Tuesday, 11 October 2016

Saudi Aramco denies it has stopped shipping oil products to Egypt


What We’re Tracking Today

Egypt, Greece and Cyprus tripartite summit gets underway this morning: Greek PM Alexis Tsipras will touch down in Cairo today to hold talks with Cypriot President Nicos Anastasiades and President Abdel Fattah El Sisi on cooperation in energy and trade, as well as boosting political ties, Greece’s Kathimerini reports. As we noted yesterday, industry analyst Charles Ellinas tells New Europe that he does not expect a breakthrough natural gas agreement to be announced during the two-day summit, claiming that low prices, not a lack of political will, would stand in the way.

Finance Minister Amr El Garhy will appear today at the ABANA Conference 2016 in New York, joining a cast of characters that also includes Egyptian American Enterprise Fund chief Jim Harmon. El Garhy’s appearance follows his meeting with the heads of a number of Wall Street firms including JP Morgan and Fidelity Investments on Monday to pitch Egypt’s economic reforms and FDI prospects, said Deputy Finance Minister Ahmed Kouchouk, according to Youm7. El Garhy was also expected to speak on the USD 3 bn eurobond issuance and the IPO of state-owned companies.

Egypt is expected to open talks on EUR 129 mn in European Union assistance with the rumored arrival sometime between today and tomorrow of Johannes Hahn, the European Union’s Head of the European Neighbourhood Policy and Enlargement Negotiations, Al Mal says.

If you own a Galaxy Note 7, you’ll want to power it down now and go have a chat with whoever sold it to you about a refund or an exchange. Readers will remember we noted that exploding batteries in the devices had led to a global recall. Now, even purportedly safe “replacement devices” are apparently blowing up, prompting the manufacturer to officially halt production late yesterday. The last time something like this happened, Samsung launched a quality control initiative that kicked off with the ritual burning of 150,000 defective mobile phones: “In 1995, Chairman Lee was dismayed to learn that cell phones he gave as New Year’s gifts were found to be inoperable. He directed underlings to assemble a pile of 150,000 devices in a field outside the Gumi factory. More than 2,000 staff members gathered around the pile. Then it was set on fire. When the flames died down, bulldozers razed whatever was remaining. ‘If you continue to make poor-quality products like these,’ Lee Keon Hyok recalls the chairman saying, ‘I’ll come back and do the same thing.’” Read Sam Grobart’s excellent 2013 piece for Bloomberg “How Samsung Became the World’s No. 1 Smartphone Maker” for the full background, or Daisuke Wakabayashi’s excellent piece for the New York Times last night on the Note 7 scandal.

Oh, and Facebook wants to kill Slack. The social network company announced yesterday the launch of Workplace by Facebook, setting its sights on company messaging giants Slack and HipChat. It’s basically Facebook (all of it, including news feeds and messenger) but it can be used only to annoy the [redacted] out of people who share the same @yourcompany email address as you do. Facebook has no plans to connect your work and personal profiles (yet), doesn’t plan to offer Office365- or Google Apps-like productivity tools (yet), isn’t going to show you ads (yet), doesn’t plan to provide a back-door for Western intelligence to view your stuff (yet) and will be charging USD 1-3 per user account per month depending on how big your company is. That compares to USD 6.67 per month for each Slack account you buy. iOS, Android and web apps are already active. Given the ubiquity of El Face, you probably have somewhere between a few hours and a few days before someone on your team decides this is the new place you should all be chatting…

Oh, and in a sign that the Apocalypse is upon us: Amr Diab is now in the Guinness Book of World Records, apparently because he holds the “Guinness World Records for Most World Music Awards Wins.” We wish we were joking. Not sufficient proof that we’re in the End Times? Try this: Dubai is building the world’s tallest “tower.” Because having the world’s tallest building wasn’t enough.

Speaking of the potential Apocalypse of a Trump planet, while a pre-debate NBC / Wall Street Journal poll put former US Secretary of State Hillary Clinton ahead of Republican nominee Donald Trump by double digits, the first post-debate poll showed a more subdued lead — but a lead nonetheless. In a telephone survey of 537 registered voters (pdf) conducted by CNN and ORC International following Sunday’s second presidential debate, 57% of respondents stated that Sec. Clinton was the night’s winner as opposed to 34% of respondents saying the same of Trump. However, Trump’s numbers had slightly improved and Sec. Clinton’s slightly declined relative to the first debate. 27% of the respondents self-identified as Republicans, 36% as Democrats and 37% as Independents.

Okay, we’ll shut up now. On to the news.

What We’re Tracking This Week

The board of the National Telecommunications Regulatory Authority (NTRA) is due to decide the fate of the 4G spectrum rejected by the three incumbent mobile network operators on Wednesday (12 October).

NI Capital is expected to complete its evaluation of companies slated for an IPO sometime this week, government sources tell Al Shorouk.

Speed Round

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THE OIL MINISTRY HAS CONFIRMED THAT SAUDI ARAMCO has halted October’s shipments of petroleum products to Egypt, but has not called-off a USD 23 bn, five-year supply agreement, said Oil Ministry spokesperson Hamdy Abdel Aziz in a statement on Monday. Aramco hasn’t given a reason behind the move, said Abdel Aziz adding this does not mean Aramco is backing out of the agreement, which would see it deliver 700k tonnes of petroleum products monthly on a line of credit. An Aramco official denied yesterday the company had suspended shipments, saying the company has an obligation to fulfill its contract with the Egyptian General Petroleum Corporation, according to Saudi news outlet Al Mnatiq. Also yesterday, Reuters quoted an unnamed government official as saying Aramco had abruptly informed the EGPC verbally it would halt the supply of refined oil products to Egypt without citing a reason or a timeline.

The cabinet is already exploring alternatives to meet demand, including increasing tenders, an unnamed government official tells Al Masry Al Youm, something traders had confirmed over the weekend. EGPC has already issued a tender to import up to 105k tonnes of 95-octane fuel for November delivery in Suez, Reuters reported. The tender, which specifically calls for delivery from 1-3 November, 9-11 November, and 21-23 November, closes on 12 October. The newswire says EGPC has already issued a separate tender to import up to 132k tonnes of gasoline for November delivery in Alexandria.

Shipment delays come amid diplomatic rows: The hiatus in shipments comes amid an uncharacteristic public spat between Egypt and Saudi, widely picked up in both the domestic and foreign press. The Saudi envoy to the United Nations, Abdullah al Muallami, had rebuked Egypt on Sunday after it voted for a Russia-backed resolution on Syria besides the Saudi-backed French one. Mada Masr, which is quoting an official from Aramco, is claiming that the decision to stall shipments was politically motivated. Linking both incidents may be a stretch at this point: The shipments have been delayed since 1 October, long before the vote, though lobbying and an indication of where the vote would land may have taken place beforehand.

YOUR MOVE, TE: Orange Egypt, Vodafone Egypt and Etisalat Misr have all reportedly refused to sign national roaming agreements with Telecom Egypt (TE) that would have allowed it to operate 2G and 3G services on their networks, sources told Al Mal. TE had begun negotiations with the existing mobile network operators to operate mobile virtual networks in early September, after it acquired Egypt’s first 4G licence. The agreement required it to reach an agreement with the MNOs use their existing 2G and 3G network infrastructure until its own 4G network is ready. For their part, the MNOs had all refused to acquire the licence, citing inadequate spectrum allocation and high prices.

Did the MNOs just effectively veto TE’s 4G agreement? It is not entirely clear if TE’s failure to reach an agreement with the MNOs has a direct impact on the validity of its 4G contract. The company will not be able to begin operating immediately as an MVNO and provide 2G and 3G. More directly, the contract with NTRA stipulates that TE must begin providing 4G service within six months of signing. The contract was signed on 31 August.

WTO APPROVAL for Egypt’s import restrictions? Egypt has applied for and received approval from the World Trade Organization to implement import restrictions under provisions of the General Agreement on Tariffs and Trade (GATT) and the General Agreement on Trade in Services (GATS), a government source tells Al Masry Al Youm. As per WTO guidelines, countries facing balance-of-payment difficulty may apply for import restrictions under the GATT and GATS which includes raising tariffs and banning imports. The government is considering using this to shave USD 10 bn of its import bill by cutting imports of at least 15 non-essential goods, the source added. The move appears to be an escalation by the Ismail government of the import restrictions including its exporters registry, which imposes stricter quality control measures on imports of manufactured goods. A number of Egypt’s trading partners have reportedly complained to the WTO over the registry, the most vocal of which was the European Union. The block vowed to continue to mount pressure on Egypt to end the registry.

HEADLINE INFLATION DOWN, core inflation up in September: Egypt’s headline annual urban consumer inflation rate dropped to 14.1% in September from 15.5% in August, Reuters reported. The rate dropped for the first time since March, Bloomberg says, despites economists’ warning that the rate could jump to up 20% by year-end. Core inflation rates increased to 13.9% for the month, up from 13.3% in August, according to a statement from the central bank. Disambiguation: Bloomberg’s Ahmed Feteha filed a separate report the same day, noting that core inflation is up to a new record; the first piece covers headline inflation. Reuters also noted in a separate piece that core inflation is up to a “post-2009 peak.”

THE EGYPTIAN COMPETITION AUTHORITY (ECA) has refused requests for a settlement to close the cases of 24 distributors of superphosphate fertilisers and referred them to prosecution. The ECA insists the companies colluded to fix selling prices through three explicit agreements. The case is particularly important to ECA, which says it refused to exercise any leniency and agree to a settlement because it relates directly to food prices and after having had to fight pushback from the companies that refused to provide data and cooperate during the investigation. The ECA added that it, generally, will not allow of any chance of reconciliation with law violators who directly harm the general public and do not cooperate during investigations.

Separately, Oriental Weavers told the EGX that the Prosecutor General has shelved a case against it by the competition authority after finding no evidence of wrongdoing.

!_StoryHed_ Attijariwafa will tap Morocco for Barclays acquisition finance

ATTIJARIWAFA WILL RELY ON MOROCCAN FINANCE to acquire Barclays Egypt, according to a Reuters report picked up by that beacon of brilliant journalism known as the Daily Mail. Attijariwafa expects to close the transaction by year’s end and is “looking at capital increases, dividend management and a reorganization of its shareholdings to finance the Barclays deal and will use foreign reserves, with no plans for international bonds or bilateral foreign deals,” the newswire reports. “It will be between us and in house, we have enough resources even if the closing happens before the end of the year, as we expect it,” Attijariwafa Managing Director Ismail Douiri is quoted as saying. Among other things, the piece also notes Attijariwafa is in advanced talks with the Islamic Development Bank to set up a shariah-compliant subsidiary at home.

MNHD REPORTS RECORD GROWTH in 3Q2016: Madinet Nasr Housing and Development (MNHD) reported (pdf) total contracted sales grew 688% year-on-year to EGP 1.3 bn in 3Q16, the strongest quarter in its history. Contracted sales for the month of September were up 787% y-o-y to EGP 372 mn. The company had announced record growth in August as well, with sales surging 520% y-o-y to EGP 519.1 mn.

ELSEWEDY ELECTRIC launches EGP 225 mn share buyback program, seeking up to 3.6 mn shares at EGO 62.50 per, the company said in an emailed statement yesterday (pdf). The buyback offer begins today and ends on Monday, 17 October. The company will use “excess cash in local currency” to fund the buyback, it said.

TENSIONS WITH ETHIOPIA RISE: Ethiopia has officially blamed Egypt, Eritrea, and other states of “arming, training and funding” groups that it blames for a wave of protests and violence in regions around its capital Addis Ababa,” Reuters reported. Government spokesman Getachew Reda said “There are countries which are directly involved in arming, financing and training these elements … We have to be very careful not to necessarily blame one government or another. There are all kinds of elements in the Egyptian political establishment which may or may not necessarily be directly linked with the Egyptian government.”

Foreign Affairs Ministry spokesperson Ahmed Abu Zeid responded by reiterating Egypt’s respect for Ethiopian sovereignty and its refusal to meddle with its domestic issues. The Ministry’s statement also added that there is direct contact between the two governments currently to stress the importance of maintaining positive relations between the two countries.

DEMYSTIFYING FiT ROUND 2: Law firm Sharkawy & Sarhan issued a report on Monday clarifying the details of the second round of the feed-in tariff (FiT) program, detailing the government’s efforts in attempting to “address some of the drawbacks of Round One,” noting however that “the Round Two tariff comes significantly lower than the Round One tariff, which was indicated by the government in a number of instances as highly lucrative compared to other nearby jurisdictions” such as Jordan and the UAE. The firm urges that “policy makers should take a step back and see beyond the mere comparison of figures… it remains a question for Egypt to prove throughout the Round Two FiT whether it is only about procuring lowest figures possible or [if] there is a will to put some opportunity cost investment for an active renewables energy market. Read the full note here, pdf.

NOBEL SEASON is over: Harvard’s Oliver Hart and MIT’s Bengt Holmström won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2016, as the Nobel prize in economics is formally known. Hart and Holmström were awarded the prize for teaching us how to form and design contracts. Together, they have developed “contract theory, a comprehensive framework for analysing many diverse issues in contractual design, like performance-based pay for top executives, deductibles and co-pays in insurance, and the privatisation of public-sector activities.” The popular background reading behind the award is available here.


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The Macro Picture

THE BLOODBATH FOR FUND MANAGERS continues. Last month, we told you that active fund managers were taking it in the teeth — at least in America, where “nine out of ten US equity funds failed to beat the market over the past year,” prompting the FT to note that the “scale of the disappointment in recent [performance] figures … is likely to fuel further outflows from an industry that is already under pressure.” In tandem, index funds — famously dubbed “absentee landlords” by Hermes Investment Management’s Saker Nusseibeh — are “eating the world.” Cue the Financial Times, which now reports that sovereign wealth funds hit by “low commodity prices and disappointing returns” have pulled USD 90 bn from asset managers over the past two years.

Egypt in the News

Whatever, man. It’s another slowish news day in the foreign press on Egypt, and anything worth noting appears elsewhere in today’s issue organized according to subject matter. This is a good thing. Relax. Ask that co-worker, for whom you care nothing about, questions on their family life. Plan for that vacation that’ll leave you more worn-out by the time you get back. Whatever, just…

On Deadline

Al Masry Al Youm columnist Amr El Shobaky says keeping Islam El Beheiry in prison for contempt of religion beyond his actual sentence is a mistake. El Shobaky criticized the existing law for its vagueness and its impact on freedom of thought. El Beheiry did not insult Islam, El Shobaky says, but provided a platform for intellectual discussion of religion that should have been celebrated.

Worth Reading

Take the red pill and the Wall Street Journal will show you how deep the rabbit hole goes: Pei Li and Eva Dou have written a remarkable piece on the endlessly fascinating phenomenon of Chinese tourists in Egypt tipping Egyptians with mentholated balm (the same stuff sold here as Voltaren or Tiger Balm abroad) in metal tins. Neither the Chinese tourists nor the Egyptians have any idea how the practice started or why it endures, but it provides fodder for some fantastic quotes.

“Before I came to Egypt, the tourism agency told me repeatedly to bring cooling balm as a gift to make the trip easier,” according to one Chinese tourist. Meanwhile: “Chinese tourists like to give this to me, but I really do not know why,” according to a cleaner at a Hurghada resort. “I really would like to know why Egyptians like cooling balm” according to one Chinese traveler writing on the social media site Weibo. And so on and so forth. (Read Chinese tourists in Egypt have a unique way of greasing palms)

Worth Watching

El Erhab wel Kebab — Egyptian indifference once again saves the day: We’re not sure how we missed this when it first emerged online back in July, but a video of an Egyptian kebab store owner in New Zealand getting held up at gunpoint in May 2016 made some waves on the internet for his frankly insane but highly enjoyable reaction. Store owner Said Ahmed not only ignores the gun pointed at him by the masked robber, but makes sure to continue handing out orders to a waiting customer before walking away (27 seconds, no audio). BBC News caught up with Ahmed to ask him “What were you thinking?” (watch: 1:44)


Dispute settled between Bawabet Al Kuwait Holding and four petroleum companies -Oil Ministry

Four state-owned petroleum companies signed a settlement agreement with Bawabet Al Kuwait Holding (BAK), the Oil Ministry said in a statement, reported Al Masry Al Youm. The companies include EGAS, GASCO, Petrotrade, and Alexfert, the statement added. Through the settlement agreement, BAK agrees to drop arbitral proceedings filed against Egypt at the World Bank’s International Centre for Settlement of Investment Disputes. The dispute reportedly centers around allegations the state unilaterally backed out of a 15-year contract to supply the company with gas at a price of USD 3/mbtu, we noted in July.

SDX identifies gas and oil bearing prospects at South Disouq ahead of exploration well

Egypt-focused SDX Energy announced that the quality of the data gathered from the 3D seismic mapping at its South Disouq concession surpassed pre-acquisition expectations. “SDX’s initial internal assessment of the 3D seismic data has identified 15 leads and at least two currently drillable gas and oil bearing prospects. These will now be further interpreted ahead of the planned drilling campaign, expected to commence in late 2016/early 2017.”

Basic Materials + Commodities

Saudi’s Panda signs agreement with Kaha for USD 18 mn in annual purchases

Saudi Arabian supermarket chain Panda has signed an agreement to purchase USD 18 mn in product from state-owned Kaha for Preserved Foods, Kaha Chairman Hani Medhat told Al Borsa. Kaha manufactures other products for major labels including Harvest Heinz. Kaha will also rent Panda a hypermarket Kaha had built. The food producer is also in negotiations with the Qatar National Bank-Egypt for an EGP 20 mn loan to finance expansions and upgrades, Medhat added.

Americana allocates EGP 17 mn towards upgrading beans, olives factories

Americana will invest EGP 10 mn in upgrading its olive-product lines and a further EGP 7 mn for the annual maintenance on its fava beans factory, head of exports Ahmed Nabil told Al Borsa. He did not specify when the investment is expected to be injected. Nabil also said the company recently launched a new EGP 50 mn fava beans production line which is allocated entirely to exports to the US, he added.


Universal to invest EGP 1 bn in feeder industry and components manufacturing

Universal Group is investing EGP 1 bn in feeder and components manufacturing, Al Borsa reports. The company is banking on a boom in the sector as domestic industry looks to source more production inputs locally as a result of the FX crunch, said Chairman Yousry Kotb. The company’s factories already supply raw materials for manufacturing home appliances and plastics. The company had launched a EGP 130 mn components manufacturing plant back in August which supplies 70% of the its raw materials needs.

Health + Education

Egyptian delegation in France to consult on implementing Universal Healthcare Act

A delegation of the ministries of health and finance have arrived in Paris to consult with leading French health officials on implementing universal healthcare in Egypt, said Deputy Finance Minister Mohamed Moeit. He added that the ministry will complete its fiscal and actuarial assessment of the Universal Healthcare Act in November, Al Ahram reports.

Redcon Medical to inject EGP 500 mn in initial investments in medical park in Alburouj

Redcon Medical, a subsidiary of Redcon Construction, plans to inject EGP 500 mn as initial investments in a medical park within Capital Group Properties’ Alburouj, said the firm’s managing director for financial affairs, Al Mal reported. The park will span over an area of 22k sqm and will be built over three phases, with construction set to start by the beginning of next year. The initial investment estimate will be used to buy the land plot, as well as equipment. While Chairman Hazem El Ashry previously said that the park would cost around EGP 400 mn, the financial affairs executive claims that the total cost of the project is yet to be determined, adding that the project will be partially financed through bank loans.

Real Estate + Housing

Talaat Moustafa Group subsidiary files lawsuit against NUCA

The Arab Company for Projects and Urban Development, a subsidiary of Talaat Moustafa Group Holding (TMGH), has filed a lawsuit against NUCA challenging the interest rate set on its debts to the authority, the company said in a statement. The economic court has passed the lawsuit to the administrative court, the statement adds. TMGH had previously reached an agreement with NUCA determining the value of the land due to NUCA from Madinaty must be no less than EGP 9.979 bn and include 3.195 mn sqm of finished buildings to be delivered over the lifetime of the project. Additionally, the company will pay the regional services premium for EGP 1.122 bn, in addition to interests, bringing the total up to EGP 2.9 bn over 10 years.

Tatweer Misr investing EGP 1.5 bn into Il Monte Galala, Fouka Bay in 2017

Real estate developer Tatweer Misr is investing EGP 1.5 bn in 2017 into its projects Il Monte Galala in Ain Al Sokhna and Fouka Bay in Ras Al Hekma, Managing Director Ahmed Shalaby told Amwal Al Ghad. The investment is split between EGP 1 bn going towards Il Monte Galala and EGP 500 mn into Fouka Bay, he explained. The company is bolstering its construction rates to reduce the risk of rising prices, said Shalaby. Tatweer Misr has completed 25% of the first phase in both developments, and has issued 1,200 housing units to contractors, he added. The company is currently evaluating the contractor bids and is expecting construction on the units to begin in December 2016.


World Travel and Tourism Council delegation to visit Egypt next month

A delegation from the World Travel and Tourism Council (WTTC), led by CEO David Scowsill, will visit Egypt next month to provide advice on boosting security in Egypt, TravelMole reported. The delegation is hoping its efforts would encourage the UK government to overturn its ban on flights to Sharm El Sheikh. The exact date of the visit is not clear.

Automotive + Transportation

Transport Ministry signs EGP 900 mn consulting agreements for phase one of Cairo Metro Line 4

The Transport Ministry’s National Authority for Tunnels signed the EGP 900 mn consulting agreements for phase one of the Cairo Metro Line 4 with Japan International Cooperation Agency (JICA) on Sunday, Al Mal reports. Developing the first phase of the EGP 25 bn line will be exclusively tendered to Japanese-Egyptian consortiums.

Egypt’s initiative to modernize public transport turns in solid results, says World Bank

The World Bank’s Carbon Finance Specialist Juha Seppala sheds light on the results of the initiative to scrap old taxis in Egypt, named the Egypt Vehicle Scrapping and Recycling Project, and its impact on emissions reduction. The initiative, which involved replacing 40,000 taxis in Egypt, around half of Cairo’s taxis, has been the first and only Clean Development Mechanism-registered “programmatic” project in the world, which provides for emissions reduction using the certified emission reductions (CERs), Seppala claims. Recently-released results showed that emission reductions achieved in 2013 and 2014 amounted to 146,005 CERs. Seppala says the emissions reductions for 2015 are already in the process of being verified and hopes the programme could be expanded to more cities.

Banking + Finance

CIB in talks to obtain EGP 700-800 mn credit line from IFAD and FDA

CIB is reportedly in negotiations with the Egyptian government to obtain an EGP 700-800 mn credit line from the International Fund for Agricultural Development and French Development Agency, said Kamel Sallam, head of Finance Programs and Donor Funds at the bank’s agriculture division, Al Borsa reported. The move comes in an effort to support the agriculture sector in Egypt by injecting EGP 300 bn in loans per month into the market in the sector.

EFSA drafts new guidelines to assess fair value of corporate assets

The Egyptian Financial Supervisory Authority (EFSA) has released its draft of new guidelines for determining and assessing the fair value of companies and their assets. EFSA discussed the draft with the brokerage division of the Federation of Egyptian Chambers of Commerce on Monday, who requested more time to study the draft, Al Mal reports.

Legislation + Policy

Law to increase Egypt’s competitiveness in organic agriculture sector in the works

The Ismail government is reportedly studying legislation to regulate organic agriculture, said Abdel Moneim El Banna, head of the Egyptian Agricultural Research Centre, according to a report in Al Shorouk. The legislation aims to make Egypt’s exports of organic produce more globally competitive, the story suggests.

National Security

No foreign military bases to be built in Egypt, Ittihadiya says, denies Russian reports

Egypt will not allow the building of foreign military bases on its soil, Ittihadiya spokesperson Alaa Youssef told Ahram Gate. The statement comes denying a report by Russia’s Izvestia (also carried by RT), citing an official from Russia’s Foreign Affairs Ministry who said that the Russian government is in talks with Egypt to set up an airbase in Sidi Barrani, which previously served as a Soviet-era base until 1972. The sources had said that the talks, if successful, could see the reconstruction of the bases completed by 2019.

US to sell Egypt USD 81.4 mn in defensive aids to protect against MANPADS

The US Defense Security Cooperation Agency (DSCA) said the State Department approved the sale of Common Missile Warning System (CMWS) for AH-64E Apache, UH-60 Blackhawks, and CH-47 Chinook Helicopters and related equipment, training, and support. The defensive aids are designed to protect against shoulder-fired ground-to-air missiles. The agreement is worth about USD 81.4 mn to prime contractors BAE Systems and DynCorp. DSCA says “the proposed sale of the CMWS will equip the Egyptian Air Force’s fleet of multi-mission helicopters with a detection system for infrared missile threats. Egypt will have no difficulty absorbing this equipment into its armed forces. The proposed sale of this equipment and support will not alter the basic military balance in the region.”

On Your Way Out

A15’s Tamer Azer is calling for the formation of a venture capital association in Egypt in an effort to strengthen the startup ecosystem in Egypt and hopefully regionally in a piece on Wamda. While investors may have to forgo their immediate individual needs, he reckons that by sharing data, reforming legislation and regulations, as well as increasing collaboration with international investors, the whole startup ecosystem would be better off in the long-run.

The markets yesterday

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USD CBE auction (Tuesday, 04 Oct): 8.78 (unchanged since 16 March 2016)
USD parallel market (Monday, 10 Oct): 14.15 (from 14.00-14.25 on Sunday, 09 Oct, Amwal Al Ghad)

EGX30 (Monday): 8,364 (-0.9%)
Turnover: EGP 675.4 mn (55% above the 90-day average)
EGX 30 year-to-date: +19.4%

THE MARKET ON MONDAY: EGX30 bucked its latest gaining trend and fell for the first day after a 4-day winning streak that was buoyed by speculation of an imminent devaluation. The index’s largest constituent, CIB, dragged the index down by closing at a loss of 1.4%. The selling wave hit all of the EGX30’s constituents except for Elsewedy Electric and Edita. The worst performers of the day were Domty, Arabian Cement and Qalaa Holdings. Market turnover was EGP 675.4 mn with regional investors the sole net buyers of the day.

Foreigners: Net short | EGP -11.3 mn
Regional: Net long | EGP +23.1 mn
Domestic: Net short | EGP -11.8 mn

Retail: 63.9% of total trades | 68.1% of buyers | 59.7% of sellers
Institutions: 36.1% of total trades | 31.9% of buyers | 40.3% of sellers

Foreign: 20.5% of total | 19.6% of buyers | 21.3% of sellers
Regional: 8.7% of total | 10.5% of buyers | 7.0% of sellers
Domestic: 70.8% of total | 69.9% of buyers | 71.7% of sellers


Petroleum aid from Saudi stops, raising doubts on Saudi deposit transfer

Reports that Saudi Aramco has informed Egyptian General Petroleum Corporation earlier this month that the supply of refined oil products to Egypt would be halted — without a reason or timeline given for the suspension — raises question marks about the USD 2-3 bn in deposits Egypt awaits from Saudi Arabia, according to a note by Pharos to be published this morning.

With Saudi Arabia having to undergo its own austerity measures and with expectations of weak growth in the kingdom due to depressed oil prices, the halt or temporary halt of oil product supply to Egypt is not surprising. The issue here is the critical time in which this is happening, when Egypt is accumulating USD liquidity in preparation for devaluation. The crucial question is whether Egypt would still receive the USD 2-3 bn deposit from Saudi Arabia within the next two weeks, which is much needed for the buildup of net international reserves and to secure enough USD liquidity within the banking system pre-devaluation.

Strategy: Buy the dips in high value stories. We have always reiterated our view that the market will continue to trade within the 7,900-8,500 range, with extremely high volatility to news flow, especially with regard to news that come below expectations. We continue to flag undervalued banking sector stocks like CIEB and HDBK. EFG Hermes and EK Holding still offer good value at these levels. Infrastructure spending beneficiaries such as SWDY and ORAS, along with real estate players TMGH, PHDC and MNHD are among our picks, as is ORWE.

Rearranging the Egyptian fiscal puzzle

Also this morning: Fiscal position, not only monetary policy, is another cornerstone of the IMF agreement. Egypt awaits this month the approval of the IMF Executive Board on a three year USD 12 bn financial support package, according to a note published by Pharos on Monday. While all eyes have been on monetary policy and the movement in exchange rate, we believe another cornerstone of the IMF agreement is bringing down the budget deficit as a percentage to GDP down to single digits. Click or tap here to read the report “Rearranging the Egyptian fiscal puzzle” (pdf).


WTI: USD 51.27 (-0.16%)
Brent: USD 53.14 (+2.33%)
Natural Gas (Nymex, futures prices) USD 3.27 MMBtu, (-0.31%, Nov 2016 contract)
Gold: USD 1,261.00 / troy ounce (+0.05%)

TASI: 5,574.2 (+1.2%) (YTD: -19.4%)
ADX: 4,387.3 (+0.6%) (YTD: +1.9%)
DFM: 3,358.6 (+0.3%) (YTD: +6.6%)
KSE Weighted Index: 346.2 (-0.3%) (YTD: -9.3%)
QE: 10,405.2 (+0.5%) (YTD: -0.2%)
MSM: 5,686.6 (-0.1%) (YTD: +5.2%)
BB: 1,130.3 (-1.3%) (YTD: -7.0%)

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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 October (Monday) EBRD executive meeting in Egypt on sustainable development strategy.

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.

3 November (Thursday): The Emirates NBD PMI for Egypt, Saudi Arabia and the UAE compiled by Markit comes out here.

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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