Monday, 27 June 2016

Celtics draft an Egyptian who can dunk


What We’re Tracking Today

Beltone Financial’s general assembly is set to decide on converting a third of its share capital to GDRs when it meets today, according to Reuters.

Israel, Turkey to re-establish diplomatic ties. Israeli and Turkish officials said late on Sunday they have reached an agreement on the restoration of full diplomatic ties, with an official announcement expected today, the Wall Street Journal (paywall) reported.

Will the agreement leave Egypt in the awkward position of being the only country in the world imposing a blockade on Gaza? No. The Turks had to abandon their demand for Israel to lift the blockade, but Israel is expected to announce they will allow Turkey to build “a hospital, power plant, desalination facility and other badly needed infrastructure in the war-battered Palestinian enclave,” the WSJ notes. Also not expected in today’s announcement, but still in the works: A proposed pipeline that would send Israeli gas to Turkey. We’ll be watching to see what this could mean for plans to import Israeli gas for domestic us and for liquefaction at facilities in Egypt.

When do we eat? Iftar will be at 7:01 pm CLT today, while the cut-off for sohour will be at 3:11 am CLT, according to Islamic Finder.

On the Horizon

Thursday is a national holiday commemorating 30 June. Enterprise will also be off, but we’ll be back on Sunday.

Eid Al Fitr should begin next Wednesday (6 July). There’s no official word on days off as yet, but the odds now look good we’ll have two long weekends in a row — or a chance for a monumental bridge.

Next hearing in Tiran, Sanafir case on 3 July: The Supreme Administrative Court will hold on Sunday, 3 July, its next hearing on the State Lawsuits Authority’s appeal of a lower court ruling declaring the islands of Sanafir and Tiran to be Egyptian. The date was set after the SAC postponed yesterday its first hearing after the plaintiffs in the case filed a motion asking it to “recuse itself,” Ahram Online reported.

Speed Round

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Veteran MDs won’t face mandatory retirement, court decides: The Administrative Court overturned Central Bank of Egypt Governor Tarek Amer’s imposition of nine-year term limits on bank managing director. The court, judging on a case filed by two bank shareholders, said Amer’s decision violates the rights of bank executives to employment and also refused the retroactive application of the decision, Al Ahram reported. As it stood, Amer’s decision would have ended the terms of CIB’s Hisham Ezz Al Arab, Arab African International Bank’s Hassan Abdalla, and Bank Audi’s Hatem Sadek, among others, by 31 June.

…In response, Amer said he accepts the court’s decision and will not lodge an appeal, Al Borsa reported, but sources claim the central bank has begun moving to amend the Central Banking Law to allow it to take executive decisions of a “similar” nature. The amendments will give the CBE the remit to implement any executive actions it sees fit for the banking sector, the sources added.

CI Capital mulling IPO? CI Capital is reportedly considering floating its shares on the EGX, among a number of strategic options after the planned acquisition by Beltone Financial fell through after repeated delays in the receipt of regulatory approval, sources told Al Mal. The listing could also involve selling a 50% stake to “a major financial institution.” Details about the other “options” being considered were not provided.

Beltone Financial is suing the heads of the EGX and EFSA: Beltone Financial Holding is filing a court case against the heads of the Egyptian Exchange and of the Egyptian Financial Supervisory Authority (EFSA) for the repeated cancellation of trades in its shares, sources told Reuters. Beltone’s stock price shot-up more than 550% in three months before the EGX decided to repeatedly reverse trades due to what it claimed were “unjustified increases.” The case, filed at the Administrative Court, accuses EGX Chairman Mohamed Omran of “deliberately harming” Beltone Financial and asks the court to bar him from reversing trades. The suit also seeks damages. “EFSA Chairman Sherif Samy said everyone has the right to challenge decisions in front of the administrative court, declining to comment further. Bourse Chairman Mohamed Omran wasn’t immediately available to comment,” Bloomberg reported, noting that EFSA has referred 12 individuals to the Prosecutor General’s office for investigation of claims they manipulated Beltone shares.

Are Rosatom’s plans in Egypt a pipedream? Experts are saying many of Rosatom’s overseas agreements, including one with Egypt, have “little chance of turning into firm contracts” considering many of the countries are “decades away” from being able to use nuclear energy due to a lack of “experience with nuclear power, shortage of capital and grids that are unsuitable,” Reuters reports. “The Russians are increasingly viewing their energy fuels and technologies as a lever for foreign policy," said Carnegie Endowment for International Peace associate Mark Hibbs, a reputation Rosatom needs to shed. "Rosatom is pretty good at announcing [EUR 100 bn] of orders in 25 countries, but not an awful lot of these are firm contracts, they are just bits of paper," said Steve Kidd at East Cliff Consulting. We had reported yesterday that Finance Minister Amr El Garhy and Electricity Minister Mohamed Shaker were in Russia for talks on the Daba’a nuclear power plant agreement.

Egypt attracted the second largest FDI inflows in Africa in 2015, according to the World Investment Report 2016 (pdf) issued by the United Nations Conference for Trade and Development on Thursday. Some USD 6.9 bn in FDI flowed into Egypt, a 50% y-o-y increase, making the nation the second-most popular destination on the continent, second only to Angola’s USD 8.7 bn. FDI in Africa was estimated at USD 54 bn, according to the report, with Egypt and Morocco expected to experience the most significant inflows in 2016.

On the flip side, Egypt’s economy needs about 20 years to recover due to a poor investment climate, former head of the Egyptian Businessmen’s Association Hussein Sabbour told DNE. “Doing business in Egypt is a difficult mission,” said Sabbour, adding that “bureaucracy, corruption, and [the] government’s habit of breaking or dishonouring contracts,” top the list of factors hindering the investment environment, to say nothing of the CBE’s limits on the transfers of USD abroad and “the general lack of security due to political conflict,” he says.

Banks are ignoring the Central Bank of Egypt’s 100 bps interest rate hike as only a handful of state-owned banks are increasing interest rates on savings products correspondingly. Daily News Egypt was told the correspondingly higher return on treasuries was not large enough to justify increasing the interest rates paid on savings products offered to clients. One treasury head expects the increase not to last for longer than three months to avoid impacting the local public debt negatively. Al Borsa adds to its sister publication’s views, saying banks are preparing to increase rates on loans 1-1.5 percentage points within a few days following the increase in their cost of funds.

EGAS has issued a tender for a third FSRU with a capacity of 750 mcf/d to meet domestic demand, Oil Minister Tarek El Molla told Al Borsa. The floating storage and regasification unit will be connected at the SUMED pier in Ain Al Sokhna, he added. The third FSRU will increase Egypt’s import capacity to 1.95 bcf/d from 1.2 bcf/d, El Molla noted. The direction to add a third FSRU will guarantee the stability of supplies to factories and power plants, said El Molla.

While the FSRU won’t arrive in time to make a difference before this summer’s peak national demand season, EGAS will not be cutting off supplies to factories in August, Chairman Mohamed Al Masry said, Youm7 reported on Sunday. He added that EGAS has coordinated with energy-intensive companies to have as many as possible conduct annual maintenance during August to curb demand. Manufacturers in energy-intensive industries had been bracing themselves for cutbacks in supply when demand peaks in August.

Alexandria-born Abdel Nader became the second Egyptian-American in history to be drafted by an NBA team. Iowa State forward Abdel Nader was the Boston Celtics’ 58th pick in this year’s NBA draft. “It gets to the last couple of picks and you’re thinking it’s over. Then you hear your name and it’s relieving … I knew they had a high interest, but I didn’t know if they were going to call my name, so it was definitely a surprise… Coach Stevens talks about how he wants a lot of versatile players here … I can play multiple perimeter positions, I can guard multiple perimeter positions and can even defend some bigs,” Nader told Boston Celtics’ official website. Before Nader, Alaa Abdelnaby was the only Egyptian to have played in the NBA having had a stint with five franchises from 1990 to 1995 after being picked by the Portland Trail Blazers in the 1990 NBA Draft. Nader played high school basketball in Chicago before going on to Iowa State. Basketball Insiders has an interview (run time: 2:49). ESPN declared him “Dark Nader” in naming a ferocious Nader dunk (that drew a foul to convert for three points) as one of the best dunks of the 2016 college basketball season. (Text here, or go straight to the video, run time: 0:45). (Says our editor: There’s nothing better than the Boston Celtics — except perhaps an Egyptian playing for the very team that Red made great.)

MOVES- Amr El Degwy, a non-executive board member of the Egyptian Holding Company for Natural Gas (EGAS), has joined the board of directors of Egypt Gas Company as a non-executive member, Youm7 reported on Sunday.

CORRECTION- Egypt did not win a seat on the UN Human Rights Council, contrary to reports in the domestic press over the weekend. It was ambassador Ahmed Fathallah, a legal expert, who was elected for a four-year term as a member of the UN’s Human Rights Committee, which is a special committee of independent experts that monitors the implementation of the International Covenant on Civil and Political Rights. The ambassador was elected on an individual basis and is not acting in a representative capacity for Egypt. Daily News Egypt covered the news. H/t Amy H.

CORRECTION- Juhayna plans to invest EGP 640 mn in growth in 2016. Of that amount, EGP 250 mn will be directed toward manufacturing expansions for the company’s juice and dairy lines and EGP 390 mn will be earmarked to expand its animal resources and transportation fleet. H/t Khaled D.


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Egypt in the News

Wheat in the news once again: The Supply Ministry dismissed on Sunday allegations that its wheat procurement figures were inflated, promising to enforce penalties “for domestic suppliers that misreport stocks,Reuters reports on the heels of yet another rejected wheat shipment we mentioned yesterday. “We do not believe the state has lost money or that funds have been wasted,” the ministry said. “There is a 25 percent penalty on quantities not supplied in addition to the price of the wheat itself.” The ministry also said it is not possible to corroborate quantities in each storage site until wheat is fully discharged. But millers and traders told Reuters tools do in fact exist to count wheat in storage and that “discharging the wheat before counting it will allow suppliers to mix cheaper imported grains into their stocks to cover gaps.”

Is Egypt’s ad campaign to fight corruption just a bunch of hot air? Some experts interviewed by Al-Monitor seem to think so. Four TV ads hit the airwaves this Ramadan under the slogan “Egypt is stronger than corruption” to raise awareness on cronyism and nepotism, bureaucracy within government departments, and bribes in the customs process. “The government does not sincerely believe what it purports to in these ads about fighting corruption,” said Asim Abd al-Mu’ti, the former undersecretary of the Central Auditing Organization. “The government’s practical procedures contradict the advertising campaign’s stated goals … They tend to pass laws that work to the advantage of businessmen embroiled in corruption cases, without any procedures that might have a deterrent effect on them. The same goes for officials accused [of complicity] in corruption cases.” You can watch the ads here, here, here, and here (all with a run time of 0:31).

The Macro Picture

Brexit: A 28+ month headache in the making… As the UK faces the “stark reality of crumbling influence on the world stage,” David Cameron is expected to address Parliament today after a weekend of political and market turmoil after the vote to leave the EU, Bloomberg reports. Opposition Labour Party lawmakers’ attempts to throw leader Jeremy Corbyn overboard left the sense that “Britain was facing its greatest crisis in half a century with neither a functioning government nor an opposition,” Bloomberg reports.

Meanwhile, the GBP slid further, with the Financial Times (paywall) writing that “beyond potential ructions for the [GBP], the greater concern is that a broadly stronger [USD] triggers another wave of emerging market jitters led by increased pressure on China’s [CNY].” Brexit could also trigger central bank moves in the form of easing and currency intervention. On the upside, “Brexit’s fireworks for markets was another down leg for top-tier government bond yields” and an extended fall in asset prices could be “tempting at some stage.” RS Investment Management is already saying declines left equities in Greater China looking more attractive.

Worth Reading

The best thing to read on the internet at the moment, even though it is definitely not for everyone, is an intense piece of investigative journalism by Mother Jones reporter Shane Bauer, who went undercover working as a guard in a private prison in Louisiana. At 36,000 words, this reads more like a short story than an article, but it is deeply engrossing. Please, however, be warned, everything horrible that you imagine that goes on in prison, really does go on in prison, so you may want to save this until after iftar. “When CCA [the company that runs the prison where Bauer works] shares appeared on the NASDAQ stock exchange in 1986, the company was operating two juvenile detention centers and two immigrant detention centers. Today, it runs more than 60 facilities… In 2015, CCA reported USD 1.9 bn in revenue; it made more than USD 221 mn in net income.” (Read My four months as a private prison guard)

Diplomacy + Foreign Trade

A US Congressional delegation arrived in Egypt on Saturday to meet with President Abdel Fattah El Sisi to “discuss the long-standing partnership between the United States and Egypt, efforts to fight terrorism, and shared interests in regional stability and security,” the US embassy said in a statement. The delegation is headed by Dana Rohrabacher (Republican of California), chairman of the Europe, Eurasia, and Emerging Threats Subcommittee of the US House of Representatives, who will also meet with other officials.

Israeli Prime Minister Benjamin Netanyahu reportedly wants the US to press for a regional summit in Egypt to discuss Israeli-Palestinian peace efforts, a senior Israeli official told Bloomberg. Netanyahu was set to “nudge” the peace efforts in the direction of regional negotiations in a meeting with US Secretary of State John Kerry in Rome on Sunday, said the source.

Foreign Minister Sameh Shoukry met with Norway’s Middle East peace envoy Tor Vinslad to discuss the Paris-based Israeli-Palestinian peace initiative, ministry spokesperson Ahmed Abu Zeid told Ahram Online. “The Norwegian peace envoy listened to the assessment of the foreign minister of the results of the meeting that took place earlier this month in Paris between different international foreign ministers to discuss the peace process,” Abu Zeid said in a statement.

President Abdel Fattah El Sisi spoke with Bahraini King Hamad bin Isa Al-Khalifa, where the monarch vowed to boost bilateral ties between the two nations, as well as to apply the projects agreed upon during his last visit to Egypt, Al Mal reported on Sunday. In April, Egypt and Bahrain had signed 11 MoUs in different sectors, including vocational training, scientific research and electricity, among others.

Investment Minister Dalia Khorshid has met with Chinese Ambassador Song Aiguo to review projects signed between the two nations in June, Al Borsa reported on Sunday.
The meeting mainly involved prioritizing projects to be implemented first, with projects in the telecommunication and CIT sectors likely to be given preference.


Crescent Petroleum expects oil at USD 60 per bbl this year, sees growth in Egypt

Crescent Petroleum, an oil and gas producer in Egypt and Iraq, expects oil prices could reach USD 60 per bbl, CEO Majid Jafar told Bloomberg. Crescent operates in Egypt and Iraq through Dana Gas, in which it controls a 19% stake, and sees opportunity for growth in both countries.

Harel insurance could buy up to 4% in Tamar field from Noble Energy

Israel’s largest insurer, Harel Insurance and Financial Services, is in talks to buy up to 4% of the Tamar offshore natural gas field from Houston-based Noble Energy, Harel said on Sunday, according to the FT (paywall). “The sale would be part of framework deal agreed by Noble and other investors in Israel’s offshore gas sector with the country’s government in order to address an antitrust challenge and allow the much larger Leviathan gas project to go ahead.” The talks come on the heels of work finally starting on Leviathan, “a potential cash cow for Noble and Delek, which have signed preliminary export deals with Jordan and two refinery projects in Egypt.”

Egyptian Electricity Holding Company to contract Recovered Energy to increase Sixth October plant efficiency

The Egyptian Electricity Holding Company (EEHC) will sign an agreement with Recovered Energy to increase the efficiency of the Sixth October power plant at a total cost of USD 30 mn, Recovered Energy VP for Middle East Division Tarek Ghorab told Al Borsa. The project will add 50 MW to the power plant’s capacity, he added. Recovered Energy submitted a proposal to EEHC to increase the efficiency of three production units at the Damietta power plant at a total cost of USD 35 mn in cooperation with three international banks, but is waiting on a response.


USD shortage postpones LG new production line plans

The USD shortage in Egypt has postponed LG’s plans to build new production lines, LG Egypt CEO Don Kwack told Al Mal. The company’s current strategy includes reducing reliance on imported production inputs, Kwack had previously told Al Mal. LG Egypt currently operates at less than 60% of its total capacity, and as we had reported yesterday, has increased the price of imported home appliances by 40% due to increased tariffs.

Industrial Development Authority issues 1 mn sqm in industrial land in Badr City

The Industrial Development Authority is tendering 1 mn sqm in industrial land plots in the Badr City this week, sources told Al Borsa. This is the first land issuance since the cabinet tasked the authority with managing land allocated to industrial projects, instead of the General Authority for Investment and Free Zones, the source added. The land is expected to attract chemical and building material industries, the source said.

Falcon Group inaugurates security equipment factory with foreign partner next week

Falcon Group is inaugurating a security equipment factory with an international security partner next week, CEO Sherif Khaled told Al Borsa. The name of the partner or the size of their investment was not disclosed. The group is targeting African markets at reduced prices, as well as meeting the Interior Ministry’s demand for X-ray machines and security gates, he added. As we had previously reported, Falcon Group signed an agreement with Restrata to train 7,000 of its personnel on passenger and luggage screening for Egypt’s airports.


Air Cairo schedules two weekly flights to Iceland

EgyptAir subsidiary Air Cairo has scheduled two weekly flights between Cairo and Iceland as part of its plan to expand into new markets, Chairman Yasser El Ramli told Al Shorouk. The company recently expanded into Prague as part of the same plan, in addition to scheduling flights between Poland and Sharm El Sheikh and Hurghada, he added.

Automotive + Transportation

Brexit means UK won’t be exempt from customs on automotive industry –Customs Authority

The UK leaving the EU means the customs exemptions on vehicles and parts in the Association Agreement will no longer apply, head of the Egyptian Customs Authority Magdy Abdel Aziz told Al Borsa. The authority is currently studying the effects of the Brexit on bilateral trade with the UK, but the immediate impact won’t be felt for at least another two months, he said.

Banking + Finance

Banque du Caire contributes EGP 450 mn to Petrotrade loan

Banque du Caire intends to contribute EGP 450 mn to an EGP 5 bn syndicated loan to the Egyptian Petroleum Trading Services Company (Petrotrade), Banque du Caire board member Ayman Mokhtar told Al Borsa. The loan will be paid back over five years and will be issued in one go, he added. As we had reported earlier, 13 banks are arranging an EGP 5 bn loan for Petrotrade to pay back debts to the Egyptian General Petroleum Company.

Abu Dhabi Islamic Bank in negotiations with Egyptian Electricity Transmission Company for EGP 2 bn loan

Abu Dhabi Islamic Bank (ADIB) has entered negotiations with the Egyptian Electricity Transmission Company for an EGP 2 bn syndicated loan, sources told Al Borsa. Five other banks said they’ll join the syndicate, he added, noting the funding will be disbursed next month. The loan will be used to finance new cables, network extensions, and paying back debts.

NBE approves EGP 3.5 bn loan to Egyptian Electricity Holding Company

NBE has approved an EGP 3.5 bn syndicated loan to the Egyptian Electricity Holding Company last week, Deputy Chairman Yehia Abou El Fotouh told Al Borsa. The loan will be issued in one tranche and used to pay back debts to EGPC. The loan will be paid back over a period of eight years, he added, with Banque Misr and CIB also participating.

Bank participation in national projects as part of debt repayment by government possible, experts say

The House of Representative’s suggestion for banks to be allowed to own shares of national projects as a form of debt repayment by the government is “practically possible,” experts told Al Shorouk on Sunday. While public banks may take advantage of the scheme, some private banks, as well as branches of foreign banks, would not be compelled to accept the proposal as their primary activity is lending, Beltone Financial’s Head of Equities Hany Genena said. However, the number of national projects will not be enough to cover the debt owed to banks, according to senior economist at Dubai-based Arqaam Capital Reham El Desoki.

AfDB delegation, International Cooperation Ministry and GAFI officials meet to discuss economic plan

A delegation from the African Development Bank (AfDB) has met with General Authority for Investment and Free Zones (GAFI) head Mohamed Khodeir, GAFI Vice Chairman Mona Zobaa, and representatives from the International Cooperation Ministry to review Egypt’s economic plan, particularly in the energy sector, Al Borsa reported. Last week, the government started talks for the second USD 500 mn tranche of AfDB’s USD 1.5 bn loan to support the state budget and the one-stop shop policy.

Other Business News of Note

Government launches National Company for Sinai Development, House approves Sinai Peninsula Development Plan

The government has established the National Company for Sinai Development with authorized capital of EGP 10 bn and issued capital of EGP 1.4 bn, Planning Minister Ashraf El Araby told Amwal Al Ghad. The company will self-finance its projects and will also seek grants and international cooperation agreements with GCC countries, he added. The company was established between the National Investment Bank, the National Service Authority of the Armed Forces, and the National Authority for the Development of the Sinai Peninsula. Meanwhile, the House of Representatives approved the Sinai Peninsula Development Plan that will be funded through a USD 1.5 bn loan from the Saudi Fund for Development, the International Cooperation Ministry said in a statement. The plan includes the King Salman University in Tor, nine urban communities, 13 agricultural communities, as well as major infrastructure projects including roads and desalination plants. The Kuwait Fund for Arab Economic Development is contributing USD 900 mn toward infrastructure and housing projects, in addition to USD 155 mn from the Arab Fund for Economic and Social Development.

Investment Ministry to establish Qena Public Free Zone

The Investment Ministry agreed with Qena governorate to allocate a piece of land for a public free zone, Al Borsa reported. We had reported earlier this month that Investment Minister Dalia Khorshid said the ministry is planning three new public free zones, without specifying their location, to be added to the existing seven. The General Authority for Investments and Free Zones (GAFI) is studying plans to establish two investment regions, including one in Minya, a GAFI official said. GAFI is set to allocate land for 17 projects in Marsa Matrouh soon, Khorshid said.

Export council heads urge government to speed up free trade agreement with the UK

The heads of export councils have called for the government to speed up negotiations to sign an agreement to liberalize trade with UK, which would take the place of the agreement with the EU following the Brexit vote, Ahram reported on Sunday. The UK is likely to be busy with Brexit procedures which could slow down negotiations with Egypt, Export Council for Building Materials, Refractory & Metallurgy Industries Head Walid Gamal Eldin said, adding that the Agadir agreement will also likely need to be renegotiated. The devaluation of the GBP since the vote will make Egyptian exports more expensive, noted Khaled Abou Al-Makarem, head of the plastics section at the Chemical and Fertilizer Export Council.

Legislation + Policy

Gov’t to make state-owned land allocations through GAFI optional –sources

The Ismail government is reportedly looking into amending the Investment Act to make allocating state-owned land plots through the General Authority for Investment and Free Zones (GAFI) optional, sources told Al Borsa. The amendments will allow state bodies including the New Urban Communities Authority and the Industrial Development Authority to continue issuing land plots and not require them to abide by the one-stop shop regulations through GAFI. Mohamed Khodeir, the newly appointed head of GAFI, said the authority is soliciting suggestions for amendments to the legislation to go along with the legislative agenda, which includes clauses regulating bankruptcy and sole proprietorship. Cabinet paved the way for the amendments last week, as we reported in our wrap-up on last Wednesday’s cabinet meeting.

National Security

Russia to deliver R-32 missile corvette to the Egyptian Navy, or is it already delivered?

Russia will deliver an R-32 missile corvette equipped with Moskit missile system to the Egyptian navy in July, chief of the Russian Navy’s Combat Training department Viktor Kochemazov said on Saturday, RT Arabic reported, which was also picked up by Al Ahram. Sputnik, however, quotes Kochemazov as saying “the Russian Project 1241 class R-32 missile corvette has been handed to Egypt.” The Russian government decided to give the Molniya missile boat to Egypt as a gift last August, the Egyptian army spokesperson had said, according to Ahram Online. RT adds that Egypt and Russia will also conduct joint naval exercises this year.


Rumors circulate that Chelsea has eye on Zamalek goalkeeper El-Shenawy

Rumors are circulating that English football club Chelsea is interested in making a move for 25-year-old Zamalek goalkeeper Ahmed El-Shenawy, according to The Sun. “With one year left on his current deal, his club may accept at [GBP 3 mn] rather than risk him going for free after next season.”

On Your Way Out

The AP has raw footage of the opening of the Panama Canal’s new locks. We’re guessing it was five Egyptians who disliked the video. (Watch, running time: 1:42) and Nestle have signed an agreement to sell fast-moving consumer goods including Nescafe, Maggi, Nesquik, Nido, and Cerelac through’s website, Al Mal reported.

The markets yesterday

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USD CBE auction (Tuesday, 21 June): 8.78 (unchanged since Wednesday, 16 March)
USD parallel market (Wednesday, 22 June): 11.07-11.10 (compared to 11.05-11.08 on Tuesday 21 June, local press)

EGX30 (Sunday): 6,852 (-5.5%)
Turnover: EGP 533.2 mn (22% above the 90-day average)
EGX 30 year-to-date: -2.2%

THE MARKET ON SUNDAY: The repercussions of the United Kingdom’s exit from the European Union extended to the Egyptian stock market as the EGX30 ended Sunday’s session 5.5% down on the heels of global and regional indices. GB Auto, Qalaa Holdings, and Oriental Weavers were particularly hit, while index heavy­weight CIB suffered a relatively mild decline of 2.2%. At a market turnover of EGP 533.2 mn, foreign investors were the sole net buyers of the day.

Foreigners: Net long | EGP +26.3 mn
Regional: Net short | EGP -1.0 mn
Domestic: Net short | EGP -25.3 mn

Retail: 56.1% of total trades | 57.6% of buyers | 54.6% of sellers
Institutions: 43.9% of total trades | 42.4% of buyers | 45.4% of sellers

Foreign: 6.0% of total | 8.5% of buyers | 3.5% of sellers
Regional: 7.3% of total | 7.1% of buyers | 7.3% of sellers
Domestic: 86.7% of total | 84.4% of buyers | 89.2% of sellers


Macro Thoughts on Brexit: Vulnerability elongates road to recovery rather than triggers a steep decline

Egypt’s external sector is exposed significantly to the UK/EU

  • 30-35% of imports and exports are accounted for by trade with the EU
  • 50-75% of tourist nights are spent by European tourists (versus 15-30% for Middle
  • Eastern visitors)
  • 15% of remittances are sourced from Europe (versus c.30% for the USA and c.50% for the GCC)
  • 40-50% of FDI stems from EU investors

Egypt’s external sector has already been hit, which means that the Brexit hit should not be massive, but Egypt’s road to recovery could now take longer

  • Imports and exports will be affected, but since Egypt’s exposure to Europe is almost 30% of trade, the net effect on the trade balance should be expected to be minimal
  • Egypt has already been hit by lower tourism receipts, and European visitors to Egypt have already been diminished in total by rising numbers of Middle Eastern and Asian visitors
  • Suez Canal revenue might suffer a potential reduction of c.25%, but it has been hovering around the EGP 4.0-5.0 bn over the last 10 years
  • Remittances, which have been very important since the revolution in 2011 are only 15% exposed to Europe, and are mostly secured from the GCC (although they are under pressure from the effects of lower oil revenues)
  • Portfolio investments are almost non-existent
  • GCC aid was estimated to level off anyway due to lower commodity prices
  • 50% of FDI stems from European investors but are mostly within the oil and gas sectors, which we believe will continue to receive some inflows. However, FDI is already 50% below their peak, limiting the downside.

Tap here to read the full report.


WTI: USD 47.35 (-3.07%)
Brent: USD 48.41 (flat)
Natural Gas (Nymex, futures prices) USD 2.64 MMBtu, (-1.12%, July 2016 contract)
Gold: USD 1,330.50 / troy ounce (+0.61%)

TASI: 6,478.6 (-1.1%) (YTD: -6.3%)
ADX: 4,416.7 (-1.9%) (YTD: 2.5%)
DFM: 3,258.2 (-3.3%) (YTD: 3.4%)
KSE Weighted Index: 349.7 (-1.3%) (YTD: -8.4%)
QE: 9,842.9 (-1.2%) (YTD: -5.6%)
MSM: 5,762.2 (-0.6%) (YTD: 6.6%)
BB: 1,111.1 (-0.7%) (YTD: -8.6%)

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27 June (Monday): Beltone Financial’s general assembly to decide on converting a third of its share capital to GDRs, according to Reuters.

06-08 July (Wednesday-Friday): Eid El Fitr (national holiday, tentative date)

28 July (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

05-08 September (Monday-Thursday): The 6th EFG Hermes London MENA and Frontier Conference, Emirates Arsenal Stadium, London, UK.

11-13 September (Sunday-Tuesday): Eid El Adha (national holiday, tentative date).

19-20 September (Monday-Tuesday): Euromoney Egypt, venue TBD.

22 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

02 October (Sunday): Islamic New Year (national holiday, tentative date) .

06 October (Thursday): Armed Forces Day (national holiday).

November (TBD): Delegation of German companies in the renewable energy sector due to visit to discuss investment opportunities.

11-12 October (Tuesday-Wednesday): Global Islamic Economy Summit, Madinat Jumeirah, Dubai.

01 November (Tuesday): Prophet’s Birthday (national holiday, tentative date).

17 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

27 November (Sunday): 2016 Cairo ICT, Cairo International Convention Centre.

04-06 December (Sunday-Tuesday): Solar-Tec exhibition, Cairo International Convention Centre.

04-06 December (Sunday-Tuesday): Electricx exhibition, Cairo International Convention Centre.

11-13 December (Sunday-Tuesday): The Middle East Fire, Security & Safety Exhibition and Conference (MEFSEC), Cairo International Convention Centre, Cairo.

29 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

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