Sunday, 9 October 2016

IMF’s Lagarde: Devalue and cut subsidies before we approve the loan.


What We’re Tracking Today

Today is the deadline to register for the value added tax (VAT). The failure of businesses with annual revenues of more than EGP 500k to register to collect and remit the tax could result in charges of tax evasion.

Today is also the deadline for the government to release the VAT’s executive regulations. Tax Authority chief Abdel Moneim Mattar had said the regs would be out last week; other Finance Ministry officials have suggested a more flexible deadline.

Clinton, Trump to clash tonight after release of Trump’s vulgar 2005 video. The video is proving so toxic that the WSJ notes “GOP leaders turn backs on Trump” while the NY Times declares that “Lewd Donald Trump tape is a breaking point for many in the GOP.” We have more on the video in question in Worth Watching, below. The debate starts tonight at 9pm Eastern (that’s 3am CLT on Monday) and will be livestreamed on Youtube (with commentary from NBC) and Twitter (with commentary from Bloomberg).

Some inspiration for you this morning if you’re building or running your own business: If you, like tens of thousands of others, are reading this in your inbox this morning and not on the web, you have MailChimp to thank. The company is proof positive, the New York Times’ Farhad Manjoo wrote in a profile over the weekend, that “it’s possible to create a huge tech company without taking venture capital, and without spending far beyond your means.” MailChimp has 16 mn customers and will have turnover of USD 400 mn this year, but started as a side-project of a web design firm. Read “MailChimp and the Un-Silicon Valley Way to Make It as a Start-Up.

What We’re Tracking This Week

The 2016 ABANA Achievement Award Dinner honoring BlackRock chief Laurence Fink gets underway Monday night at 6pm Eastern time at the Pierre Hotel in New York. The next morning, the ABANA Conference 2016 gets underway, also at the Pierre, at 8am with a focus on “the Egyptian economy, sovereign wealth fund investing and how Middle East Policy under the next President will affect US investors.” Finance Minister Amr El-Garhy and Egyptian American Enterprise Fund chief Jim Harmon are due to speak. (ABANA was founded in the early ‘80s as the “Arab Bankers Association of North America.”)

What’s happening with 4G? The board of the National Telecommunications Regulatory Authority is due to decide the fate of the spectrum rejected by the three incumbent mobile network operators on Wednesday (12 October). NTRA is reportedly mulling the idea of bundling the spectrum and making it available in an auction in which both domestic and international players could bid. None of the incumbents have asked to re-open talks, an unnamed NTRA official tells Al Borsa reported. Meanwhile, hell hath no fury like a regulator scorned: The NTRA has reportedly decided to continue the old system for international gateway pricing for the three incumbent MNOs, the newspaper reports. The system will cost Vodafone Egypt EGP 3.9 bn and Orange Egypt some EGP 3.4 bn. The new system would have charged each MNO EGP 1.8 bn, the source added.

NI Capital will complete its evaluation of companies slated for an IPO this week, government sources tell Al Shorouk. The evaluation is a crucial step in restructuring the companies ahead of the sale and determining the final list of companies which will be put up. The Investment Ministry is currently working with Banque du Caire and Banque Misr to see whether some of their 300 subsidiaries will be divested ahead of the sale. NI Capital’s CEO Ashraf El Ghazaly had previously stated that he expects Egypt “to privatise two or three state-owned companies via listings on the stock exchange in the first year of a privatisation program.” BdC, which as we noted last week has narrowed its list of potential investment banks for its IPO, is expected to list as early as 1H17. Finance Minister Amr El Garhy will be drumming up interest in New York among investment banks for the IPO in the coming days, Al Borsa reports.

Fall conference season is in full swing: There is the 2nd Annual Leasing Conference entitled “New insights to stimulate financing instruments”, due to be held at the Four Seasons Nile Plaza Hotel on Tuesday. Also taking place that day is the two-day Global Islamic Economy Summit, Madinat Jumeirah, Dubai, while The Factoring Role in promoting SMEs conference is set to take place on Wednesday.

Speed Round

Speed Round is presented in association with

DEVALUATION, SUBSIDY CUTS NEEDED BEFORE AND NOT AFTER IMF LOAN is approved, says IMF’s Lagarde: “There are several prior actions which need to be completed before the Board can actually meet in order to formally approve a USD 12 bn program over a period of three years,” said International Monetary Fund Managing Director Christine Lagarde in response to a question on when the IMF’s Executive Board can meet and approve an extended fund facility to Egypt during a press briefing hosted by the International Monetary and Financial Committee on Saturday. “To my knowledge, these prior actions are almost completed, not quite, in relation to both the exchange rate and in relation to subsidies. There is still a little bit of implementation to be had before the Board can meet… So, that is the sequence: completing implementation of prior actions, convening of the Board, Board review of the proposal, hopefully approval, then first tranche released.” Central Bank Governor Tarek Amer had said in an interview last February: “[Flotation] is something we might consider only when the reserves are at the USD 25-30 bn level.” Devaluation before receipt of the first tranche of the IMF loan would leave Egypt short of even the low end of targeted reserves initially outlined by Amer, leaving the CBE without the liquidity it needs to flood the market.

The IMF will likely release around USD 2.5 bn as an initial tranche of the loan “within a day or so” of going to the IMF board, said Masood Ahmed, head of the IMF Middle East and Central Asia department, Bloomberg reported. Masood expects that the IMF board will likely look into the Egypt program by the end of October or the start of November, adding that Egypt is making “very good progress” on talks with Saudi Arabia, China and some G7 countries to secure USD 5-6 bn in funding needed to unlock the agreement. Finance Minister Amr El Garhy also said that Egypt is close to securing the funding, according to Bloomberg. “We’re around that number, more or less,” El Garhy said, but the government needs another “two or three weeks to wrap up provision of other financing before it’s in a position to conclude the IMF accord.” The agreements are either completed or pending, with some in their “final fine-tuning phase.”

Expect eurobonds in late October or early November. The markets are, in general, “very anxious” now, El Garhy said, adding that “hopefully something will be clear by then about the US elections.” The government is working on finalising the timing of the issuance with its advisers, he noted.

Also coming out of the IMF / World Bank annual meetings, International Cooperation Minister Sahar Nasr has signed the USD 500 mn Upper Egypt development loan with the World Bank, according to a ministry statement. The loan agreement has terms preferential to Egypt with a 35-year repayment period, an eight-year grace period a 1.2% annual interest rate, she told Al Mal.

The IMF, World Bank, and other international institutions have nothing to do with “impoverishing” Egyptians. “Our economic policy—or rather, the lack thereof—is what brought us to this point, compelling us to seek foreign loans and institute austerity measures… The only real conspiracy is the one we’ve perpetrated against ourselves,” former Deputy Prime Minister Ziad Bahaa Eldin writes in Ahram Online. Taking in foreign liquidity without changing underlying policies will be exacerbate the situation, he says. The government needs to reassess a wide range of policies, warning that the “coming phase” will not be easy.

HAS SAUDI TURNED OFF THE OIL SPIGOT? Saudi Aramco hasn’t shipped petroleum cargoes due to Egypt since 1 October under a five-year, USD 23 bn oil supply agreement, Reuters reports, forcing Egypt to scramble to line up international shipments using hard currency the nation can ill-afford to spend. The Oil Ministry said it was not officially notified by Aramco of a halt in shipments, but it was “too early” to claim they were not coming at all, Al Mal reported. Egypt had signed an agreement with Saudi Arabia to provide 700k tonnes monthly of petroleum products on a credit line with 2% interest rate to be repaid over 15 years. EGPC has since announced the largest set of purchase tenders in months, including calls for around 560k tonnes of gasoil for October delivery, a steep rise from the roughly 200k tonnes sought in September, traders told Reuters.

EGPC gets USD 100 mn facility from APICORP: Meanwhile, the Saudi-based Arab Petroleum Investments Corp (APICORP) announced it is extending a USD 100 mn three-year murabaha financing facility to EGPC. APICORP says EGPC will use the funding to buy liquefied petroleum gas from the Arab Maritime Petroleum Transport Company.

COULD RUSSIAN FLIGHTS RESUME BY YEAR’S END? Russian Deputy Prime Minister Arkady Dvorkovich is hoping flights between Egypt and Russia could resume by the end of the year, Ahram Online reported. While Dvorkovich said that security situation in Cairo International Airport has improved, he doubts that flights could be resumed this month. Russian Transport Minister Maxim Sokolov had previously denied flights would resume this month. On Friday, Sokolov told Russian state news agency TASS that he expects Russian tourism in Egypt to return to its pre-flight suspension levels by next year, adding that Egyptian authorities have made “very rapid progress in resolving all issues regarding security enforcement.” We see the return of tourism as one of the key pieces of a solution to the FX problem.

CIB, PIRAEUS LOWER CEILING ON CREDIT CARD USE ABROAD: The two banks are lowering their respective caps on the use of credit cards outside Egypt. CIB announced overnight that it will cut limits effective Wednesday, 12 October (see the announcement in pdf), while Al Borsa says Piraeus (now owned by Al Ahli Bank of Kuwait) will cut its maximum for withdrawals and purchases by 50%. Notable: The CIB announcement makes clear that “International limits are applied on all your credit cards collectively (primary & supplementary) in case of holding more than 1 credit card. The limit of your highest credit card type will be your maximum international limit on all your credit cards (same applies on debit cards).”

EGYPT’S NON-OIL PRIVATE SECTOR DOWNTURN stretched to 12 months. Business conditions worsened for the twelfth straight month, according to the Emirates NBD Egypt PMI compiled by Markit (pdf), which recorded a reading of 46.3 in September, down from 47.0 in August. Alarmingly, the rate of decline accelerated as output fell, demand deteriorated domestically and abroad, and inflation spiked with the introduction of VAT and falling currency value. Employment fell at the same survey-record pace recorded in August. Emirates NBD Senior Economist Jean-Paul Pigat commented that while economic reforms in 4Q2016 will “ultimately prove beneficial for long-term stability, in the near term they could result in a further deterioration in business conditions for the private sector.”

AT LEAST 19 COMPANIES HAVE PLEDGED TO LOWER PRICES 20% on some of their products for the coming three months as part of an initiative between the Federation of Egyptian Industries and the government first announced by Amr Adib on his show Kol Youm. At least 13 food manufacturers, including Domty and Juhayna, have signed on to the initiative. Six retail chains including Fathallah Market, Spinneys, Carrefour, Kazyon, and Hyper One will also be participating. Top executives from these companies sat down with Adib on Wednesday to announce the initiative, which will launches today. The initiative, which will also include a number of government and armed forces-run outlets, came after President Abdel Fattah El Sisi met with food industry executives last week to discuss mitigating inflation. As we noted last week, ride-hailing app Ousta announced it would offer 20% discounts on the prices of all rides for a three-month period as well.

You can catch the episode with Adib and the executives discussing the initiative and the products included here (runtime: 52:12) and the episode where Adib first announces it here (runtime: 1:07:36).

HOHO’S GOING TO KSA: Edita Food Industries announced on Wednesday it signed an agreement with Khalifa A. Algosaibi Cold Stores (KACS) that will see KACS distribute Edita’s Hoho’s, Twinkies, and Tiger Tail (HTT) brands throughout Saudi Arabia. Edita acquired regional rights to the HTT brands last year and has said it would use them as a the cornerstone of its regional expansion drive. “KACS distributes and markets FMCG brands throughout the KSA and manages some of the largest and most technologically advanced distribution complexes in the Middle East; including dry, chilled and frozen facilities.”

Edita also said it received an EGP 170 mn medium-term loan facility from the Arab Bank to finance the construction and services operations at its new E08 factory. The loan is payable over seven years. Edita also secured an EUR 6 mn loan, payable over seven and a half years, to finance a new production line.

FEP CAPITAL WILL MANAGE OFFERING of Ahmed Abou Hashima-owned Egyptian Steel shares on the EGX, FEP Capital CEO Omar El Maghawry told Al Mal. The timing of the issuance has not been set yet, he noted. Separately, El Maghawry said FEP completed the process to increase Abou Hashima’s Egyptian Media’s capital to EGP 1 bn from EGP 800 mn, and is currently working on restructuring it financially. He added that the company will undergo another round of capital increases to EGP 1.1-1.2 bn before issuing its shares on the EGX, a move he had said was planned for 1Q2018.

**Earnings Watch: Qalaa Holdings reported a net loss after minority interest of EGP 529.8 mn in 1H16 against a net loss of EGP 123.1 mn in 1H15, according to a company statement (pdf). Revenues grew 15.3% for the period to EGP 3.5 bn, up from EGP 3.1 bn in 1H15, which the company attributes in large part to an increase in TAQA Arabia revenues. Qalaa co-founder and MD Hisham El-Khazindar noted that the company’s bottom line was in the black in 2Q16 “after factoring-out non-cash charges.” El-Khazindar also noted the company is working on a plan to reduce its USD-denominated debt in a bid to minimize FX losses before its USD 3.7 bn Egyptian Refining Company (ERC) reaches mechanical completion in the second half of next year.

IS THE GOV’T REVISITING THE INCOME TAX? The government is considering making “a number of amendments” to the Income Tax Act, a senior government official tells Al Masry Al Youm. The unnamed official did not specify what these changes would be, but said the changes could include the 10% capital gains tax. The Finance Ministry is still studying whether the tax was suspended for two years on merit or market factor at the time, according to statements by Deputy Finance Minister Amr El Monayer last month. He noted that the study won’t be concluded until 1Q17. The mystery official also reassured the government will not move to tax bank deposits. This comes as the Egyptian Businessmen’s Association (EBA) is lobbying the government to reduce corporate income taxes to 15% from a current 22.5%, said EBA board member Taha Khaled at a gathering which hosted Planning Minister Ashraf El Araby, Al Borsa reports. The move would be essential to drawing new investments to the country.

TIFF OVER SECURITY WARNINGS: Egypt’s Ministry of Foreign Affairs issued a rebuke yesterday after the embassies of the United States, Canada and the UK in Egypt, as well as Australia’s Department of Foreign Affairs, issued security warnings urging their citizens to avoid large gatherings and public spaces during the weekend of October 7-9. The statements specifically urged their citizens to avoid “concert halls, movie theaters, museums, shopping malls, and sports venues in Cairo until 9th October. The Egyptian Foreign Ministry has said that it was “disturbed” by the US embassy’s security warning, claiming that the embassy did not coordinate with the ministry nor notified Egyptian authorities of any risk concerns, according to a statement by the ministry’s spokesperson. The Foreign Ministry says the embassy claimed the warning was a routine measure for a long weekend.

CORRECTIONS- In Wednesday’s issue, we incorrectly stated that International Cooperation Minister Sahar Nasr was set to meet with the Executive Board of the IMF. The minister was actually set to meet with the Executive Directors of the World Bank in her capacity as the Governor of Egypt to the World Bank Group. H/t Nehal H. Also on Wednesday, we misstated the location of Finance Minister Amr El Garhy’s meetings with the IMF in the TL;DR; it was presented correctly in the story. We regret the errors.


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The Macro Picture

Tepid US jobs report points to rate hike in December rather than November -analysts: US employment figures came in lower than expected, with the US economy adding 156k jobs last month, according to a statement by the Bureau of Labor Statistics. US Federal Reserve Vice Chairman Stanley Fischer is quoted as describing the numbers as close to a “Goldilocks” scenario, as in not too cold or too hot, with regard to a potential rate increase. “The September jobs report should leave the Fed on track to hike in December, but it wasn’t robust enough to push for a November hike,” according to US economist at Bank of America Merrill Lynch in a report, MarketWatch reported.

Egypt in the News

Egypt and the UAE anchor a multi-page special pullout section in the Financial Times headlined “Arab world: Banking and finance.” Our friend Ahmed El Alfy’s GrEEK Campus is one of four lead stories teased in the online edition of the package. The landing page for the whole package is here (it also includes content from the past two years). Among the pieces in this year’s package worth reading this morning:

Also in the Financial Times this morning: Heba Saleh writes in the wake of last month’s migrant ship disaster that “Egyptian teenagers risk their lives to join migrant flow to Europe … as the economy struggles and poverty rises. …Two-thirds of the Egyptian illegal migrants who made the journey last year were unaccompanied minors like Saad, according to the International Organization for Migration.”

The military is stepping in to address Egypt’s immediate economic challenges, Heba Saleh writes for The Financial Times (paywall). “The military — traditionally a powerful actor in the economy — has over the past year announced a string of new ventures in which it either secured contracts with the government or which it planned to launch itself. These include producing cement, supplying medical items to hospitals, running the government’s smart-card system for the distribution of subsidised goods, establishing fish farms and manufacturing water meters.”

Economic reforms “will not be an easy ride” this time around, veteran finance writer Patrick Werr writes for The National. Egypt is facing tougher economic challenges now compared to in 2004, with twin deficits coupled with a tourism sector in dismal condition. The one bright spot, Werr says, is workers’ remittances, which only slipped because expats are opting to channel funds back through the parallel market instead of through official channels to benefit from higher rates.

Other international news coverage of Egypt over the long weekend included:

On Deadline

Talk show hosts are misleading the masses, sowing fear and panic as devaluation approaches, El Watan’s Hazem Mounir writes, saying the Ismail government must shoulder the blame for not explaining to the masses what’s going to happen and why.

Worth Reading

The hows and whys of countries going cashless: Nathan Heller’s profile in The New Yorker on how Sweden has transitioned to an increasingly cashless society must read like black magic or science fiction to some in Egypt, or at the very least a remote possibility that is very far off for our own country. However, an argument could clearly be made that Egypt’s need to consciously begin a similar transition is pressing — perhaps more so than other countries. Almost 90% of the population is unbanked, corruption traffics in cash payments, and tax evasion is a way of life. Former chief economist at the IMF Kenneth S. Rogoff argues in his new book that the United States should make more of a deliberate effort to become cashless, starting by phasing out large bills and allowing smaller denominations to fall out of use.

“Rogoff argues that the invisible large notes [80% of the US’ currency supply is in hundred USD bills, with USD 1.34 tn outside the banking system at any given moment] must be paying off-the-book wages. They are sitting in Zurich safe-deposit boxes, probably, crossing borders with cartels and traffickers, and doing other awful things… A mn [USD] in hundred USD bills is easy to tote in a shopping bag, but a mn in USD 10 bills weighs an ungainly two hundred and twenty pounds. Hobbling the underground market should also temper tax evasion, a costlier problem than many people realize.” (Read Imagining a cashless world)

Worth Watching

All three videos in today’s Worth Watching contain strong language. Viewer discretion is advised. With the US presidential election just a month away — and ahead of the next presidential debate slated for Sunday night (early Monday morning Cairo time) — the Washington Post released a video taken in 2005 (run time: 3:06) in which Republican presidential nominee Donald Trump can be heard bragging about being able to get away with groping and making other advances on women without their prior consent because of his celebrity. All of his claims fall under the US Department of Justice’s definition of [redacted] assault. A number of prominent Republicans have called on Trump to drop out of the race and have his running mate Mike Pence lead the ticket instead, while House Speaker Paul Ryan, party chairman Reince Priebus, and evangelical leaders all continue to support Trump.

Ana Navarro for President: Hours after the Post released the clip, a CNN panel of political commentators made what can only be described as television history. Ana Navarro, a Republican commentator but vocal opponent of Trump, led the charge against “official Trump surrogate” Scottie Nell Hughes’ continued support for The Orange One. Both clips must be seen to be believed and should be viewed in sequence: Reaction Shots (10 seconds) and Trump Surrogate Hypocrisy, Dismantled (1:12).

Diplomacy + Foreign Trade

President Abdel Fattah El Sisi signed 17 cooperation agreements with Sudan’s President Omar Al Bashir, Al Mal reported. The agreements, almost entirely cooperation protocols, included cooperating in strategic development, education, agriculture, healthcare, sports, and tourism. They also included an implementation plan to an MoU for trade points between the two countries. There were no reports of a resolution of Sudan’s ban of Egyptian fruit and vegetable exports.

Infrastructure funding arrangements in the works? International Cooperation Minister Sahar Nasr has signed an MoU with the Islamic Corporation for the Development of the Private Sector (ICD) to fund infrastructure projects under a PPP framework, Al Mal reported. Separately, the Islamic Development Bank (IDB), which owns the ICD, will be sending a delegation to Egypt in December to look into a strategic partnership with particular focus on infrastructure development, employment opportunities and capacity development. The IDB is also considering launching an investment fund to finance SMEs in Egypt, as well as opening an office in Egypt at the start of 2017. Nasr and Finance Minister Amr El Garhy also discussed funding infrastructure development projects at a meeting with a delegation from the Asian Infrastructure Investment Bank on the sidelines of the bank’s annual meeting in Washington DC, Al Mal reported. Egypt has recently paid its USD 650 mn share in the bank’s capital, Nasr said.

Agriculture Minister Essam Fayed may have finally put the issue of Egypt’s agricultural exports to Russia to bed during his visit to Moscow over the weekend, a ministry official tells Al Shorouk. Fayed met with his Russian counterpart, Aleksandr Tkachyov, to discuss bolstering trade in agriculture goods and reached an agreement with Russia’s Retail Companies Association to expand their imports of Egyptian agriculture products. The agreement will be signed within two weeks, according to a ministry statement. His visit comes on the back of a Russian ban on fruit and vegetable imports from Egypt last month, which was reversed early this month.


Electricity Ministry extends deadline to respond to FiT phase two to 21 October

The Electricity Ministry has extended its deadline to receive qualified companies’ replies for the second phase of the feed-in tariff programme to 21 October, Al Borsa reported. The initial deadline was set for 7 October for companies to announce whether they will move forward with their projects or not.

Shell to receive extra shipments of gas to its liquefaction plant to compensate for receivables

Shell cut an agreement with the Egyptian government mid-September to send 3.54 mcm/d to its Idku liquefaction plant to compensate for rising receivables, according to Interfax Global Energy. A source at the Finance Ministry said the CBE could not source enough USD to make the necessary payments. “The trains are operational but processing gas at a very low rate of a few cargoes per annum. We are reviewing the various options for this asset with our partners,” said Shell Middle East and North Africa spokesman Nureddin Wefati. An EGAS engineer told Interfax’s Rachel Williamson that the plant received a one-off shipment of natural gas in September, but that the Idku plant “might require some upgrades and maintenance before higher volumes could be resupplied on a regular basis.”

Italy’s Prysmian wins tender to install interconnection project with Saudi Arabia cables

Italian cable manufacturer Prysmian has won the tender to install the electrical cables for the electricity interconnection project with Saudi Arabia, Chairman of the Egyptian Electricity Transmission Company Gamal Abdel Rehim told Al Borsa. The final agreement will be signed within two weeks, he added. The project is expected to be in the trial phase by mid-2017, he added.

Basic Materials + Commodities

Sugar shortages impacting Domty’s factory in 6 October

Domty’s new juice factory in Sixth of October, launched last week, is barely able to keep up with its production capacity due to scarcity of sugar, CEO Mohamed El Damaty tell Al Mal. “Sugar has become like the USD, expensive and hard to come by,” quipped El Damaty. The company had been hoping to scale up juice production at the factory to 100K tonnes per annum. Domty isn’t the only one complaining: Traders speaking to Al Borsa speak of a widespread shortage that has seen prices spike as high as EGP 9.50 per kilogram. The Ismail cabinet has said in response that it will purchase 450K tonnes of sugar in the coming days and will buy another 200K tonnes this week. This may be easier said than done: The General Authority for Supply Commodities cancelled a tender to import 100K tonnes on Saturday due lack of interest from traders.

Centamin expects to hit upper end of its production guidance

Egypt-focused gold miner Centamin said it expects to be at the upper end of its production guidance after a “solid” 3Q2016 from the Sukari mine operations. It says its YTD production is at 414,249 ounces of gold currently, expecting 2016 to close between 520,000 and 540,000 ounces.

Nestle, R&R launch Froneri ice cream JV

Nestle and the UK’s R&R Ice Cream have signed an agreement creating the Froneri ice cream and frozen food joint venture, Reuters reported. The 50/50 JV announced in April will combine Nestle and R&R ice cream businesses across Europe, the Middle East, Argentina, Australia, Brazil, the Philippines and South Africa. The agreement includes all of Nestle’s ice cream market in Egypt, Al Borsa reported.


Trade and Industry Ministry launches investigation into dumping steel sheet imports

The Trade and Industry Ministry has launched an investigation into allegations that China, Russia, and Belgium are dumping cold-rolled steel sheets on the domestic market, Al Masry Al Youm reported.

Real Estate + Housing

Arab Contractors to build two hotel buildings in Dubai at a cost of AED 55 mn

Arab Contractors has signed an AED 55 mn contract with Al Ghurair Properties to develop two hotels in downtown Dubai, Chairman Mohsen Salah said, Al Shorouk reported. The agreement is the first phase of a larger AED 600 mn project in the UAE.


Steigenberger Hotel Group to rebrand as Deutsche Hospitality

Hotel operator Steigenberger Hotel Group will be renamed Deutsche Hospitality as part of an “aggressive international expansion.” Deutsche Hospitality will unite all the three existing hotel brands of Steigenberger Hotels AG; Steigenberger Hotels & Resorts, Jaz in the City, and Intercity Hotels, under one umbrella. The group is set to open two hotels in Egypt this year, the Steigenberger El Tahrir in Cairo and the Steigenberger Alcazar in Sharm El Sheikh.

Automotive + Transportation

Trade and Industry Ministry bans import of two-stroke motorcycle engines

The Trade and Industry Ministry has issued a statement banning the import of two-stroke motorcycle engines, Amwal Al Ghad reported. The ban was imposed because of a surplus in supply, and the availability of newer models, said head of the commercial agreements unit at the ministry Saeed Abdullah.

Only Japanese companies allowed to bid on developing phase one of Cairo Metro Line 4

Developing phase one of the Cairo Metro Line 4 will be exclusively tendered to Japanese companies, said an official from the National Authority for Tunnels. The move comes as part of the conditions set by Japan International Cooperation Agency (JICA) for funding the EGP 1.2 bn project. JICA’s 10-year loan comes at a 0.2% interest, Al Borsa reports.

Egyptian government seeks membership in TIR convention

Egypt is looking to become a member of the International Road Transport Union and sign-on to the UN’s Customs Convention on the International Transport of Goods under Cover of TIR Carnets (TIR Convention) (pdf), Al Mal reports. The convention reduces customs restrictions between signatory nations such as cutting financial deposits made at each border and provides a cross-border guarantee system to cover duties and taxes for each transport operation. The move has the endorsement of the Union of Egyptian Investors Associations, whose head Mohamed Farid Khamis called on the House of Representatives to swiftly ratify and approve Egypt’s membership.

National Security

U.S. State Department approves sale of USD 81 mn missile warning systems to Egypt

The U.S. State Department has approved the sale of USD 81 mn worth of missile warning systems to Egypt, according to a statement by the Defense Security Cooperation Agency. BAE Systems and DynCorp served as contractors for the sale, which will see Egyptian AH-64E Apache, UH-60 Blackhawks and CH-47 Chinook helicopters equipped with detection systems for infrared threats.

On Your Way Out

Tarek Amer has reportedly said the Central Bank of Egypt plans to open new FX bureaus after the devaluation, Mohsen El Tagoury, deputy head of the importers division at the Federation of Egyptian Chambers of Commerce, claims, according to Al Mal. The move would appear to coincide with plans by the National Bank of Egypt announced last month to open its own FX offices to fill the void left over after shuttering of bureaus for trading in the parallel market. Authorities continued to crack down on the market, with Al Borsa reporting the arrest of another exchange bureau owner on Friday.

Three 6 April movement activists have received 10-year prison sentences for protesting without a permit at a retrial of a previous criminal court sentence of life, Al Masry Al Youm reports. Meanwhile, a 6 April member denied to Daily News Egypt their involvement with calls for a nationwide protest on 11 November, saying, “We have nothing to do with these calls for protests. In fact we strongly reject them… It is unacceptable to have political opposition acting from another country… Obviously, they are not well-informed on internal affairs and not facing security pressure like we are,” said Sherif El Roubi.

The 2016 Nobel Prize in Chemistry was awarded on Wednesday to Jean-Pierre Sauvage, Sir J. Fraser Stoddart, and Bernard L. Feringa for their design and production of molecular machines. They have developed molecules with controllable movements, which can perform a task when energy is added. The awarding committee says “2016’s Nobel Laureates in Chemistry have taken molecular systems out of equilibrium’s stalemate and into energy-filled states in which their movements can be controlled. In terms of development, the molecular motor is at the same stage as the electric motor was in the 1830s, when scientists displayed various spinning cranks and wheels, unaware that they would lead to electric trains, washing machines, fans and food processors. Molecular machines will most likely be used in the development of things such as new materials, sensors and energy storage systems.” The scientific background can be found here.

On Friday, the peace prize was awarded to Colombian President Juan Manuel Santos for “his resolute efforts to bring the country’s more than 50-year-long civil war to an end,” and despite having the referendum on peace with FARC having been narrowly defeated by the Colombian public.

The markets yesterday

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USD CBE auction (Tuesday, 04 Oct): 8.78 (unchanged since 16 March 2016)
USD parallel market (Saturday, 08 Oct): 13.85 (from 13.85-14.25 on Tuesday, 04 Oct, Al Mal, Al Borsa)

EGX30 (Wednesday): 8,369 (+2.1%)
Turnover: EGP 845.3 mn (94% above the 90-day average)
EGX 30 year-to-date: +19.4%

THE MARKET ON WEDNESDAY: The benchmark EGX30 ended the last session of the week at its highest intraday level of 8,369 points, up 2.1%. CIB and EFG Hermes were both up, with the top gainers of the day being Egyptian Resorts, Sodic and Elsaeed Contracting. Among the day’s worst performers were Domty, Telecom Egypt and Qalaa Holdings.

Foreigners: Net Long | EGP +142.2 mn
Regional: Net Short | EGP -0.3 mn
Domestic: Net Short | EGP -141.9 mn

Retail: 57.4% of total trades | 54.7% of buyers | 60.1% of sellers
Institutions: 42.6% of total trades | 45.3% of buyers | 39.9% of sellers

Foreign: 21.5% of total | 29.9% of buyers | 13.1% of sellers
Regional: 9.1% of total | 9.1% of buyers | 9.2% of sellers
Domestic: 69.4% of total | 61.0% of buyers | 77.7% of sellers


Palm Hills Developments | Value Is in Diversity

Pharos writes that In the real estate world, PHD stands out judging by the various projects across Egypt reflecting its solid brand equity. Its real estate development portfolio features many co-development projects, a trend that has become quite widespread in the face of costly land acquisition. In a note released just before the holiday long weekend, the research house notes:

  • Market price fails to reflect raw land plots; Buy on FV of EGP3.47/share
  • Further NUCA collaboration would be a key catalyst
  • Sales momentum to continue in short term, despite signs of systemic risks
  • Lack of client-segment diversification a potential threat

Tap here to read the note in full (pdf).


WTI: USD 49.81 (-1.25%)
Brent: USD 51.93 (-1.10%)
Natural Gas (Nymex, futures prices) USD 3.17 MMBtu, (-0.02%, Nov 2016 contract)
Gold: USD 1,258.60 / troy ounce (+0.54%)<br
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QE: 10,357.3 (-0.1%) (YTD: -0.7%)
MSM: 5,610.0 (-0.1%) (YTD: +3.8%)
BB: 1,137.0 (-0.16%) (YTD: -6.5%)

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11 October (Tuesday): 2nd Annual Leasing Conference entitled “New insights to stimulate financing instruments”, Four Seasons Nile Plaza Hotel, Plaza Ballroom, Cairo.

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

12 October (Wednesday): The Factoring Role in promoting SMEs conference, Semiramis Intercontinental Hotel, Cairo.

12 October (Wednesday): NTRA board decides fate of spectrum rejected by the three mobile network operators.

19 October (Wednesday): Digital Media Forum Cairo, Four Seasons Nile Plaza Hotel, Cairo.

24-29 October (Monday-Saturday): The 2016 Dubai Design Week Iconic City exhibition Cairo NOW City Incomplete, Dubai Design District (d3), Dubai

26-27 October (Wednesday-Thursday): The Marketing Kingdom Cairo 2 event, Cairo.

31 October (Monday): Deadline for Telecom Egypt to reach an agreement with MNOs over using their 2G and 3G network infrastructure

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

14-16 November (Monday-Wednesday): Bank of America Merrill Lynch MENA 2016 Conference, The Ritz Carlton, Dubai International Financial Centre, Dubai.

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.

29-30 November (Tuesday-Wednesday): Citi’s Global Consumer Conference, London, UK.

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

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

07-08 December: Citi’s 2016 Global Healthcare Conference, London, UK.

10-13 December (Saturday-Tuesday): Projex Africa and MS Marmomacc + Samoter Africa, Cairo International Convention Centre.

11 December (Sunday): Prophet Muhammad’s Birthday (national holiday; date to be confirmed).

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

13 December (Tuesday): Amwal Al Ghad’s top 50 most influential women in Egypt women forum, Four Seasons Nile Plaza Hotel, Cairo.

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

14-16 February 2017 (Tuesday-Thursday): Egyptian Petroleum Show, Cairo International Convention and Exhibition Centre.

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