Sunday, 20 November 2016

Emerging markets don’t like Trump, but Egypt certainly does

TL;DR

What We’re Tracking Today

If you’re in most any emerging market, you’re not loving Donald Trump at the moment —unless your EM is Egypt. Capping a week in which EM across the globe slumped and politicians tore their hair out, Egypt came out smelling of roses: From politicians to markets, our nation loves The Donald, and we’re so far proven immune (thanks to the Ismail government’s closing of the USD 12 bn IMF bailout) to the “Trump Slump” that’s swept global emerging markets.

EM have tanked since the election of Donald Trump, with MSCI Emerging Markets Index down 6.1% since Trump got the nod. In, fact, the past week or so has been the worst period for EM since the China-induced sell-off in August 2015, according to a recent note by the International Institute of Finance (pdf). CNBC adds that last week could have been the worst for EM since the “taper tantrum” during the second quarter of 2013.

What’s happening? Writing for the Financial Times (paywall), Allianz chief economic advisor Mohamed El-Erian explains that investors in “emerging market assets have been spooked by the possibility of higher US interest rates and greater trade protectionism.” This isn’t unusual, he writes, nor is the fact that it extends across asset classes. What’s odd is that it comes as US markets rallied, implying investors in US assets are discounting Trump’s election rhetoric.

What does this mean for EM in general? As El-Erian puts it, emerging market investors are afraid that Trump’s rhetoric will be bad for trade —and thus bad for business in EM. “If the EM interpretation is the correct one, US stocks have some rough sledding ahead. If, however, emerging markets have misread the president-elect’s policy intentions, then these beaten down assets have more upside over the next year than that offered by US stocks.”

What about Egypt? Egyptian shares are up 20% in exceptionally heavy trading in the same period that the MSCI EM has tanked. The EGX broke a five-year-old record for total turnover on Thursday, and foreigners have been net buyers since devaluation. What’s more: Egypt is still undervalued, Bloomberg says, explaining on Thursday that in USD terms, shares are still trading at a 26% discount to their pre-float level. And the carry trade continues to pick up, as the business information service noted last week.

What’s with the appetite for Egypt? Reports Bloomberg: “‘Volatility presents opportunities, and we’re finding them in markets like Egypt, said Andrew Schultz, the Cape Town-based head of frontier sales at Investec Securities who reported a pick-up in demand for Egypt from clients. ‘“We’re seeing investor relief over the authorities’ decision to float the currency. Now it’s a market where you can make investment decisions based on fundamentals, rather than have potential gains capped by an overvalued exchange rate.’”

President Abdel Fattah El Sisi fundamentally agrees with El-Erian on the need to be critical about whether Trump’s campaign rhetoric and approach to governance mesh, telling a Portuguese interviewer ahead of his visit there this week that “We have got to draw a distinction between the rhetoric that takes place within presidential campaigns and the real and actual administration of a country after the inauguration of a president. …I believe that President-elect Trump will be more rigorously engaged with the issues of the region. … As a matter of fact President-elect Trump has shown deep and great understanding of what is taking place in the region as a whole and what is taking place in Egypt.” The president said “personally I respect and appreciate [Trump]. That is why I am looking forward, and I am expecting more support and more reinforcement of our bilateral relations.”

The Trump-Sisi story was on the verge of going viral at dispatch time this morning, with pickups everywhere from DC’s The Hill to China’s Xinhua. The Israeli press is on it, and of course Breitbart is gobbling it up.

And, speaking of Trump: The US president-elect spent the weekend in a flame war with the cast of the musical Hamilton, after a cast member lectured Trump’s running mate; filled key national security posts (including national security advisor, attorney general and CIA director_ with right-wing hardliners; and arrived at a USD 25 mn settlementon the Trump University lawsuit that could have seen him taking the stand to testify before the inauguration. Trump also met with former Republican presidential candidate (and Trump foe) Mitt Romney, so our bet: He follows the trio of right-wing appointments by naming mainstream Republicans as the secretaries of state and of the treasury.

CIB raises limits on credit card use abroad —again. The bank raised its limits yesterday on credit card use abroad to the USD equivalent of EGP 150,000 a month for Platinum clients and reduced fees on card use outside of Egypt to 3-4%, depending on which card you hold. You can see the latest table of limits here (pdf). Meanwhile, it appears HSBC has raised its limits, too, allowing Premier account holders the USD equivalent of EGP 15,000, Al Borsa reports, adding that HSBC has raised fees on use of its cards outside the country to 6% from 3.5%

You’ll be getting phone calls from numbers starting with 015 soon: Telecom Egypt (TE) said it will provide 4G mobile services giving its customers phone numbers starting with 015, according to Al Mal. The 015 phone prefix was previously allocated to landline numbers in Tenth of Ramadan, but TE says it changed that to 0554. There is as yet no news on when TE will begin providing service.

The International Civil Aviation Organization is apparently in town this week to inspect Egyptian airports, Al Borsa says.

What We’re Tracking This Week

President Abdel Fattah El Sisi starts a two-day visit to Portugal tomorrow, where he will meet recently elected president Marcelo de Sousa. It’s the first visit by an Egyptian president to Portugal in about 24 years. El Sisi spoke with Portuguese media about terrorism (“Egypt is fighting against terrorists in Egyptian soil. They are not insurgents or rebels, but terrorists”); tourism (“I wanted to reassure tourists …our tourist destinations are totally safe and stable, as are our airports”); and former Portuguese PM and now UN secretary-general-designate António Guterres (Egypt “supported his candidacy from the start”). Oh, and Trump, as we noted above.

The draft executive regulations of the value-added tax will apparently be presented to the business community for feedback this week, according to statements last week by Deputy Finance Minister Amr El Monayer to Al Ahram.

An auction of eight new cement production licences will reportedly take place on Tuesday, 22 November.

Enterprise+: Last Night’s Talk Shows

The two-year sentence handed to Press Syndicate Yehia Qalash for allegedly harbouring “fugitive” journalists was widely covered on Saturday across the airwaves. The Press Syndicate will file an appeal within 10 days in response, Qalash told Al Hayah Al Youm (watch; runtime: 13:52). “If our defending of the syndicate will have a price, we are open to pay that price,” he said, adding that defending the syndicate doesn’t mean an escalation. We have further coverage on the issue, including international reaction, in Speed Round.
Amr Adib nailed it on the head when he said “this will have grave consequences for Egypt in the international media.” Adib showcased a video of journalists collecting donations to pay Qalash’s EGP 10,000 bail (watch: running time: 7:28). Adib also spoke with Islam Beheiry, who was released by presidential pardon a few days ago after being jailed on charges of contempt of religion, about hissolitary confinement (watch; runtime: 3:48). Beheiry says he’s looking to re-start his controversial talk show (watch; runtime: 1:01).

Adib also delved into the viral footage on social media of the body of Magdy Maken, a fish seller who died in police custody, allegedly under torture. Adiburged people to await the official forensic report on the matter before jumping to conclusions (watch; runtime: 1:24).

CIB is increasing limit on credit card transactions abroad by 50% for health and educational purposes starting from Sunday, CIB chairman Hisham Ezz El Arab told Lamees Al Hadidy in a call-in to CBC’s Hona El Assema (watch; runtime: 23:52). He added that he was sure other banks will follow. Ezz El Arab reiterated that the exchange rate will stabilize within three months. Commenting on a national shortage of some meds, Ezz El Arab said his bank never stopped providing medical companies with their FX needs.

That shortage dominated last night’s episode of Hona El Assema, as Lamees showcased the impact of the shortage on hemodialysis clinics in Fayoum and Alexandria. A manager of a hemodialysis clinic in Sohag blamed private sector companies. “The EGP float was not a surprise to anyone. Why was the healthcare sector not ready to meet this challenge?” Lamees asked, adding: “We can bear anything … a shortage in sugar or food items … but this time is different.”

Health ministry drops a bombshell: In a call in reaction to the segment the Health Ministry’s Ahmed Mohie El Qased said the ministry is now studying a report on repricing meds. If true, this is a complete reversal of the ministry’s position that now isn’t the time to reprice products. El Qased also said the ministry will allow the price of some procedures to rise. Ahmed El Ezaby, head of the pharma division of the Federation of Egyptian Industries, joined the conversation, repeating the division’s line that reasonable price hikes would help eliminate shortages.

Finally, Lamees’ “4+1” weekly debate discussed Ahmed Shafik’s return to Egypt and foreign funding of NGOs, among other issues (watch: runtime: 21:02).

You can view the full episode here(watch, runtime: 2:10:23)

Citizens whose income exceeds EGP 1,500 a month or whose pension is more than EGP 1200 a month will not be eligible for ration cards, said Assistant Supply Minister Ahmed Kamal during an interview with talk show host Amr Abdelhamid on Howar Al Qahera (watch; runtime: 3:10). Kamel said that “[the government] intends to launch a cash subsidy system, but not at the moment.”

Speed Round

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Egyptian banks have provided USD 2.492 bn in financing to importers of foodstuffs, medications, and production inputs in the period from 3 to 15 November, the central bank said. USD 1.459 bn went to finance intermediate goods and production inputs, USD 414.65 mn to foodstuffs, USD 97.65 mn to import medications since the float of the EGP, and the remainder on other goods. The financing came through short-term loans to importers and letters of credit.

This comes as the CBE apparently told bankers that they are allowed to begin financing imports of non-essential goods on Sunday, six banking sector sources told Arabic Reuters on Friday. These “verbal instructions” by the CBE come with the caveat that the liquidity must come from the interbank market. The interbank requirement will discourage banks from financing non-essential imports, according to senior private sector banker. Importers complained to Reuters on Wednesday that they have been forced to return to the parallel market as banks have been withholding USD for non-essential, despite statements from GB Auto (one of the largest buyers of FX from the parallel market) last week that they had begun completely relying on the banking sector.

Meanwhile, the CBE is apparently holding talks with the Social Fund for Development (SFD) to shield SMEs from the effects of the EGP float, said SFD head Soha Suleiman, who gave no further detail on the talks.

The CBE’s Monetary Policy Committee left interest rates unchanged at its meeting on Thursday, according to a statement from the CBE, saying “at this juncture and given the balance of risks, the MPC judges that the key CBE rates are currently appropriate.” The deposit rate stood at 14.75% while the lending rate was unchanged at 15.75%. The CBE’s main operations rate and discount rate stands at 15.25%. The story has gotten some international ink in the Financial Times and Reuters. This comes as the monthly headline inflation rate for October rose by 1.7% from 1.25% in September, reports a CBE statement from earlier this month. Annual headline inflation for the month decreased to 13.56% in October from 14.09% in September. Monthly core inflation grew by 2.81% in October from 1.39% in September, while the annual core rate increased to 15.72% from 13.93% in September.

Journalist Syndicate chief Yehia Qalash and two members of the Syndicate’s board were sentenced to two years in prison each for harboring wanted colleagues and spreading false news, judicial sources told Reuters. The three are free on bail of EGP 10,000 apiece as they appeal the verdict. (Background on the case is here.)

Syndicate responds: Syndicate members had raised a black banner along the building’s façade reading, “journalism is not a crime.” Journalists gathered outside the syndicate’s headquarters in downtown Cairo to protest the verdict amidst stepped-up security presence in the area. The three defendants also attended an emergency syndicate council meeting where they vowed to pay their bail and appeal what they described as a “harsh and surprising” as well as “politicized” sentence. Khaled El Balshy, one of the two board members sentenced, said that he would not stop defending freedom of speech.

Reax: The verdict has been condemned the Tunisian Journalists Syndicate and celebrated Egyptian author Alaa El Aswany, among others. Expect more to follow in the days ahead.

The sentencing came immediately following President Abdel Fattah El Sisi’s decree pardoning 82 prisoners, according to Ahram Online. Ittihadiya says most of the detainees pardoned are university students. The list includes Islamic scholar Islam Beheiry, but did not include Irish citizen Ibrahim Halawa. Following his release, Beheiry said he intends to return to the air.

The rift between Egypt and Saudi Arabia is “not surprising,” according to analysis by Stratfor, “Egypt has demonstrated a desire for greater independence in its foreign policy, resisting Saudi Arabia’s attempts to bring the country further under its influence.” For now, Cairo’s main priorities are to find financial support and fuel supplies — and Kuwait and the UAE are “continuing business as usual,” preserving the ties that bind Egypt to the GCC bloc. Stratfor says that while relations with Saudi Arabia are faltering, those between Egypt and the UAE have been as “strong as ever” and its contacts “indicate that Abu Dhabi and Cairo may be hashing out a deal for petroleum products to tide Egypt over through the spring.” Stratfor says Egypt is looking beyond traditional allies as well, mentioning agreements with the likes of Azerbaijan and Iraq. With the influx of IMF and World Bank funding expected, Stratfor says the “promise of financial relief could embolden Cairo in its pursuit of greater foreign policy independence,” but warns that “Cairo cannot afford to jeopardize the valuable relationships it already has with Saudi Arabia and the GCC. Similarly, the GCC cannot turn its back on Egypt, in whose stability the bloc’s members are all invested.”

Cheese maker Obour Land is expecting that the Egyptian Financial Supervisory Authority will approve its fair value report on its shares this week, ahead of the planned listing of 25% of its shares on the EGX in December, sources tell Al Borsa.

Kuwait’s Global Investment House has reportedly sold its stake in Global Egypt, its securities trading arm, to “two Egyptian businessmen,” Al Mal reported. Al Mal says Global Investment House sold its 86% stake in the subsidiary (the company’s website notes it owned 90% of Global Egypt). Sources refused to disclose the value of the transaction, but said the new owners will be changing the outfit’s name to Global Investment for Securities Trading and will focus on expanding more in brokerage business and introducing financial advisory services. Global Egypt had a brokerage market share of 0.4% for 10M2016, according to the EGX league table (pdf).

The second draft of a proposed overhaul of the investment at has been completed, and discussed with the private sector this week, according to statements byInvestment Minister Dalia Khorshid at the Egyptian-European Business Council picked up in Al Borsa and Amwal Al Ghad. This second draft takes into account feedback from government and business, she added, reiterating her commitment to achieving consensus on whatever draft goes to the House of Representatives. Business associations have a range of complaints about the act, but Khorshid is reportedly sticking to her end-of-month timetable to present the draft to cabinet. Investment incentives will be based on the ability to export, how labor intensive a business is, and whether the business fulfills a strategic economic need for the government, Al Mal quotes the minister as saying.

World Bank encourages progressive tax: Imposing a progressive tax will help redistribute wealth and resources to low income citizens, said Asad Alam, the World Bank Group’s Country Director for Egypt, Yemen, and Djibouti. Finance Minister Amr El Garhy had stated earlier this month that the Ismail cabinet was mulling imposing such a tax. Among other things, Alam also argued that countries that have failed to battle poverty usually have faced issues with a lack of a competitive FX market and have held on to maintaining energy subsidies, he said at a talk held by the Egyptian Center For Economic Studies.

Supply Ministry spokesman Mohamed El Saifi has resigned from his post after only one week in office due to what he called “a lack of transparency,” El Watan reported. He accused senior ministry officials of concealing information from him in an attempt to sabotage the minister. The move follows the announcement last week by the ministry’s Food Industries Holding Company to raise the price subsidized rice, a decision disavowed by the Supply Ministry. The head of the Food Industries Holding Company told Ahram Gate that those responsible for the news that circulated late last week have been referred to investigation. On a related note, the government cut customs on imported sugar, according to a report from Al Borsa

MOVES- Sally Buzbee, the former Cairo-based Middle East editor of the Associated Press, will lead the AP as executive editor and senior vice president starting 1 January 2017, the news wire said in a statement on Thursday.

HSBC reached an agreement to sell its Lebanese business to Blom Bank, Bloomberg reported. The transaction is expected to be completed by 1H2017, subject to approval from Lebanon’s central bank. Bloomberg notes that “HSBC will continue to operate its private banking business in the country, two people with knowledge of the matter said, asking not to be identified as the information isn’t public.”

Other stories worth a read this morning if you have the time:

  • Who is the next Jamie Dimon? Jamie Dimon may not want to be Trump’s treasury secretary, but the fact that the JPMorgan boss was asked to throw his name into the right has set off a wave of gossip about his likely (one day) successor. (Reuters)
  • Former Saudi oil minister Ali Al-Naimi has lunch with the FT’s Roula Khalaf, who regales her with tall tales and “his frustrations with Opec, his early years as a nomad — and why he will be proved right. (Financial Times, paywall)

Egypt in the News

A trio of stories has us downbeat about prospects for positive coverage of Egypt in the international press this week after a very nice two-week run. First, as we’ve noted above, Journalist Syndicate chief Yehia Qalash has been sentenced to two years in prison for reportedly harbouring “fugitives,” and wire coverage has been picked up most major news outlets, including the Wall Street Journal. (We might have learned from the imprisonment of the so-called “Marriott Cell” of Al Jazeera English journalists that scribes around the world tend to react more than a little negatively when one of their own is imprisoned.)

Also likely to influence sentiment this morning are two stories from the Associated Press, including Maggie Michael’s “Egyptian fish vendor latest victim of alleged police abuses” (with its echoes of the fish vendor whose death touched off relatively rare protests in Morocco) and “Amnesty warns new Egypt rights bill ‘draconian’.” Both pieces are getting wide pick up this morning.

Egypt needs to do a whole lot more to transform its economy, and it starts with dismantling the public sector. –former IMF director. Writing for the Financial Times (paywall)’s Beyondbrics blog, former IMF director for the Middle East and Central Asia George Abed writes: “The Fund programme represents a good start but it cannot produce the tangible improvements that ordinary Egyptians have long been waiting for. For that, Egypt needs to move beyond stabilisation and pursue a fundamental transformation of its economy. … a fundamental improvement in Egypt’s prospects requires the dismantling of the ossified structures of an economy that has evaded fundamental reform for decades. Egypt’s economy in this regard is akin to those of eastern and central Europe before the fall of the Berlin Wall. Its economy remains shackled by a public sector that is bloated, inefficient and unresponsive to market signals.” And some political reform wouldn’t hurt, either, Abed notes.

Student protests at AUC are showing that the foreign currency “crisis” in Egypt is testing everyone, Diaa Hadid and Nour Youssef write in the New York Times. “If we can’t afford it, we can tell how much other people are suffering,” Malak Rostom, the vice president of the student union, says, talking about the impact of the tuition fee increase. The university charges tuition fees based on the USD exchanged, which means that tuition in EGP terms has nearly doubled for some students.

US President-elect Donald Trump’s choice for national security adviser Mike Flynn advocates stronger ties with Egypt, Phil Stewart writes for Reuters.

Image of the Day

The 100 Most Influential Images of All Time. From lunch atop a skyscraper to Robert Capa’s Omaha Beach still, from Malcolm Browne’s burning Vietnamese monk to Eddie Adams’ shot capturing a summary execution and the “Falling Man” of 9/11, Time magazine has pulled together a stunning gallery of what it thinks are the most influential photos of all time. There aren’t many you can argue with here.

Worth Watching

The Simpsons warn the Transportation Ministry of the Six October Monorail (and every other cash-guzzling project): With the 6 October-Giza monorail project rearing its head once again (see Automotive + Transportation), we would like to present the Transportation Ministry with a warning from the Simpsons — whose prescience was eerily proven by Trump’s victory. On the whims and songs of a charlatan, the citizens of Springfield earmarked an influx of cash for a useless monorail project, with Homer Simpson as its inaugural conductor. This was how they were sold on the project (watch; runtime: 4:21).

Diplomacy + Foreign Trade

Egypt “appreciates” the US support for its economic reform program, Foreign Minister Sameh Shoukry told Secretary of State John Kerry, according to a Ministry statement. Shoukry also thanked Kerry for the support shown to Egypt in “a number of different economic sectors” recently. The pair also discussed developments in Syria, Libya, and Yemen.

Energy

Shell to boost deepwater investments, but is owed substantially by gov’t

Shell will be increasing exploration and drilling at its deepwater concessions in Burullus and Rosetta concessions, according to statements by Aidan Murphy, Shell Egypt VP and country chairman. The company plans to expand its investments there following promising data on the size of the concessions. Murphy also stated that the company is owed a substantial sum by the government, Al Shorouk reports, possibly tying these future investments to the government’s ability to payback its arrears.

Refined petroleum demand product could see demand drop -ICIS

Refined petroleum products in Egypt face the prospect of negative demand growth as the prices of subsidized fuel products went up, petrochemicals market information provider ICIS suggests. “The price of gasoil, which accounts for a third of Egyptian demand, rose by 30% overnight, for example, albeit from a very low base. Given the wider inflationary pressures affecting consumer spending, we are likely to see a slowdown in oil demand growth-potentially even negative demand growth,” James McCullagh, an oil products analyst said. Polymers demand in Egypt is already suffering, ICIS says, due to foreign currency shortages. Local players are looking for “stability” in the market with one telling ICIS it could “take one or two weeks.”

Electricity prices to go up in 2017

Egypt will cut energy subsidies further, raising electricity prices from next summer, Electricity Minister Mohamed Shaker told The National’s LeAnne Graves. The new prices are set to take effect from 1 July 2017, with the start of the new fiscal year. Al Borsa spun Shaker’s comments differently, saying that there will be no electricity price increases until next June.

Basic Materials + Commodities

Gov’t refuses to increase fertilizer prices

The Agriculture Ministry refused to increase the prices of fertilizers by EGP 500 per tonne, Al Mal reported. The seven fertilizer manufacturers operating domestically had petitioned the government to increase the price of urea fertilizers to EGP 2,500 per tonne and EGP 2,200 per tonne following the EGP float. The producers say they used to buy natural gas from the government at USD 4.5 per mmBtu, an actual cost that nearly doubled after the flotation. The market has a total production capacity of 12 mn tonnes of urea, of which 8 mn tonnes are subsidized and allocated to domestic consumption.

Melinvest to visit Egypt next month

Wheat silo manufacturers Melinvest are set to visit Egypt in December to discuss investment opportunities and building additional silos, Melinvest representative Magdy Shehata told Al Mal. Melinvest has been positioning itself as a prospective competitor to Blumberg Grain in building wheat storage facilities.

Manufacturing

Egyptian, Saudi investors to build USD 1 bn steel complex in Sokhna

Egypt and Saudi investors will open a USD 1 bn steel production complex in Ain Sokhna, head of the Suez Canal Authority Mohab Mamish told Al Shorouk. In total, the complex is set to contain three production plants built on land owned by the Suez Canal Authority. The first plant in the complex should begin production by the end of 2018 with a capacity of 1.2 mn tonnes annually.

Health + Education

Vacsera receives funding for fight against avian flu

Vacsera announced it received USD 20.2 mn in funding from the Saudi Fund for Development and the Islamic Development Bank to finance its efforts in combating bird flu, Al Mal reported. The Saudi Fund for Development provided USD 4.5 mn and the Islamic Development Bank the remainder. Vacsera is currently in process of signing agreements for a plant that would produce veterinary flu vaccines. It’s bird flu season and Egypt has a history of having one of the highest incidences of the H5N1 strain.

Tourism

EgyptAir float prices, aims to record surplus this year

EgyptAir has decided to float its ticket prices in accordance with “demand and supply and according to the FX rate,” Chairman Safwat Mosallam said, according to Al Borsa. Booking systems EgyptAir use have increased their fees, Civil Aviation Minister Sherif Fathy said, but EgyptAir had not increased its base ticket price. Mosallam says EgyptAir is also cutting the salaries of its staff based abroad by 20% and reducing its representative offices. He said the national flag carrier is aiming to record its first surplus since 2011 this year.

UK’s continued flight ban on Sharm El Sheikh “mind boggling”

The continued UK flight ban on Sharm El Sheikh is “mind boggling” Egyptian ambassador to the UK Nasser Kamel told BBC Radio 4, Ahram Online reported. “When I talked to the Department of Transport or even the home office or foreign office, they are all for the resumption [of flights],” Kamel said. “I think the decision is stuck somewhere higher.”

Telecoms + ICT

PM and ICT Minister meet with Vodafone Group’s regional director

Prime Minister Sherif Ismail and CIT Minister Yasser El Qadi met with Vodafone Group’s Chief Executive for Africa, Middle East and Asia-Pacific (AMAP) Vivek Badrinath on Saturday. No specifics on the meeting were reported by other side.

Automotive + Transportation

Transportation, Housing ministries to announce winning bid on monorail project this week

Transportation Minister Galal Saeed and Housing Minister Moustafa Madbouly are expected to decide on the winning bid for the monorail project linking Sixth of October to Giza this week, said Saeed. The project is expected to be launched in January, said Saeed. As we had previously noted, a consortium led by Orascom Construction and Bombardier had offered to build the project for USD 1.3 bn, bidding against a USD 1.1 bn offer from a consortium consisting of China Gezhouba Group, Petrojet, Concord Engineering, and CRRC Corporation.

Siemens and GE compete over import contract for 100 locomotives

Siemens and General Electric (GE) are reportedly competing over an agreement to import 100 locomotives to Egypt. Siemens officials told Al Shorouk that the company intends to manufacture the locomotives in Egypt and provide raw materials, labor, and training.

Other Business News of Note

Chambers of Commerce files lawsuit against EGX decision to limit deal market transactions to banks

The securities division of the Federation of Egyptian Chambers of Commerce has filed suit with the Administrative Court calling for the reversal of the EGX’s decision to limit the execution of EGX deal market transactions valued at more than EGP 100K to CBE-approved banks. The court is now seeking the recommendation of the Egyptian Council of State (Maglis El Dowla) on the matter, said the division’s head Awni Abdel Aziz. The regulations were imposed by EGX Chairman Mohamed Omran in late May. As we noted back in July, the Investment Ministry was considering reversing the decision after heavy lobbying by the Egyptian Capital Markets Association. Deal market transactions fall under the EGX’s over-the-counter regulations which govern trading and transfer of the ownership of the companies not listed on EGX and for capital increases of listed companies not regulated by the Egyptian Financial Supervisory Authority (EFSA).

Legislation + Policy

House Budget Committee to introduce legislation on private funds

House Budget Committee member Yasser Omar plans to introduce legislation that would place 25% of the notorious “private funds” under the control of the Finance Ministry, Al Borsa reports. As it stands, private funds must move 20% of their assets to the state treasury annually. The committee’s chair, Hussein Eissa stated that he is not in favor of eliminating the funds in one swoop, something which MPs from the Support Egypt Coalition have been demanding, as it may jeopardize the operations of a number of government bodies that rely on them for funding and to pay salaries. Private funds — which are not part of the budget and which were formed with the intention of weaning some government bodies off the Finance Ministry — have gained the reputation for being slush funds and havens for corruption.

Executive regulations for the Civil Service Act will be complete in one month

The Planning Ministry will complete the executive regulations for the Civil Service Act within a month,Planning Minister Ashraf El Araby said according to Al Mal. The full text of the old executive regulations can be read here.

Egypt Politics + Economics

El Sisi meets with Ismail, Amer

President Abdel Fattah El Sisi met with Prime Minister Sherif Ismail, CBE governor Tarek Amer, the head of the Administrative Control Authority, and the ministers of defense, interior, foreign affairs, and finance, Al Masry Al Youm reported, to discuss the effects of the recent economic and monetary policies, as well as protection for limited-income households.

National Security

Russia offers Egypt modern armament and electronics for the Mistrals

Russia is in negotiations to offer Egypt “modern armament and electronic warfare systems and communications means to mount on Mistral helicopter carriers,” Vladimir Kozhin, Russia’s presidential aide for military and technical cooperation, told TASS.

Director of Defense Intelligence Agency makes trip to Cairo

Vincent Stewart, Director of the US Defense Intelligence Agency, reportedly arrived in Cairo on Thursday on a three-day visit, according to a report carried by Al Masry Al Youm. Stewart was set to meet with unnamed senior Egyptian officials to discuss defense cooperation and counterterrorism.

Sports

World champion wrestler killed in traffic accident

World champion wrestler Reem Magdy, “who won a bronze medal in the Cadet Wrestling World Championships held in Georgia in September, [was struck by a car and killed] while crossing the Cairo-Ismailia road,” the Associated Press reports.

On Your Way Out

Daesh beheads “Sinai clerics mistaken for priests” –AP. “The Islamic State affiliate in Egypt says it has beheaded two men that it mistakenly described in a statement as priests, but were later identified by locals as leading religious figures from among Sinai’s Bedouins,” the Associated Press reports. There are no words.

Because no one ever seems to have fakka: The head of Finance Ministry’s National Mint says the authority minted 13.3 mn coins in October, increasing the Mint’s output by 100%, Al Masry Al Youm says. The Mint also completed process to buy raw materials for coins to ensure that a stockpile is available. An advisor to the Finance Minister denied there is a coin shortage domestically, but our local coffee provider would disagree.

The markets yesterday

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EGP / USD CBE market average: Buy 15.54 | Sell 16.14
EGP / USD at CIB: Buy 16.00 | Sell 16.25
EGP / USD at NBE: Buy 16.00 | Sell 16.25

EGX30 (Thursday): 11,221.56 (+2.04%)
Turnover: EGP 2.627 bn (504% above the 90-day average)
EGX 30 year-to-date: +60.17%

THE MARKET ON THURSDAY: The Egyptian benchmark Index closed 2.0% up. Thursday’s top gainers included Egypt Kuwait Holding, Eastern Co, and Madinet Nasr Housing. On the downside, today’s worst performing stocks were Domty, ACC, and GB Auto whose share price fell 6.9%. The market turnover was EGP 2.6 bn, which is a five-year high for trading and reflective of increased confidence in the market. Foreign investors were the sole net buyers

Foreigners: Net long | EGP + 128.0 mn
Regional: Net short | EGP – 24.6 mn
Domestic: Net short | EGP – 103.4 mn

Retail: 72.1% of total trades | 68.6% of buyers | 75.6% of sellers
Institutions: 27.9% of total trades | 31.4% of buyers | 24.4% of sellers

Foreign: 10.4% of total | 12.9% of buyers | 8.0% of sellers
Regional: 12.0% of total | 11.5% of buyers | 12.4% of sellers
Domestic: 77.6% of total | 75.6% of buyers | 79.6% of sellers

WTI: USD 45.69 (+0.59%)
Brent: USD 46.86 (+0.80%)
Natural Gas (Nymex, futures prices) USD 2.85 MMBtu, (+0.14%, December 2016 contract)
Gold: USD 1,208.70 / troy ounce (-0.67%)<br
TASI: 6,628.9 (-0.3%) (YTD: -4.1%)
ADX: 4,292.1 (0.0%) (YTD: -0.4%)
DFM: 3,309.8 (+1.4%) (YTD: +5.0%)
KSE Weighted Index: 370.0 (+0.4%) (YTD: -3.1%)
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Calendar

18-20 November (Friday-Sunday): 4th Africa-Arab Summit in Malabo, Equatorial Guinea.

21-22 November (Monday-Tuesday): President Abdel Fattah El Sisi visits Portugal.

22 November (Tuesday): Industrial Development Authority cement auction (unconfirmed report)

22 November (Tuesday): Al Ahram Hebdo and the French Embassy in Cairo’s French Investments in Egypt: Opportunities and Challenges conference, Al Ahram’s headquarters, Cairo.

25-26 November (Friday-Saturday): 27th Energy Charter Conference, Tokyo, Japan.

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

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

30 November (Wednesday): OPEC’s 171st ordinary meeting, Vienna, Austria.

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

03-05 December (Saturday-Monday): African Investments and Business Forum, Algiers, Algeria.

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

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

6 December (Tuesday): Building a Sustainable Future for Solar in Egypt event, Sonesta Hotel, Cairo.

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

09-11 December (Friday-Sunday): RiseUp Summit, Downtown Cairo.

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.

January: Jordanian trade delegation to visit. Date TBD.

14-16 February 2017 (Tuesday-Thursday): Egypt Petroleum Show 2017 (EGYPS), CIEC, Cairo

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