Monday, 4 January 2016

Amer: We don’t have the USD 1.5 bn from World Bank, AfDB — yet


Amer: We don’t have the USD 1.5 bn from World Bank, AfDB — yet. Egypt will make Qatar and Paris Club payments as scheduled. (Speed Round)

OTMT looks to Bank Audi for finance to acquire CI Capital; CIB says it has finalizing rolling Corplease into its investment banking arm. (Speed Round)

Pharos says it has a pipeline of nine M&A transactions, two IPOs. (Speed Round)

New regulations will set terms for VAT draw-back for exporters. (Speed Round)

Ministers in KSA to finalize five-year fuel supply agreement as well as fresh investments. (Speed Round)

Are U.S. markets hitting the end of their post-crisis rally? (Speed Round)

China seems to have high appetite for Egyptian infrastructure projects as Cairo prepares for Xi Jinping’s state visit this month. (Spotlight)

Egyptian ambassador arrives in Tel Aviv. (Egypt in the News; Diplomacy + Foreign Trade)

Interior Ministry to look into 101 cases of reported “forced disappearances”. (Speed Round)

By the Numbers + With Egypt’s 5Y USD credit default swap (CDS) spread at a two-year high, a risk compression trade is in sight.


Prime Minister Sherif Ismail is expected to arrive in Saudi Arabia today to sign the final agreements on investments and the supply of petroleum products. More in Speed Round and Last Night’s Talk Shows, below.

Islam El Behery is expected to appeal a one-year sentence for blasphemy in front of a Cairo appeals court today.

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Coptic Christmas falls on Thursday, meaning banks, markets, the private sector and the civil service will be off for the national holiday. Merry / Happy Christmas to those of you celebrating, and to all our best wishes for a relaxing long weekend.


The Coordinating Council formed the Ismail government and the central bank will meet a week from yesterday (Sunday, 10 January) to issues including measures to curb imports and lifting ceilings on foreign currency deposits.

Elected members of the House of Representatives will convene for the first time on Sunday 10 January to be sworn in and elect a new speaker of the House and two deputy speakers. The morning-time session will be broadcast live on national television.

The Emirates NBD Egypt Purchasing Managers’ Index is also due out on Sunday, 10 January, at 7:30am CLT. PMIs for the UAE and Saudi Arabia will be out on Thursday, 7 January. Egypt typically releases on the same day, but Thursday is a national holiday in celebration of Coptic Christmas.

Unconfirmed reports in December said President Abdel Fattah El Sisi would be making a state visit to Tokyo this month.


Tensions between Saudi Arabia and Iran dominated last night’s talk shows, leaving very little space for business chatter.

The only macro news appeared on Al-Hayat Al-Youm, when Cabinet spokesperson Hossam Qawish called host Lubna Asal to confirm that three ministers are currently in Saudi Arabia to prepare for Prime Minister Sherif Ismail’s meeting with the Deputy Crown Prince Mohamed bin Salman. “The ministers of health, housing and investment are currently in Saudi Arabia preparing for the next [Egyptian-Saudi Coordination] Council meeting,” Qawish said, noting that Saudi investors “showed great interest in tourism projects in Sharm El Sheikh, agriculture projects and investing in the energy sector.”

Qawish also confirmed that Chinese President Xi Jinping is visiting Cairo this month to celebrate 60 years of diplomatic relations between China and Egypt. The government is putting together infrastructure project agreements to present to the Chinese delegation during the visit, he added. (See our special Spotlight, after Speed Round, below, on preparations for the visit.)

Back to politics. The majority of talk show hosts were trigger-happy last night, rallying to defend the Saudi decision to execute 47 individuals (a number of them Shiite) convicted of terrorism. Ahmed Moussa on his show “Ala Mas’olity” said that supporting Saudi Arabia is tantamount to supporting Islam. “Call us and tell us how you want to support Saudi against Iran,” he pleaded.

Journalist and MP Moustafa Bakry called into “Masa’a Al-Qahera” on TEN TV to describe the Iranian protestors’ attack on the Saudi embassy in Tehran as a provocation of Saudi Arabia to drag it into a war. “We are standing with Saudi Arabia and other GCC countries in the face of the Iranian interference in the region as president El Sisi wants,” Bakry said.

Amr Adeeb also joined the chorus, telling us we are all in grave danger. “We are on the verge of an Arab-Persian war. Iranians stormed the embassy of Saudi Arabia, which is an insult to all Arab people. The kingdom has cut the ties with Iran in a strong statement not only to Iran, but to America as well.” Adeeb went on to say that the Saudi decision is a clear sign that the kingdom doesn’t fear Iran and that Saudi can protect the whole region.

On Lamis El Hadidy’s “Hona Al Assema,” Saudi ambassador to Cairo Ahmed Qattan called in to thank the Egyptian media for its support of the kingdom. But El Hadidy interrupted the ambassador to broadcast a live press conference by Saudi Minister of Foreign Affairs Adel Al-Jubier announcing that the kingdom was severing all diplomatic ties with Iran and giving its diplomats 48 hours to leave the country. “We asked Iranian authorities to beef up security around the embassy three times, when it was clear the number of protesters was increasing, and they ignored our requests,” said Al-Jubier.

After the press conference, Kuwaiti journalist Ahmed Al-Jarallah called El Hadidy saying GCC countries are discussing taking a strong, unified position against Iran, with cutting all diplomatic ties being an option on the table.

Ibrahim Eissa was off yesterday.


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CBE Governor Tarek Amer denied that the central bank received a loan package worth a combined USD 1.5 bn from the World Bank and the African Development Bank (AfDB), refuting an earlier statement by International Cooperation Minister Sahar Nasr that the funds were deposited in the CBE’s accounts. The World Bank had not yet received a request for the transfer of the funds from the Egyptian government, a World Bank official told Al Borsa. He blamed lengthy government procedures for the delays in obtaining the payment, which was signed for last month. The official said the World Bank would meet with the government to discuss the new Country Partnership Framework (CPF) and other future programs after the Ismail government obtains the House of Representatives’ endorsement of its policy agenda.

Egypt will not ask to postpone payments on bonds worth USD 1 bn owed to Qatar this week, Al Masry Al Youm reported. Qatar had suggested through mediators delaying the deadline for payments on the condition that Egypt file a request for the delay. CBE Governor Tarek Amer said Egypt is prepared to pay on schedule both Qatar and a USD 700 mn installment owed to the Paris Club, government sources report. Amer said the payments would overly tax Egypt’s FX reserves.

The central bank is considering launching two initiatives to support factories and promote production, Daily News Egypt says. The CBE mulling whether to channel funds to “faltering” factories via a new holding company, a special fund, or by providing the liquidity to banks. In parallel, the central bank is looking to encourage manufacturers through incentives including lower interest rates and and a new, unspecified funding mechanism that could allow manufacturers better access to bank credit. The paper says the Coordination Council will discuss the measures in a meeting scheduled for 10 January.

The central bank kept the exchange rate unchanged at EGP 7.73 per USD 1 on Sunday at its first FX auction of the year. The CBE injected USD 39.1 mn in liquidity, Al Masry Al Youm reported. This coincided with a drop in the parallel market to EGP 8.50 per USD 1.

Latest on CI Capital, OTMT deal: After a week of relative quiet for the holidays, leading commercial bank CIB said it had finished rolling leasing affiliate Corplease into CI Capital in a transaction valued at EGP 133 mn. The bank said in a statement that the transaction was executed on the Egyptian Exchange. The news comes as Orascom Telecom Media and Technology Holding (OTMT) is in talks with Bank Audi-Egypt for acquisition finance, a source told Al Shorouk. The source said OTMT is requesting around EGP 1 bn in funding to complete its acquisition of CI Capital, and that Bank Audi will be looking to form a syndicate to provide the loan with other local banks. Bank Audi-Egypt has already lent OTMT EGP 250 mn to finance its takeover of Beltone Financial. (Read in Arabic)

Pharos Holding is ringing in the new year with what it suggests is a deep pipeline of nine acquisitions and two IPOs, head of investment banking Sherif Abdel Aal told Daily News Egypt. The company is mandated as financial adviser to selling parties in the transactions. Among them: Food companies in deals with ticket sizes ranging from EGP 100 mn to over EGP 1 bn, a pharma company with an estimated value of over EGP 500 mn, and two retail companies, one valued at EGP 1 bn and the other at several bn EGP. The two IPOs Pharos is managing this year are in the health and service sectors, Abdel Aal said.

El Molla to discuss the development of Phase 9B wells: Oil Minister Tarek El Molla is scheduled to meet with the leaders of Rashpetco, the JV between EGPC, BG Group and Petronas, to discuss the development of Phase 9B wells, a source tells Al Shorouk. BG had decided to postpone the development of the project from the beginning of 2016 to the second half of the year due to increased debts owed from EGPC, Daily News Egypt had announced in December. Still, the source says Rashpetco awaits the approval of the foreign partners to allocate the expenditures necessary for Phase 9B’s development, a sum that could reach up to USD 1.4 bn over the next two years. The source adds that drilling operations are expected to begin in 3Q2016 and to come on stream by 3Q2017.

… This follows news that Egypt closed 2015 with USD 3 bn in arrears owed to international oil companies, Oil Minister Tarek El Molla told Reuters. The number is up from USD 2.7 bn in October 2015.

As many as thirty E&P companies are objecting to the 5% surtax on income over EGP 1 mn, with some planning to appeal paying the tax, according to sources speaking to Al Borsa. Sources at the companies justified the move by stating that they have a special income tax system already in place. Under the system, E&P companies pay a 40.6% income tax on top of a 22.5% general tax on corporations. This follows a notice issued by the Tax Authority to these 30 companies to pay the wealth surtax for FY2014/15 in addition to fines for delaying the payment. The Mahlab government eliminated the wealth surtax in 2015, but left it in place for that fiscal year.

Masdar eyes Egypt, Morocco and Jordan for renewable energy projects: “Egypt, Jordan and Morocco are the three key markets in the Mena [Middle East and North Africa] region that Masdar is looking into very carefully for investment. There is plenty of potential in these countries for both solar and wind,” said the CEO of Abu Dhabi-based renewable energy firm Masdar, Ahmad Belhoul, in an interview with Gulf News. Just last month, the company inaugurated the region’s first utility-scale wind energy project: the 117 MW Tafila wind farm, as a joint venture with EPGE and InfraMed, the latter of which was co-founded by EFG Hermes.

Conditions for VAT exemptions on exports are set-out in the new draft executive regulations for the value-added tax, Al Borsa reports in a piece detailing the regulations. A key feature is setting conditions for a full VAT rebate for exporters. These conditions mandate that the exporter be registered for the VAT, that the export not be a reused item and sold for more than the price of its components — and that a paper trail of the sale be submitted to the Tax Authority. As we noted back in November, Tax Authority chief Abdel Moneim Mattar had promised that exports would be VAT-exempt. Other major elements include banning the sale of goods at below-market prices as a tax dodge and appointing the Tax Authority with establishing a system for monitoring and collecting taxes on e-commerce transactions.

An Egyptian delegation has arrived in Saudi Arabia to discuss the terms of Saudi aid to Egypt, a source told Al Shorouk. The delegation will discuss the delivery of fuel shipments to Egypt as well as the specific projects that are to receive Saudi Arabian investments. The source added that an agreement is expected to be signed today with Prime Minister Sherif Ismail and Deputy Crown Prince Muhammad bin Salman in attendance. Amwal Al Ghad says the ministers of international cooperation, oil, electricity, investment, agriculture and manpower have already arrived in Saudi Arabia, but hinted that an agreement is likely to be signed on Tuesday.

The Trade and Industry Ministry issued a list of imported consumer goods whose foreign producers are obliged to sign up for the new registry of approved manufacturers. As we noted yesterday, manufacturers of these have two months to meet the safety and quality conditions set out by the registry. The list — published on the Official Gazette — ran the gamut of food items, toys and steel.

The Interior Ministry is investigating 101 cases of alleged forced disappearances that were referred to the ministry by the National Council for Human Rights (NCHR), according to an emailed government statement. Interior Minister Magdy Abdel Ghaffar said the results of the investigation would be formally announced, adding that this reflects the ministry’s efforts to engage with human rights organizations. Egypt had received widespread coverage and criticism over the past few years of alleged disappearances of activists, with Egyptian human rights organizations having documented cases dating back to 2013, according to a statement by Human Rights Watch. The Interior Minister has historically denied all allegations.

Saudi Arabia gives Iran 48 hours to remove its diplomats from the Kingdom as tensions escalate following execution of Shiite cleric: Saudi Arabia cut diplomatic ties with Iran on Sunday following the ransacking of two of their diplomatic missions in Tehran on Saturday, after protesters became enraged by Saudi’s execution of prominent Shiite cleric Nimr Al Nimr, the New York Times reported. Iran’s Supreme Leader Ayatollah Ali Khamenei also warned “The unjustly spilled blood of this oppressed martyr will no doubt soon show its effect and divine vengeance will befall Saudi politicians,” Reuters quoted as him saying on Iranian state television. Egypt’s Foreign Affairs Ministry condemned the attacks on Saturday. The UAE responded to the attack on the embassy by summoning Iran’s ambassador and handed him “a written protest note over the Iranian intervention in the sovereign affairs of the fraternal country of the Kingdom of Saudi Arabia and the attacks on the headquarters of Saudi diplomatic missions in Tehran and Mashhad.” The director of Amnesty International’s Middle East and North Africa Programme was quoted as saying Al Nimr’s execution “suggests they [Saudi authorities] are also using the death penalty in the name of counter-terror to settle scores and crush dissidents.”

Global investment in oil and gas is expected to fall to USD 522 bn in 2016, down 22% from USD 595 bn in 2015 and a six-year low as energy prices hit an 11-year low, according to Reuters. Chevron announced plans to cut its budget by a quarter, while Shell announced a further USD 5 bn in spending cuts if its planned takeover of BG goes through. Coupled with the delayed government payments and taxation disputes, these are prime conditions for declining investments in the sector in Egypt this year. The Reuters report comes as the Financial Times suggests the financial pain oil producers experienced last year was just the beginning.

Are U.S. markets falling off a cliff? Okay, we’re being a wee bit hyperbolic, but: Predictions for a gloomy 2015 don’t end with oil producers. “Had it not been for a small group of nifty companies, 2015 would have entered the history books as a terrible year for the US stock market,” the Financial Times reports in a piece that notes fears in the U.S. that “apart from a few stocks, the US markets are in a slump with fears [that the] post-crisis rally has run its course.” Both the “FANGs” (yes, that’s a thing, sadly — Facebook, Amazon, Netflix, Google) and a wider group that also includes Microsoft, Salesforce, eBay, Starbucks and Priceline (the “Nifty Nine”) gained more than 60% last year. The rest of the market? Not so much, prompting the paper to note that “The dominance of the Nifty Nine recalls the late 1960s and early 1970s, when a long bull market petered out into a period dominated by a ‘Nifty Fifty’ of companies such as Xerox.”

If you were sick of Grexit last year, you’re not going to be much happier with talk of growing chatter about a “Brexit” on the second business day of 2016. With the U.K. apparently committed to a referendum this year on its membership in the European Union, the Financial Times is running this morning with a poll of economists headlined “Membership of reformed EU seen as vital to economic security,” noting that “Regardless of the UK prime minister’s renegotiation of Britain’s terms of EU membership, most of the more than 100 economists thought economic prospects following a Brexit would be hit if voters decided to leave. The Washington Post, meanwhile, chimes in with a BuzzFeedian headline (“A British exit could be just the start of Europe’s unraveling in 2016”) atop a piece that does a reasonably good job of looking at the balancing act U.K. Prime Minister David Cameron has to strike this year.

Erdo-watch (or: Because we needed more problems, we now have to keep an eye on this guy again: Budding Hitler-enthusiast and aspiring God-Emperor Recep Tayyip Erdogan has kept himself busy working the pole on the international stage. From praising Hitler last Thursday as we noted in yesterday’s issue, to, improbably, singing Israel’s praises just two days later following his return from a trip to Riyadh, Erdogan has unlocked the rare achievement of having mastered the diplomatic human pretzel. Venezuela-based TeleSur TV perhaps puts it best with their headline: “Turkey’s Erdogan: We Need a Nation Like Israel, a System Like Hitler’s Germany.” While in Saudi, Erdogan signed an agreement with King Salman to form a bilateral strategic cooperation council, focusing on “security, military, economic, trade, energy and investment,” Reuters reported. On the domestic front, however, Erdogan moved ahead with his death march to snuffing out Turkey’s storied democracy by backing the stripping of parliamentary immunity and pushing forward of an investigation of his popular Kurdish rival Selahattin Demirtas, co-head of the pro-Kurdish Peoples’ Democratic Party (HDP), according to Reuters. We think Erdogan may be more than slightly jealous that Demirtas can play the baglama instrument. (He’s pretty good: watch, running time: 2:26) dismissing him as a “pop star.”

Other international headlines this morning that either carry implications for Egypt or that are simply worth noting in brief:

  • Bloomberg sees “more pain for emerging markets currencies” as China’s growth slows.
  • See the difference Mohamed El-Erian makes? PIMCO, which has lost in recent years both El-Erian and, in 2014, founder Bill Gross, was the world’s worst-selling fund house last year, reporting net outflows of USD 79 bn, the Financial Times says this morning. The top three performers: Vanguard (inflows of USD 223 bn), BlackRock (USD 234 bn) and Fidelity (USD 41 bn).
  • ‘Star Wars: The Force Awakens’ is set to surpass ‘Avatar’ this week as the highest-grossing movie of all time in U.S. and Canadian theaters,” MarketWatch reports.

And, finally: The WSJ notes that “Obama’s Mideast Plan Faces a New Hurdle.”

Enterprise asks: “Obama has a Mideast plan?”

SPOTLIGHT on relations with China ahead of Chinese President Xi Jinping’s visit this month

As we noted yesterday, Chinese President Xi Jinping is expected to arrive in Cairo this month for a state visit; we’ve yet to see dates specified. Prime Minister Sherif Ismail began preparations for the visit yesterday by calling a cabinet meeting to review a pipeline of potential Chinese investments in major infrastructure projects that Al-Ahram (quoting a cabinet statement) says includes:

  • an above-ground tram line linking Salam City to 10 Ramadan;
  • investments in the Suez Canal development zone
  • a freight line from Belbeis to Al-Rubeiky;
  • developing new piers at the Port of Alexandria;
  • a contract to build rolling stock for Egyptian National Railways;
  • an electrical energy storage project and investments in renewable energy;
  • and two power generation facilities
  • water infrastructure as well as land reclamation projects, among others.

Ismail then met with President El Sisi to brief him on the Cabinet meeting.

The domestic press is reporting this morning that China State Construction Engineering Corporation (CSCEC) signed a series of MoUs with the government and local companies for new administrative capital worth c. USD 45 bn, Al Mal reports. CSCEC signed two MoUs, one with Arab Contractors and the other with Petrojet, to establish consortiums with the two on development work. The Chinese company inked agreements with the Housing Ministry to develop the cabinet building, 12 ministry buildings, a large conference hall and 15K middle-income homes, said Housing Minister Mustafa Madbouly. Al Ahram is running the story as front-page news today. If the MoUs solidify into contracts, this would be the most substantial progress on the administrative capital since the EEDC megaproject was announced and the first MoU was signed with CSCEC in September 2015. CSCEC also signed an agreement with the Housing Ministry for funding the development of wastewater and other water infrastructure projects in over a thousand villages in Upper Egypt, Al Mal went on to report.

Meanwhile, Egypt also announced yesterday it would allow visas-on-arrival for Chinese tourist groups. Chinese tourists whose travel to Egypt is arranged by a travel agency will now be exempt from visa requirements, making them eligible for visas on arrival, according to a statement from the Ministry of Tourism on Sunday, Ahram Online reported. The statement makes mention of a minimum cash requirement, but does not get into specifics as to the required amount.


Much of the foreign press on Egypt yesterday evening and into this morning is focused on the arrival of Egyptian ambassador to Israel Hazem Khairat in Tel Aviv to assume his post.

Iran’s state-owned PressTV, as always, reads like an official statement from Ikhwanweb: “Relations between Egypt and the Israeli regime have been growing since Sisi took power in the Arab country in 2014 after orchestrating a military coup against Morsi, Egypt’s first democratically elected president, a year earlier … The Egyptian army claimed that the tunnels were ‘used by terrorists and criminals’ to smuggle weapons to militants in the Sinai Peninsula. The World Food Program (WFP), however, said in a report in February 2014 that the tunnels have represented ‘the main supply and commercial trade route for goods into Gaza’ since 2007.”

The report in question can be found here (pdf) and conveniently neglects to mention that the tunnels were also used to smuggle people, weapons and illicit substances. In 2007 in The Economist wrote: “Weapons and ammunition have long been smuggled into Gaza via tunnels under the strip’s border with Egypt. The tunnels are dug and controlled by criminal gangs … [who] then sell what they bring in — be it arms, drugs, cigarettes or other contraband — to the militias and on the black market in Gaza … The tunnels have also been the conduit, Western and Israeli intelligence officials believe, for weapons and money from Iran, and possibly even for Hamas men headed there for training. Both Fatah and the Israelis have also accused Hamas of opening the door to al-Qaeda…”

PressTV may also want to refer to the UNODC’s 2011 report (pdf) on human trafficking, which confirmed that “smuggling of migrants at the Sinai border has increased dramatically … hundreds of tunnels were built between Rafah and Egypt in order to circumvent travel restrictions.”

The following article has been rated “clickbait.” Reader discretion is advised. For a different flavor of insanity centering on Ambassador Khairat’s assumption of his post in Israel, see Arutz Sheva’s sensationalist-headline report: “Experts warn: War with Egypt possible.” Arutz Sheva translates and quotes at length a recent article from weekly Israeli Hebrew-language newspaper Makor Rishon. The “experts” cited are later clarified in the article as a retired Lt. Col. Eli Dekel, formerly of the IDF’s military intelligence arm, along with a retired individual from the Israeli Ministry of Defense whose former position is not stated. The article then further clarifies that Dekel is hawking his 2014 book, “The Next War Between Israel and Egypt.” Buried further still is the slight admission of a section header: “War appears highly unlikely.”

Russians have found that their favorite holiday destinations, namely Egypt and Turkey, are now off limits, Corey Flintoff wrote for NPR, describing Moscow’s travel bans on the countries. After nearly 3 mn Russian tourists visited Egypt last year, tourism inflows from the European nation have come to a screeching halt. “Travel agencies tried to suggest different destinations, like [the United] Arab Emirates, like Israel and other countries,” the president of a tour agency lobbying group said, but their higher cost due to a devalued RUB is proving to be a challenge.


Yet another high-ranking North Korean official dies under mysterious circumstances: Doug Bandow takes a look in The National Interest at possible explanations for the latest questionable story surrounding the death of a high-ranking North Korean official. Kim Yang-gon, a close aide to DPRK leader Kim Jong Un, reportedly died in a car accident on Tuesday, according to official reports from North Korean state news agency KCNA. While the cause of death sounds innocent enough, an unusual number of North Korean officials have reportedly met the same fate. What strikes this latest suspicious death as something of an anomaly is Kim Jong Un being visibly upset at his funeral, a far cry, as Bandow puts it, “from the denunciation as ‘despicable human scum’ of his uncle, who was executed two years ago. Kim could have been play-acting, but the departed didn’t have the sort of public profile requiring that his death be sanitized for the public.” Bandow theorizes that Kim Yang-gon may have possibly been taken out by a rival, a view which Reuters also seems to point toward. (Read Paranoia and Mystery: Peering Into North Korea)


As we note in Egypt in the News, First Egypt ambassador in Israel in three years assumes post: Egypt has an ambassador in Israel for the first time in three years, Al Ahram reported. Hazem Khairat, who was appointed ambassador last June, arrived in Israel yesterday to officially assume his role. Egypt had not had an ambassador in Israel since Atef Salem was recalled by former President Mohamed Morsi following the Israeli attack on Gaza in 2012.


Petroceltic to restructure Mediterranean footprint, could sell Egyptian assets
Petroceltic is being forced to reassess its position in the Eastern Mediterranean as the oil price remains low, according to reports suggesting that it has “initiated a ‘strategic review’ of its operations and assets to address looming debt payments.” Forbes’ Christopher Coats says this could be mean the sale of its stakes in the North Thekah, North Port Fouad, and the onshore South Idku licenses to joint partner Edison International. The transactions are expected to be completed in 1Q2016, but are still subject to regulatory approvals. (Read)

Oil Ministry targets USD 16 bn in investments in 2016
The Oil Ministry is targeting USD 16 bn in E&P, development, refining, petrochemical and infrastructure investments in 2016. The target includes issuing more E&P tenders and licences worth USD 4.5 bn and USD 1.2 bn worth of investments in production development. The ministry is also targeting USD 7.3 bn in refining projects. (Read in Arabic)

In Cyprus says 2016 will be a bad year for oil and gas
Egypt will be the center of oil and gas activities in the eastern Mediterranean in 2016 as Eni begins drilling the Zohr field and after having renegotiated pricing with BP, Charles Ellinas writes for In Cyprus. He adds that the developments with BG’s concession will depend on the acquisition by Shell and how it intends to operate in Egypt. “The fly-in-the-ointment may be Egypt’s ability to pay the debt it owes the oil and gas companies and more recently to its LNG suppliers. If this problem goes unchecked, it will affect Egypt’s credibility. Combined with persistent terrorist threats it could affect further investment in 2016,” Ellinas writes. In general, he expects 2016 to be a poor one for oil and gas if the sector is “dashed by lingering problems of oversupply and weak demand.” (Read)


Cement production licenses are coming soon … again
Trade and Industry Minister Tarek Kabil said the government will issue the terms and conditions for new cement production licenses “in days” — something the ministry has been saying since spring 2015. He added that the Cabinet only recently set the pricing scheme for the new licenses and approved allowing auctions for companies that meet the terms and conditions for licensing. Last month, Investment Minister Ashraf Salman said new cement licenses would be issued in three months. (Read in Arabic)


Hotel occupancy during Christmas holidays at 30%
Egyptian hotels had an average occupancy rate of 30% during the Christmas holidays, down from 55% the previous year, Abdel Fattah El Assy, the head of the Hotel Oversight Authority told Amwal Al Ghad. The differences across cities varied widely, with Sharm El Sheikh hotels being at 14% occupancy and Alexandria hotels at 50%. The lowest rates, according to El Assy, were in Taba and Nuweiba, which had an average hotel occupancy rate of 5% during the holiday period. (Read in Arabic)


Kuwait’s Al Salam plans to trade 30% of its shares on the EGX by July
Kuwaiti investment firm Al Salam Holdings plans to have 30% of its shares converted to Egyptian depositary receipts (EDRs) and traded on the EGX by July of this year. The company had already received approval from the Egyptian Financial Supervisory Authority (EFSA) to convert 17% of its shares in the Kuwaiti bourse to EDRs. Al Salam has applied for another 13%, said Mohamed Maher, vice chairman of Pioneers Holding—the financial advisor on the transaction. Al Salam has a number of real estate and agricultural investments in Egypt and plans to expand to the petroleum and energy sector. (Read in Arabic)


Egyptian NGO sues for right to broadcast parliamentary sessions
Egyptian NGO The Association for the Freedom of Thought and Expression is suing the presidency, the secretary general of the House of Representatives and the Legal Affairs Ministry for the right to broadcast parliamentary sessions live, Egypt Independent reported. The lawsuit is in response to reports that only state television will broadcast parliamentary sessions, and only pre-recorded excerpts. The NGO cites in its lawsuit the constitutional mandate to make the House’s sessions accessible to the public.

** Further reading in Egypt Politics + Economics: See Ahram Online’s Who’s who of President Abdel Fattah El Sisi’s 28 appointees to the incoming House of Representatives.


26 militants killed in North Sinai raids on Saturday: 26 terrorists were reportedly killed in raids by the military in the North Sinai towns of Al-Arish, Sheikh Zuweid, Rafah and central Sinai on Saturday, according to a military spokesperson. Five suspects were also reportedly arrested, and weapons and ammunition were seized. The operation was part of the ongoing “Martyr’s Right” campaign in North Sinai.

**Further reading in National Security: The Reconfiguration of the Muslim Brotherhood in Egypt: for an Israeli think tank’s perspective on Egypt’s Muslim Brotherhood, see Erez Striem’s report issued last month for INSS: “It is difficult to estimate the extent of the Muslim Brotherhood’s involvement in the wave of terrorism in Egypt … Nevertheless, the process of Muslim Brotherhood members slipping into various types of violent action is clear. It is believed that at least some of the small terrorist cells operating in the Nile Valley region were founded by former Muslim Brotherhood activists. It is also known that a number of former activists have joined Ansar Bait al-Maqdis [Wilayat Sina] — the Islamic State branch in the Sinai Peninsula — over the past two years.”


Zamalek names Mido as coach
Zamalek Sporting Club named famed striker Ahmed “Mido” Hossam head coach yesterday, some two weeks after he stepped down from the top position at Ismaily. The club sacked Brazil’s Marcos Paqueta, who himself took over from Portuguese coach Jesualdo Ferreira two months earlier, King Fut reports. (Read)


An onboard disturbance caused by three intoxicated passengers forced an EgyptAir flight bound for Riyadh to taxi back to the gate before takeoff last night, Al Mal reports this morning.

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USD CBE auction (Sunday, 03 January): 7.7301 (unchanged since Wednesday, 11 November)
USD parallel market (Sunday, 03 January): 8.50 (0.03 from Thursday, 31 December)

EGX30 (Sunday): 7,089.06 (+1.19%)
Turnover: EGP 337.8 mn (22% below the 90-day average)
EGX 30 year-to-date: +1.19%

THE MARKET ON SUNDAY: The EGX30 kicked off the new year with a gain of 1.2%, with index heavyweight CIB leading gainers as it closed up 7.4% on a significant rally in the final minutes of trading. The more representative EGX50 rose 0.9%, while the small- and mid-cap heavy EGX70 advanced 1.3%. MNHD, Oriental Weavers and Beltone Financial were the top performers, while GB Auto, Orascom Construction and Glob­al Telecom ended the day in the red. With the market at EGP 337.8 mn, regional investors were the sole net buyers of the day. Regionally, Dubai’s General Index fell as a heavy selling wave hit Emaar Properties; investors dumped the stock following a fire at the developer’s The Address Hotel in Dubai on New Year’s Eve. The index ended today’s session 0.5% down. Other GCC indices came in mixed: Saudi’s Tadawul advanced 0.6% while Abu Dhabi’s General Index dipped 0.8%.

Foreigners: Net short | EGP -22.9 mn
Regional: Net long | EGP +32.6 mn
Domestic: Net short | EGP -9.7 mn

Retail: 80.0% of total trades | 83.2% of buyers | 76.7% of sellers
Institutions: 20.0% of total trades | 16.8% of buyers | 23.3% of sellers

Foreign: 6.4% of total | 3.0% of buyers | 9.8% of sellers
Regional: 10.2% of total | 15.0% of buyers | 5.3% of sellers
Domestic: 83.4% of total | 82.0% of buyers | 84.9% of sellers


With Egypt’s 5Y USD CDS spread at a two-year high, a risk compression trade is in sight

Egypt’s five-year USD credit default swap (CDS) spread — which reflects the premium required to insure against sovereign default on a specific Eurobond issue — has sharply risen since end October 2015, reflecting both a corresponding surge in EM CDS spreads as well as Egypt-specific spread. Tap here to read more about why we think this is a key tactical indicator on which you should keep you eyes as you fashion your trading strategy this month.


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