Refining Company hits 60% completion mark
The USD 3.7 bn Egyptian Refining Company is nearly 60% complete, said Qalaa Holdings Co-Founder and Managing Director Hisham El-Khazindar. Production is expected to begin a year and a half, he added. ERC will curb Egypt’s imports of diesel by more than half and cut sulfur dioxide emissions by nearly a third by producing cleaner-burning Euro V standard diesel. (Read in Arabic)

Ganope looking to add geothermal energy to Egypt’s energy mix
State-owned Ganope approved expanding its activities to include exploring geothermal energy prospects, Al Borsa reports. Ganope is looking to begin energy production from unconventional energy sources and is looking to start a pilot project on land plots by the Red Sea or the Gulf of Suez. The project would add to Egypt’s energy mix and diversify the country’s energy sources. (Read in Arabic)

Sea Dragon anticipates production growth from Egyptian concessions
SDX Energy (formerly Sea Dragon) has increased its investment in its onshore South Disouq concession to USD 14 mn from USD 9 mn, Country Manager Ahmed Farid Moaaz said, noting that a further USD 4 mn in capital could be tapped if needed, Al Mal said. SDX Energy had signed a contract with Polish firm Geofizyka Torun for the acquisition of 3D seismic data for the area, according to a previous press release. The Oil Ministry is requiring SDX to drill one well at minimum, Moaaz said, but a more comprehensive plan to dig more wells will be put in place once seismic surveying is completed. SDX Energy currently operate four concessions including South Disouq, South Ramadan, Meseda, and North West Gamasa.

**Further Reading in Energy: The Cairo-based Sharkawy & Sarhan law firm produced a guide explaining Egypt’s new electricity law 87/2015. Under the law, the guide explains that private sector companies, along with the Egyptian Electricity Transmission Company (EETC), are responsible of providing electricity to end-users.


CBE seeks more control, forces rice exporters to go through the official banking channels
The CBE has added rice to the list of commodities that can only be exported through Egypt’s banking system, according to a statement (pdf, Arabic). To obtain customs clearance for rice sales abroad, the exporters will need present documentation that the transaction is being done through an Egyptian bank. Amwal Al Ghad says the move is to ensure that export activities are accounted for in the banking system, giving the CBE control over export proceeds in foreign currency, rather than have them executed outside of banks. The Trade and Industry Ministry had already imposed a EGP 2,000 per tonne tariff for exported rice to curb exports after the Mahlab government previously imposed and then quickly rescinded an export ban.


Orascom’s Makadi and El Gouna resorts brace for revenue drop
Orascom Hotels and Development’s Red Sea governorate resorts are expected to hit a rough patch as a result of the Metrojet disaster, with revenues from its Makadi and El Gouna resorts expected to drop 30% and 10% respectively over the coming period, said sources in the company. The company’s occupancy rates dropped to 40% since the Russian plane went down, falling from 60% before the disaster, Al Borsa reports. Company sources also indicated that the company will focus on luring European tourists of other nationalities in addition to domestic travelers to pick up the slack. (Read in Arabic)


Vodafone Egypt to create 3,500 new jobs in the next three years
Vodafone Egypt plans to expand its workforce to 12,500 employees over the next three years by adding 3,500 new jobs. The expansions will be in the sectors serving international clients and its embassy services. International services provided by Vodafone Egypt include technical support in 11 different languages, Amwal Al Ghad says. (Read in Arabic)


EBRD extends NBK-Egypt a USD 20 mn trade finance facility
The European Bank for Reconstruction and Development (EBRD) is extending National Bank of Kuwait-Egypt (NBK) a USD 20 mn trade finance facility. The facility is giving through the EBRD’s Trade Facilitation Programme. The Programme “promotes foreign trade to, from and within the Bank’s countries of operations, including Egypt. Through the facility, the EBRD will issue guarantees in favour of international commercial banks covering the political and commercial payment risk of the transactions undertaken by NBK.” (Read)

EFG Hermes Leasing grows portfolio to EGP 550 mn in four months
EFG Hermes Leasing—the leasing arm of investment bank EFG Hermes that started operations in June—grew its leasing contracts to EGP 550 mn in four months after beginning operations, said EFG Hermes Leasing CEO Ahmed El-Kholy in an interview with Al Borsa. He attributes this growth to an increased demand for leasing. He added that the company invests in a wide array of sectors regardless of any perceived instability. EFG Hermes Leasing signed loan agreements with eight banks and is negotiating with three others to expand its operations, said Al-Kholy. The company plans to raise its paid up capital to EGP 100 mn by early 2016, up from EGP 75 mn. (Read in Arabic)

Al Oula’s real estate financing market share reaches 38%
Real estate financing company Al Oula claims to hold a 38% market share of the real estate financing market, according to its CEO Hassan Hussein. Speaking at Al Mal GTM’s CEOs Thoughts conference, Hussein outlined the challenges facing the sector at the moment. These include having the real estate developer act as the mortgage lender. He also bemoaned banks providing real estate financing without having to spinoff these activities. (Read in Arabic)


Giza police arrested a man near the French Embassy in Cairo claiming to have information regarding the attacks in Paris. El Watan says the man is being interrogated currently as well as being assessed psychologically. No further details were provided.

The Tahrir Institute for Middle East Policy (TIMEP) launched its newest report “Egypt’s Rising Security Challenge.” The 2015 annual report finds that “organized violence has intensified, with attacks occurring at a rate more than three times greater than the past year, and more than fifty times greater than from 2010 to 2012.” You can read the report (in PDF) here.


Egypt beats Chad 4-0 and moves to group stage at the World Cup qualifiers
Egypt beat Chad 4-0 in Alexandria on Tuesday, and with that win, moves on to the final round of the World Cup qualifiers. Yet the victory—despite the potential significance of the outcome—was somewhat of a hollow one, with Chad having barely making it to the match at all. With repeated flight delays, the team had just enough time for a pre-match routine warm up. Supported by 25K fans, the Egyptian team leveraged this home field advantage to score all four goals in the first half of the game. Egypt will need to make it through the next stage, which it has routinely missed by a thread since 1990, to make it to the 2018 World Cup. (Read in Arabic)


An American volunteer firefighter has received “the world’s most extensive face transplant,” Reuters reported. “After a 26-hour surgery performed at the New York hospital in August, 41-year-old Patrick Hardison is living with the face of 26-year-old David Rodebaugh, a BMX extreme bicycling enthusiast from Brooklyn who was pronounced brain dead after a cycling accident. He received a full scalp and face, including ears, nose, lips and upper and lower eyelids.”

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QUICK FACT: The heat energy content of 1,000 cubic feet of natural gas (around the space occupied by a bus) is 1 million btu (MMBTU). In Egypt, the government supplies 1,000 cubic feet of natural gas to steel producers at a price of USD 7, or EGP 55. To produce 1 ton of steel using iron — by using natural gas to de-oxidize iron — the equivalent of approximately 14.4 MMBTU is required at a cost of EGP 790. This is approximately 20% of the total direct cost of steel production per ton.

USD CBE auction (Tuesday, 17 November): 7.7301 (unchanged since Wednesday, 11 November)
USD parallel market (Tuesday, 17 November): 8.57 (+0.05 since Monday, 16 November, Reuters)

EGX30 (Tuesday): 6,407.3 (-1.13%)
Turnover: EGP 662.3 mn (52% above the 90-day average)
EGX 30 year-to-date: -28.2%

THE MARKET ON TUESDAY: The EGX30 slid 1.1% yesterday, weighed down in large part by a 6.8% dip in CIB’s share price as it closed at a year-low of EGP 42.80 per share. Oriental Weavers, Eastern Company, Orascom Telecom Media and Technology, and Egypt Kuwait Holding took the brunt of negative mar­ket sentiment, while Edita held its ground against the bourse’s slide, ending the day up 1.4%. At a market turnover of EGP 662.3m, regional investors were the sole net sellers of the day. Regionally, the Tadawul closed down as Brent crude fell, while further afield, the FTSE 100, DAX, and CAC 40 all posted gains, as did the Nikkei 225.

Foreigners: Net Long | EGP +81.4 mn
Regional: Net Short | EGP -98.4 mn
Local: Net Long | EGP +17.0 mn

Retail: 49.2% of total trades | 50.2% of buyers | 48.3% of sellers
Institutions: 50.8% of total trades | 49.8% of buyers | 51.7% of sellers

Foreign: 29.1% of total | 35.3% of buyers | 23.0% of sellers
Regional: 14.2% of total | 6.8% of buyers | 21.7% of sellers
Domestic: 56.7% of total | 57.9% of buyers | 55.4% of sellers


Reverting to Extreme Caution

This week, we advise clients to “materially” increase cash holdings in their portfolios for three primary reasons: First, foreign investors will likely dump CIB, the index’s largest constituent and their key holding in Egypt, in fear of intensifying military action against ISIS and flee Egypt assets in specific for fear of deteriorating access to foreign currency. Second, Paris attacks will likely trigger a sharper reaction by the government and monetary authorities to stem off “the incremental” pressures on the EGP, such as fiscal austerity measures, another round of rate hikes or stiff capital controls. These measures, particularly high rates, will continue to raise the opportunity cost of holding equities, on a risk-adjusted basis. Third, the ongoing Fed-driven selloff in global equity and commodity markets will not be helping in the short-term, even if Egypt’s selloff had started a lot earlier. The Fed-driven selloff, or at least super volatility, will likely reach its zenith in the second week of December, ahead of the Fed’s meeting in 15/16 December 2015.

Based on the three reasons outlined above, we strictly advise clients to exercise the maximum degree of risk aversion until further notice or until valuations fall by another 10-15%, at least. If you have to be invested, continue to park in defensives and USD-positive stocks. This may soon lead us to materially increase our market risk premium (currently 7%, mostly based on the historic excess return method) over and above the current increase in the risk-free rate. If so, current valuations will no longer look cheap. Tap here for the full run-down.


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