EGX surges on devaluation talk.

Google is a little messed-up on CLT this morning: The time did not change overnight, but tell that to Google: The search giant is having a hard time digesting the Ismail government’s decision not to switch to daylight savings time. (Compare the actual time in the top left to Google’s stated time in this screenshot.) If you, like us, are deeply embedded in the hydra-headed monster that is The G, you’ll want to keep a really close eye on your schedule for the next few days. Last time this happened, both Google Calendar and Outlook for iOS were off by an hour — the latter for several weeks. Our solution: Leave your mobile device set to take the time from the network operator, and keep a written schedule in your pocket.

Trade Minister Tarek Kabil and Investment Minister Dalia Khorshid are in Beijing today for the first day of a three-day visit. Discussions will focus on transport, power, renewable energy and housing agreements signed with Chinese outfits in the past year. (See Diplomacy, below, for more.)

All eyes are on tomorrow’s Central Bank of Egypt foreign exchange auction as market watchers anticipate (pray for?) devaluation. We have the full story below in Speed Round.

Only industry and rich folk will be paying more for electricity under a planned rate hike, power ministry spokesman Mohamed El Yamany in a call-in to “Ghorfat Al Akhbar” on CBC Extra (run-time: 4:00). Al Mal has the breakdown of the new prices listed here. As we reported yesterday, cabinet is expected to approve the rate hike this week; the three lowest consumption tiers will not see a rate hike, El Yamany said.

House Speaker Ali Abdel Aal is scheduled to visit Moscow from Tuesday through Friday for high-level talks.

Solar-powered Solar Impulse 2 is expected to touch down at Cairo International on Wednesday: The solar-powered aircraft will take just over 50 hours to fly from Seville, Spain, to Cairo and is due to lift off this morning at 6:30am CLT. It’s the aircraft’s second-to-last leg on its round-the-world odyssey to promote clean technologies. The final flight will stretch from Cairo to Abu Dhabi. Solar Impulse’s website is here, and you should be able to watch the flight to Cairo live here on their website after takeoff this morning.

Another bleak PMI report: Business conditions worsened in Egypt’s non-oil sectors for the ninth straight month, according the Emirates NBD PMI compiled by Markit. The PMI recorded a reading of 47.5 in June, slightly worse than May’s reading of 47.6. Input costs have reportedly increased at a survey-record pace, while output, new orders, and employment have all fallen. The downturn was exacerbated by a severe drop in tourism, while currency weakness anecdotally drove costs up. Employment also fell for the thirteenth straight month. Jean-Paul Pigat, senior economist at Emirates NBD, believes “hopes for a stronger recovery will depend in large part on whether a solution to the ongoing FX liquidity crunch can be found in the near term.” The faintest of silver linings: The average PMI reading in 2Q2016 of 47.3 was marginally better than the 46.9 in 1Q2016 and 46.9 in 4Q2015.

Core inflation at seven-year high: The reports of cost increases are in line with inflation reports as headline inflation jumped to 14% in June from 12.3% in May, Reuters reported. This is in step with the annual spike of inflation during Ramadan on the back of rising food prices. The core inflation rate also went up in June, registering 12.37% up from May’s reading of 12.23%. That’s a seven-year high, Bloomberg points out. Al Shorouk notes that the price increases were driven by the 18.4% food price inflation last month as vegetable prices rose 38.3% y-o-y as well as a 33.2% jump in healthcare and pharmaceutical prices; we expect the latter comes largely as a result of the Health Ministry’s move in June to allow drugmakers to raise prices.

Egyptian equities are rallying in anticipation of the devaluation of the EGP following remarks last week by Central Bank of Egypt Chairman Tarek Amer, Bloomberg suggests. “Traders are betting the country may weaken the [EGP] as soon Tuesday, when the central bank holds its weekly sale of [USD] to local lenders, according to Arqaam Securities Brokerage.” Bloomberg adds that real estate equities are among the biggest winners of the expected central bank action, with the EGX 30’s real estate index up around 11% since last week. The EGX 30 was up 4.66% yesterday.

Research analysts speaking with Al Borsa expect we’ll see devaluation in the 12% range, meaning we’re facing EGP 10.00 to USD 1. Who’s tipping what?

• CI Capital’s Hany Farahat thinks anything less than 12% would be “useless.” Farahat expects the devaluation, coupled with easing FX restrictions and increasing liquidity for banks, will help break the speculation driving the runaway parallel market.
• Pharos’ Radwa El-Swaify thinks the CBE has two options: Devalue about 24% to match the parallel market or pace it with inflation and hold the rate at EGP 9.95. Any move to devalue, she adds, must be accompanied by a significant injection of liquidity into the banking sector.
• EFG Hermes’ Mohamed Abu Basha believes the government is looking to drive inflows through a range of measures that include an IMF facility, additional grants and deposits from the GCC countries, and the IPO of state-owned banks. New liquidity will allow the CBE to manage FX policies instead of tightly regulating it at a time in which Egypt needs to be flexible with its monetary policies.

Against that backdrop, caution prevailed on parallel market yesterday as the EGP weakened marginally in the parallel market to EGP 11.12 to the USD 1 on the first working day after the Eid break, dropping from EGP 11.10 on Saturday, Al Mal reports.

Foreign Minister Sameh Shoukry unexpectedly traveled to Israel yesterday to meet with Israeli Prime Minister Benjamin Netanyahu. The visit came as part of a bid by President Abdel Fattah El Sisi to move the regional peace process forward, the foreign ministry said in a statement. Shoukry is the first Egyptian foreign minister to visit Israel in a nearly a decade, reports Reuters, and follows a similar meeting with Palestinian officials in Ramallah on 29 June.

Egyptian diplomacy pushing France aside? The Jerusalem Post’s Herb Keinon argues that the announcement by Shoukry of Egypt’s intention to host direct talks between the Palestinian Authority’s Mahmoud Abbas and Israeli Benjamin Netanyahu in Egypt supplants France’s initiative to host an international conference this December. “Itzhak Levanon, who served as Israel’s ambassador to Egypt from 2009 to 2011, said that both the Palestinian Authority and Israel would prefer Cairo’s involvement to that of Paris,” Keinon writes. Shoukry’s visit is “an indication of the positive changes taking place in the Israeli-Egyptian relationship,” Israeli Prime Minister Benjamin Netanyahu told his cabinet, Keinon noted in separate piece.

Meanwhile, Netanyahu’s Arab media spokesperson released these photos showing Shoukry and Netanyahu watching the Euro final at the prime minister’s residence. (Also: Shoukry meets Mrs. Bibi and Bibi and Shoukry do the obligatory march past alternating Egyptian and Israeli flags) Coverage of the visit features prominently in the international press this morning, including front-page placement in the digital edition of the Financial Times.

Banque Misr, not NBE, top Bloomberg’s African syndicated loans league table for 1H2016: The domestic press incorrectly reported yesterday that National Bank of Egypt (NBE) topped the Egypt and Africa lists for Bloomberg’s Global Syndicated Loans League Tables for 1H2016 (pdf), published by Bloomberg almost two weeks ago. Bloomberg’s League Tables do not include any distinct list for Egypt; the three groupings maintained in the tables that apply to Egypt are for the EMEA (Europe, the Middle East and Africa), MENA and a separate list for Africa. Mitsubishi UFJ Financial ranked as the top bookrunner for MENA loans, while HSBC was top mandated lead arranger for MENA. Banque Misr was the top bookrunner and top mandated lead arranger for Africa. National Bank of Egypt ranked third place for bookrunner for African loans, and second place for Africa loans as mandated lead arranger. The domestic press reports we’ve picked up so far appear to have relied on a statement issued by NBE.

The Egyptian Financial Supervisory Authority (EFSA) is setting the legislative groundwork for a futures market, paving the way for the launch of a commodities exchange, EFSA chief Sherif Samy tells Al Borsa. A package of 20 key amendments to the Capital Market Law is now with the Investment Ministry for review, Samy noted, saying licenses to trade futures will cost on the order of EGP 10 mn. The regulations will apparently differentiate between proprietary trading by commodity market players (including dealers in wheat, cotton, corn and bakeries) on the one hand, and brokerage houses on the other. Brokers will face tougher regulations, Samy said, without further explanation. Among other things, the amendments call for the establishment of a body which would serve as a central clearing for trades (similar to the functions of Misr Clearing) and which would apparently ensure the physical availability of the commodities being traded.

El Farasha for Printing and Packaging has picked Beltone Financial to manage its planned IPO on the Egyptian Exchange, Investor Relations Manager Ahmed Younes told Al Mal. El Farasha plans to float 25-30% of its shares, according to reports from May. The company started exporting 5% of its production recently, but domestically it says it continues to maintain a 40% share of the packaging market, supplying 25% of Chipsy’s packaging needs, 25% of Coca Cola’s, 40% of Cadbury’s, and 15% of Nestlé’s.

Elsewedy Electric Company for Trading and Distribution, a subsidiary of Elsewedy Electric, signed a USD 190 mn agreement with the Egyptian Electricity Transmission Company (EETC). The contract is for an EPC agreement for a 358 km 550kV overhead transmission line that is expected to be delivered in 18 months, according to a bourse statement.

Is NUCA looking to compete with the private sector? The New Urban Communities Authority has completed a feasibility study on forming a real estate investment company, Al Borsa reports. The company’s capital has yet to be determined, but should be in the EGP 500 mn to EGP 2 bn range, the newspaper says. Housing Ministry sources state that the company has already picked out prime real estate which will it will develop for profit at its launch in early 2017. These are predicted to be in 6th of October and Madinaty New Cairo. The company, which was announced in late May, was formed as a revenue generator for the state, according to Housing Minister Moustafa Madbouly, who apparently fails to grasp the conflict of interest when a regulator competes with private companies in the market it is regulating.

The House of Representatives committee probing corruption in the collection of this year’s wheat harvest has identified EGP 365 mn in what it claims are faked receipts for domestic wheat collected at four shounas, a source from Parliament tells Al Borsa. EGP 125 mn worth of wheat was falsely reported as having been collected in East Cairo, while other shounas have been reported to be missing anywhere between EGP 70-90 mn worth of wheat. An official from the committee cast doubt at the government’s reported achievement of collecting 4.8 mn tonnes, stating that the Egypt’s shounas have a storage capacity of no more than 3 mn tonnes. The committee will issue its report on the probe on Sunday, 17 July.

MOVES- Jean-Marc Harion (LinkedIn) is set to become CEO of Orange Egypt, according to a bourse statement. Orange Egypt’s board of directors will vote on Harion’s appointment in its next meeting on 21 July. Harion was the CEO of Orange Belgium and stepped down last week to become to head the Egyptian operations. He succeeds Yves Gauthier, who stepped down in May to lead Orange’s Moroccan subsidiary.

Unless you’ve actually spent time under a rock, you may have already heard that Portugal has won the Euro Cup 2016, its first, defeating hosts France 1-0. Portugal’s chances looked bleak after top scorer Cristiano Ronaldo was tearfully taken off the pitch after an injury 25 minutes into the game, only to be delivered to victory by the winning goal from substitute Éder. We’re consoling ourselves by humming La Marseillaise as we slurp our early morning coffee. (Proof, we suppose, that budgetary support to La Francophonie is money well-spent…)

US jobs recovery may not be flashy, but it’s strong -FiveThirtyEight: US employers added 287,000 jobs in June, according to the US Bureau of Labor Statistics on Friday, beating forecasts of 175,000 jobs. FiveThirtyEight’s Ben Casselman thinks the conventional interpretation of the numbers, that the US job market tanked in April and May and is starting to recover in June is incorrect. Rather, he argues “job growth [is] gradually cooling but remaining basically strong.” Casselman also argues that while it is still too early to tell Brexit’s impact on US manufacturing, “the so-called Brexit led to a sharp increase in the value of the [USD], which could hurt US exporters… the decision could also damage the overall global economy, further slowing trade.”

Brexit and Bank of England set tone for markets this week -FT: The FT (paywall) picks up where Casselman’s points on the payroll numbers and Brexit, saying that the positive jobs report has “only intensified the search for yield via bonds and dividend paying shares” in developed markets. Meanwhile, the Bank of England is expected to announce a rate cut on Thursday, and US companies are also expected to report “their fifth straight quarter of year-over-year profit decline — the worst stretch since the aftermath of the financial crisis.”

Oil price outlook continues to remain low: The Baker-Hughes Rig Count showed last week that the number of global rigs is increasing, with the total number of rigs in North America alone increasing to 521, up from 507, according to Yahoo Finance. Along with indications from the US Energy Information Administration reporting that inventories are more or less flat, no recovery in oil prices is expected for the foreseeable future, “with supply and inventories still at significantly higher levels.”

The Washington Post’s Jackson Diehl lambasts the Obama administration for its silence on the case of Egyptian-American dual national Aya Hijazi and her husband, who have been imprisoned in Egypt without trial since May 2014. The Hijazis founded the NGO the Belady Foundation to help street children, only to be accused by the state of molesting the children and paying them to protest against the government.

The cult driving the push for rewriting Japan’s constitution, along with its history: “The ideology behind Prime Minister [Shinzo] Abe and his cabinet had received only modest scrutiny from Japan’s mainstream media until this May,” writes Jake Adelstein for the Daily Beast. The objective of the Nippon Kaigi [Japan Conference] cult includes: “Gut Japan’s post-war pacifist constitution, end [gender] equality, get rid of foreigners, void pesky ‘human rights’ laws, and return Japan to its Imperial Glory… Despite Nippon Kaigi’s small numbers overall [38,000 members], half of the Abe Cabinet belongs to the Nippon Kaigi National Lawmakers Friendship Association, the group’s political offshoot. Prime Minister Abe himself is the special advisor.” (Read The religious cult secretly running Japan)

The first tranche of Egypt’s contribution the Asian Infrastructure Investment Bank’s capital is valued at USD 26 mn, International Cooperation Minister Sahar Nasr told Amwal Al Ghad. The total value of Egypt’s share is USD 650 mn, of which half will be paid in EGP equivalent after obtaining the board’s approval, she said.

El Sisi meets Moroccan FM: President Abdel Fattah El Sisi and Foreign Minister Sameh Shoukry met yesterday with Morocco’s Minister of Foreign Affairs and Cooperation Salaheddine Mezouar, with both parties discussing a need to enhance coordination between the two countries to “strengthen joint Arab action” and to boost bilateral ties between the countries in various sectors, a statement from the president’s spokesperson said.

Kabil in China: Technical studies on Egyptian-Chinese projects agreed to in the past year will be on the table for discussion at ministerial-level meetings in Beijing that started yesterday, Trade and Industry Minister Tarek Kabil said, Al-Ahram reported yesterday. Kabil also met yesterday with Chinese Commerce Minister Gao Hucheng during the G20 trade ministers meeting in Shanghai, where they discussed the bilateral strategic partnership signed last year. Kabil urged his Chinese counterpart to facilitate the entry of Egyptian agricultural exports into China.

On another note, Kabil had stated on Saturday that the government will send the World Trade Organization’s (WTO) Trade Facilitation Agreement to the House for ratification soon, Al Masry Al Youm reported. The agreement includes provisions for expediting the movement, release and clearance of goods, including goods in transit and sets measures for cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.

Estimated gas reserves at the Zohr field have been revised up to 32 tcf from an initial estimate of 30 tcf, a source at EGAS told Al Borsa. Eni is currently drilling its fifth appraisal well, out of six wells planned for the first phase of the project. The source said each well costs around USD 100 mn to drill.

Suez Governorate is currently studying the establishment of a factory to produce refuse-derived fuel, with the armed forces potentially providing the land needed for the project, Governor Ahmed El Hiatmi said, Al Borsa reported on Sunday. The factory will produce gas from solid waste to provide to cement companies, he said, adding that funds are currently available.

The Egyptian Financial and Industrial Company (EFIC) is considering tapping HC Securities and Investments to restructure EFIC’s subsidiary Suez Fertilizers, EFIC Chairman Aly El Sayad told Al Mal. EFIC had approved doubling Suez Fertilizers’ capital to EGP 600 mn and to float a 40% stake of it on the EGX. The capital increase will be done through transferring the ownership of the Suez Complex from EFIC to Suez Fertilizer. El Sayad said HC was the sole applicant for the restructuring contract.

Private real estate developer M2 Development, also known as Misr Al Mahrousa and by the name of its New Cairo development Ashgar Darna, will begin an 800 feddan land reclamation project in Aswan by the end of the year at a total cost of EGP 100 mn, Chairman Mostafa Aboul Fotouh told Amwal Al Ghad. The reclamation will happen through one of the company’s subsidiaries, El Fagr for Land Reclamation, he added. The agriculture minister recently ordered the commencement of irrigation at the Aswan reclamation site.

The cabinet will launch tenders that could see the private sector develop ten state assets in the governorates of Port Said, Alexandria, Qena, Luxor and Beheira, Al Borsa reported on Sunday. Among the assets: Port Said Opera House, Al Saraya land in Alexandria, and the Nile Conference Hall along the Qena corniche, among others. The government also intends to develop hotels across several cities, including building a five-star hotel on an area spanning over 5.5 feddans in Qena. Prime Minister Sherif Ismail has formed a committee to oversee the process, with the housing minister having already completed stating the regulations.

The National Telecommunications Regulatory Authority is currently working on regulations governing numbers portability as Telecom Egypt readies to launch its network when it obtains a 4G license. Other operators are adamant that a “competitive” system is drawn up to transfer customers which would guard against poaching by TE, Al Borsa reports. The NTRA is reportedly considering allowing customers to opt out of TE’s network after six months and move to any of the other operator’s.

A new state-owned company will be established to manage, operate and maintain a proposed monorail connecting 6 October and Sheikh Zayed to Cairo and Giza, according to a readout from a meeting between Prime Minister Sherif Ismail and the ministers of transportation and housing. The ministers discussed competing offers presented by consortiums from Canada and China to build the monorail project, according to an emailed statement. Al Shorouk also has the story.

The Finance Ministry has received two offers from Italy and England to help upgrade operations at the Egyptian Mint Authority, Sherif Hazem, and advisor to the finance minister, told Al Borsa. The ministry will pick between the two within a month and a half, he added. The Mint is looking to expand its activity by establishing an investment zone that specializes in manufacturing metal coins for countries in the region, he added. Additionally, the Treasury will issue a tender within the coming month to launch a new website. While we welcome the news that we may potentially manufacture metal coins for the region, may we first please get our own coins back? As we reported last month, Egypt reverted to printing EGP 1, EGP 0.5 and EGP 0.25 paper banknotes over concerns of counterfeit Egyptian coins produced and smuggled from China. Other sources at the time said the move was motivated over the costliness of metal coin manufacturing. As we’ve stated in the past, the most practical use for EGP 1 paper banknotes is to serve as the official currency of the Arab Republic of Gouna.

Ostoul Securities Brokerage will apply for an investment banking licence from the Egyptian Financial Supervisory Authority next month, as part of its transformation into Ostoul Holdings for Financial Investments, said the company’s chairman Ali Al Ghannam. The company is also looking to acquire an asset management license, he tells Al Borsa, and is targeting AUM of about EGP 300 mn.

Delays in paying custom tariffs will be penalized with a 0.5% surtax as part of the amendments to the Customs Law proposed by the Finance Ministry. The law, according to Al Ahram, will also require receiving information on cargo on ships prior their arrival to allow the customs authority the ability to handle or refuse shipments prior to docking in Egypt. The amendments will also allow for electronic transfer of data, relying less on physical documents. Smuggling is also set to be penalised by paying double the customs tariff rate and refusing to show import documents to customs officials will be penalised by a penalty of EGP 10k to EGP 100k. The customs authority will also have the remit to sell goods unreleased by importers after being held for one year.

A group of young people launched the first ballet school in Upper Egypt, calling it the Alwanat initiative. “Alwanat is a non-governmental self-funded organisation that is interested in leading artistic and cultural initiatives in Upper Egypt… We wanted to provide people in Upper Egypt governorates with a way of learning arts that were not available before… We currently have about 150 students and most of them are girls who range from 4 to 20 years old,” founder Marco Adel told Daily News Egypt.