Monday, 2 January 2017

We have a draft investment act, and it looks really solid

TL;DR

What We’re Tracking Today

The EGP strengthened noticeably on Thursday, rising just over 4% to a market average sell rate of 18.3817 to the greenback from 19.1723 the day before. One day does not a trend make, but we confess to having breathed a sigh of relief.

Speaking of the exchange rate: More than 40% of you are budgeting for a USD : EGP exchange rate at EGP 18.51 or above, but only one third of you see the currency staying in that band by midyear. Our latest reader survey also found that almost half of you see your company or fund increasing its investments in Egypt this year, and more than 60% of you see business conditions improving in 2017.

What sector will beat market expectations in 2017? Real estate, banking, export-oriented businesses, food and financial services were your favourites. Learn more about what you expect of the new year in our latest Enterprise Reader Survey, which we released at the end of last week. While you’re there, you can also peruse:

It’s always an honor to be recognized by the wider community, but we’re particularly chuffed that Al Masry Al Youm chief Abdel Moneim Said picked up on our prescriptions for what Egypt needs in 2017, focusing largely on the idea of an impatient government and a patient private sector. Noting that Egyptian culture places a rather high value on patience, Said says that the government should step away from that culture, while the private sector should embrace it during this period of reform. On the front page of the print edition, no less. Thank you, sir.

What We’re Tracking This Week

The first week of the new year looks like it might be a quiet one after all, with no major conferences or events scheduled as far as our radars can see except for Coptic Christmas on Saturday 7 January, which is a national holiday. We don’t expect the government will be giving us 8 January as a holiday despite Christmas falling on a weekend.

Speaking of which: The Armed Forces have repaired and restored the Church of St. Peter and St. Paul in the Coptic Cathedral compound in time for Coptic Christmas celebrations this coming weekend. Twenty seven people, primarily women and children, were killed in a terror attack on the church last month. Ahram Online has a gallery of the official Armed Forces photos of the restoration work.

On The Horizon

We’re going to be thinking a lot about 2017 in the days ahead, culminating with our publication early next week with our first-ever CEO Poll, which looks at what some of Egypt’s most high-profile chief executives expect of the new year. With that in mind, we have two international stories worth reading. The Wall Street Journal (paywall) believes a “re-energized USD looms over the rest of the world,” particularly as the prospect of multiple US interest rate hikes in 2017 will “make it more attractive to hold USD-denominated assets, attracting money into the US.” That’s largely bad news for emerging markets, as we’ve argued in the past.

Meanwhile, the Financial Times looks at nine events it thinks will set the tone for 2017 globally, including:

  • Trump’s inauguration (January) and first year in office
  • The UK’s activation of a key article in its journey out of the European Union (March)
  • The battle for Raqqa (first half)
  • French presidential elections — will the far-right rise? (April-May)
  • Will hard lines in Iran shove Hassan Rouhani out the door during this year’s elections (May)
  • The Fed will raise interest rates — multiple times (calendar here), possibly starting as early as 28 January
  • Erdogan seeks absolute power (first half / lifelong quest)
  • Will China’s Communist Party congress scrap this fall what amount to a term limit on the all-powerful President Xi Jinping?
  • Angela Merkel faces a “steep challenge” as she seeks a fourth term in office (September-October)

Egypt’s 2017 holiday calendar is, well, substandard. All of the usual holidays apply, of course, but painfully few of them break in a way that will give us long weekends. And depending on where the lunar calendar falls this year, as many as four of them will fall on Fridays (30 June Revolution, Islamic New Year, Armed Forces Day and the Prophet’s Birthday). Our provisional calendar of 2017 holidays is in the Calendar section (below) and, as usual, at the foot of today’s edition on our website.

Enterprise+: Last Night’s Talk Shows

Ibrahim Eissa’s show has been pulled off air at his request, broadcaster Al Kahera Wal Nas said in a statement yesterday. Eissa will take time off to focus more on his writing, according to a statement carried by Al Masry Al Youm. Eissa also issued a statement, thanking the channel, the staff, and his viewers, saying the “current situation” has led him to believe that it is best to quit TV for the time being.

The story opened up old wounds for Amr Adib, who — having been suspended himself before by the Mubarak regime — jumped to Eissa’s defense and spent the first 30 minutes of Sunday’s episode of Kol Yom criticizing the decision to take the suspendered one off the air. “Every single person in Egypt knows that Ibrahim Eissa didn’t leave to lighten his load and go write novels,” Adib said. “I know there are some people in the government who think that Eissa’s critical remarks might be too much for current conditions,” Adib said. “But we’re heading into an era where opposition will cease to exist in Egypt” (watch, runtime 37:22).

ACA investigating bribery allegations at Maglis El Dowla? Adib then moved on to talk about the rumored involvement of some members of the Egyptian Council of State (Maglis Al Dowla) in an alleged bribery scandal now being investigated by the Administrative Control Authority, the nation’s most aggressive anti-corruption watchdog. “The Council of State is the institution that revises all of our laws, so it is very important now that they issue a statement to clarify [the alleged incident],” Adib said (watch, runtime 1:58).

(Since Adib’s show aired, word has leaked that State Security investigators have detained for questioning former Maglis El Dowla secretary-general Wael Shalabi in connection with a reported bribery scandal. Al Masry Al Youm has more.)

Yahduth fi Masr’s Sherif Amer spent most of last night’s episode following up on med shortages. Federation of Egyptian Industries member Mohamed Ghoneim told Amer that a lot of meds will disappear from the market now that the Health Ministry has agreed to raise the prices of some products. Pharmacists Syndicate Chief Mohie Ebeid then said that the Health Ministry should reconsider its new pricing structure. “Small manufacturers will suffer if the percentage of increase is too low and will not be able to go on working,” Ebeid said, adding that it would be unfair to allow only large-scale manufacturers to raise the prices of meds that are already expensive. “These are only 30 or so companies and they allocate around 60% of their revenues to advertising and not the production process itself.”

Phase two trials of fuel smart card system have begun: Lobna Assal from Al Hayah Al Youm spoke with Petroleum Ministry spokesperson Hamdy Abdel Aziz, who told the host that phase two trials have already started and “that 6.3 mn fuel smart cards have been issued.” Abdel Aziz added that the putting the smart cards into use does not mean that fuel prices will be rising or that quantities will be limited (watch, runtime 4:54).

Speed Round

Speed Round is presented in association with

Habemus investment act: The Ismail cabinet approved the final draft of the investment act at its meeting last Thursday and sent it to the State Council (Maglis Al Dowla) for final review prior. The Council will then forward the law to the House of Representatives for debate. Investment Minister Dalia Khorshid said her ministry has already begun drafting the executive regulations for the act and added that the bill is one of a number of pieces of legislation that aim to improve the investment climate in Egypt. The law does not impact any existing agreements or benefits already in place.

Who benefits? Priority industries, the ministry said, include manufacturing, mining and quarrying, land reclamation, agricultural production, transportation, oil and gas, energy, hospital care, hotels, CIT, education services, and sports investments, among others. We don’t really get the sports bit (though our ballooning waistlines could benefit), but the rest of it is really on point — and we’re delighted to see communications and information technology included.

The General Authority for Investment (GAFI) will be the sole authority responsible for providing permits to establish companies under the investment law. You’ll be able to incorporate a company online and, once the system is in place, it will become the only way for companies to be set up under the law. The law requires GAFI to assess requests to form companies under the investment act within one working day and guarantees that foreign investors will be treated the same as domestic ones with protection against nationalisation, confiscation, and immediate permit cancellation and any decisions that would add financial requirements to investors without GAFI’s approval.

The law also allows investors to repatriate profits freely and to import inputs without having to register with the import registry. Companies are also allowed to employ expats up to 10% of the business’ workforce, increasing it to up to 20% in case the company requires specific specialties not available in the local labour market.

Incentives include exemptions from stamp and registration tax for five years and a restriction on customs duties to 2% on all inputs and machinery imports, as well as a yet-to-be determined incentives based on the industry and the geographic location of the project. The details on this last bit are unclear, but that’s the stuff that’s typically left to executive regulations. We expect the additional exemptions and incentives will be centered around Upper Egypt, Port Said and the New Administrative Capital in line with a policy statement from the Supreme Investment Council made on 1 November 2016.

Interestingly, the act does not appear to cover private free zones, extending incentives kindly to public free zones and special investment / economic zones, if we’re reading it correctly.

You can download the full draft of investment law on our website in either pdf or docx format, as you prefer.

CBE leaves interest rates unchanged, says it already moved preemptively: The central bank’s Monetary Policy Committee (MPC) decided to keep interest rates unchanged during its last meeting of 2016, moving with market expectation. The overnight deposit rate remains at 14.75% and the overnight lending rate at 15.75%. The CBE had increased rates by a total of 550 bps during the year.

Annual inflation is expected to narrow after being impacted by transitory cost push factors stemming from the economic reform measures,” the MPC explained in one of its most thorough statements (pdf). Looking ahead, the central banks sees “developments in the external environment show that there has been some firming of international commodity prices, while low global inflation and subdued global growth maintain weak pressures on domestic prices, respectively… broad and reserve money growth are likely to be impacted going forward by the phasing out of monetary financing of the fiscal deficit as well as by relatively higher foreign reserves accumulation. Moreover, broad money growth is strongly affected by the revaluation effects of its foreign currency components.” The MPC reiterated it will not hesitate to adjust the rates to ensure price stability in the medium term, adding that it had acted preemptively on 3 November to raise the rates by 300 bps.

…The central bank also had some good news for local companies: Egyptian companies unable to repay USD-denominated debt after the EGP float will be allowed to negotiate fixed exchange rates with banks, Bloomberg reported. “Companies need to negotiate individually with lenders to agree on a fixed exchange rate that will be used to finance their debts, Federation of Egyptian Industries [FEI] Deputy Chairman Tarek Tawfik said in a phone interview, citing an agreement with the central bank.” Companies had called for intervention saying banks are asking them to pay for letters of credit initiated before the EGP was devalued at post-float exchange rates. The FEI also said the agreement with the CBE allows for outstanding foreign currency debts to be repaid in instalments over one to three years, according to Ahram Online.

Egypt’s balance of payments (BoP) recorded a surplus of USD 1.9 bn in 1Q2016-17, driven primarily by a net inflow of USD 7.1 bn in the capital and financial account, the CBE reported. The trade balance in the three months ending September 2017 narrowed to USD 8.67 bn from USD 10.01 bn a year earlier as non-oil exports increased by USD 666.7 mn in 1Q2016-17 compared to a year earlier and oil imports fell by USD 227.2 mn y-o-y with the drop in oil prices globally. Non-oil imports fell by USD 583.3 mn, presumably due to the drop in economic activity, import restrictions and lack of FX availability at the time, as shown by the consecutive drops in PMI readings.

The current account deficit widened in 1Q2016-17 compared to the same period the previous year because of a 56.1% y-o-y drop in tourism revenues, which registered USD 758.2 mn after the number of tourist nights dropped by 61.3% y-o-y. On the face of it, a drop in remittances could be seen as a cause for concern: Transfers home from expats abroad fell 22.3% to USD 3.40 bn in the three months ending September, but, as long as no major shock hits the global economy, the figure should rebound gradually as Egyptian expatriates return to using formal banking channels to inject their funds back to Egypt given the FX rate adjustment, which took place in 2Q2016-17. There is evidence of this already, as the CBE announced that remittances in November 2016 have increased by 33.2% y-o-y following a 35.7% y-o-y increase in October. The EGP float should also contribute to a better reading in 2Q2016-17 with improved inflows.

Foreign companies operating in Egypt were able to repatriate profits of some USD 769 mn in the first quarter of the state’s current fiscal year, Al Borsa added.

Has the endgame in the rift with KSA begun? The Ismail government approved an agreement to transfer the Tiran and Sanafir islands to Saudi Arabia on Thursday and passed it on to the House of Representatives for approval. On Saturday, the “appeals court in Cairo upheld a verdict by a lower court that annulled a ruling by the administrative court, which had said the agreement to hand over the islands was void,” Reuters reported. It was unclear whether parliament would consider the matter before an expected ruling from the higher administrative court scheduled for 16 January, Bloomberg says. Meanwhile, KSA appears to be moving to heal its strained relations with GCC ally Oman — Iran’s best friend in the Gulf — which signaled that it will be joining a KSA-led military alliance.

GASC, the world’s largest wheat trader, is flexing its muscles: Egypt’s haggling power in the global wheat market is back in full force, Bloomberg reports. The world is overloaded with wheat and Egypt, “bought 235,000 metric tons of wheat in a tender Thursday and managed to pay an average 82 cents a metric ton less than the offers it received, according to people involved in the process.” With last year’s ergot spat ended and confidence in Egypt restored, “the country has the upper hand as exporters from nations such as Russia scramble to offload record harvests.” Charles Clack, an analyst at Rabobank International explains: “There are still overwhelming exporter supplies kicking about in the global market and being the No. 1 importer, Egypt is well aware of their strong negotiating position. Traders need a buyer.” What Egypt’s General Authority for Supply Commodities (GASC) also did is announce it was now accepting US hard red winter wheat, which “may increase competition with top seller Russia, where exports have so far lagged expectations amid a stronger ruble. It may also prompt lower offers in the future from Romania and Argentina, which in last week’s tender sold to Egypt for the first time since February.”

El Sisi gives nod to pharma price pact, calls for more investment in industry: President Abdel Fattah El Sisi appeared to give a nod yesterday to an agreement between big pharma and the Health Ministry that would allow manufacturers hit by spiraling input costs to raise prices on a pre-determined schedule. A statement carried by state news agency MENA quotes El Sisi as having told cabinet “the government should ensure the availability of various types of medicines at affordable prices as well as provide imported drugs that have no domestic alternatives.” El Sisi also urged the government to “improve health care services, develop the local pharmaceutical industry and increase its competitiveness, and work to attract new investments,” Ahram Online reports.

Health Minister Ahmed Rady broke the government’s strategy for dealing with the issue into three phases: “in the short-term the ministry will increase prices and overcome shortages, in the medium-term by developing state-owned pharmaceutical factories, and in the long-term by expanding the pharmaceutical industry in Egypt.”

The Health Ministry has given domestic and international manufacturers two days to submit for approval their lists of products whose prices they want to hike, Al Mal reports. As we noted last month, pharma producers had reached an agreement with Rady to raise the prices of 15% of locally-produced meds and 20% of imported meds as of February. The agreement has allowed companies to resume imports of production inputs after a long pause that was instigated by higher costs following the EGP float. According to Al Borsa, both foreign and local players are already in the process of opening new LCs to cover their import needs.

How many times have we heard this? Flights between Russia and Egypt will be resumed “soon,” Russia’s president Vladimir Putin reportedly told President Abdel Fattah El Sisi, according to Reuters. “Putin affirmed Russia’s intention to resume regular flights between Moscow and Cairo in the very near future," the Egyptian presidency said in a statement, but no specific date was given. We’re also noting this morning reports that Cairo and Moscow will sign this week the contracts for the Daba’a nuclear power plant.

Was the EGX the best- or the worst-performing bourse in 2016? In absolute terms, the EGX was up 74.1% (see graph, above, or download our XLSX and check for yourself). But in USD terms, we’re the second-worst globally — behind Nigeria and just ahead of Ghana, Bloomberg reports.Keep things in local currency and we’re still not number one: Venezuela nudges us out of the top spot with a 114% gain, while the EGX30 would close the year in second spot and Peru would be third. The three best-performing bourses in the world, the business information service tells us, are Brazil, Kazakhstan and Peru. The EGX released last week its annual report, claiming to have been the world’s best-performing market in 2016.

One thing is unarguable, though: At the official exchange rate, the EGP was the world’s worst-performing currency last year, followed by Suriname’s currency and the Venezuelan Bolivar.

Speaking of the EGX: EFG Hermes topped the bourse’s December 2016 league table with an 18.9% market share, followed by CI Capital (8.0%). A close-fought campaign saw Pharos close the month with 6.0%, followed by Pioneers (5.9%). Beltone closed out the top five with a 3.7% share. On a full-year basis, EFG Hermes was ranked number one with a 20.8% market share, followed by CI Capital with 9.4%. Pioneers (5.1%), Pharos (4.0%) and Sigma (3.9%) round out the top five. The December table is here (pdf), and you can download the FY2016 ranking here (pdf). Not enough inside baseball for you? The fourth quarter file is here, also in pdf.

New year, new pricing: A number of high-profile food and FMCG companies have raised prices by 10-40% for the new year, Al Borsa reports, pointing to dairy and dairy product producers Al Marai, Greenland, and President, as well as snack makers Edita and Chipsy. Pepsi Co., Danone, Cadbury, Solo, and household product makers Procter & Gamble and Unilever Middle East are also named.

The state will continue to subsidize bread in 2017, the price of which will remain unchanged at EGP 0.05 a loaf despite the additional costs of production (currently at EGP 0.5 per loaf), Supply Minister Ali El Sheikh confirmed. According to Al Borsa, El Sheikh also said that Egypt’s wheat reserves are enough to cover its needs for the coming five months and that new agreements are in the making to import an additional 900k tonnes.

MOVES- Antoine Issa, MENA CEO of Allianz, has been appointed chairman of the board of Allianz Egypt. He succeeds Udo Krueger, who retired as CEO and Chairman of Allianz Egypt effective 21 December 2016. Issa joins Ayman Hegazy, managing director of Allianz Egypt Life, and Mohamed Mahran, managing director of Allianz Egypt P&C.

MOVES- Admiral Mohab Mamish was reappointed as chairman of the Suez Canal Authority for a one-year term, Al Masry Al Youm reported. Mamish has been at the Authority’s helm since August 2012.

MOVES- The Egyptian Army has a new spokesman as Col. Tamer Mahmoud El-Refai replaces Brig. Gen. Mohamed Samir. El-Refai is 1994 graduate of the Military College and has served as an information analyst in military intelligence. The announcement was made on the official Egyptian Army Spokesperson Facebook page, with more on the official Twitter feed and Youtube channel.

Haven’t made your 2017 wish list yet? Go steal veteran finance writer Patrick Werr’s. At the top of his list: For the state to get out of the price-fixing business, to turn Egypt into a giant free-trade zone, and for the state to get out of the real estate business. We’d rank the free-trade-zone idea well ahead of his other suggestions, but they’re all bang on point.

The Macro Picture

The top 2017 emerging EMEA picks are focused on Russia, as investors “seek bargains in politically stable countries.” Bloomberg’s Ahmed Namatalla and Selcuk Gokoluk say “almost everybody loves Russia and wants to get as far away as possible from Turkey.” 2017’s top calls are “centered on markets where the political climate is improving and assets are less vulnerable to external shocks arising from higher U.S. borrowing costs and President-elect Donald Trump’s policy announcements.” For currencies: UBS is betting on Russia’s Ruble, JPMorgan Chase expects the Czech Koruna to be resilient, and Morgan Stanley bets on a Polish Zloty rebound. Russian equities are an “obvious candidate” for NN Investment Partners, Griffiths sees a rally in South Africa, and Capital Economics is betting on banks in eastern Europe, the Middle East and Africa, excluding Russia’s and Turkey’s. Egypt’s bonds are attractive, says Denmark-based Global Evolution Fonds, while Deutsche Bank recommends South African and Russian bonds.

Worth reading as an accompanying piece is David Gardner’s latest for the Financial Times: “A new balance of power in the Middle East,” wherein he argues that “As they look towards 2017, Russia and Iran can, nonetheless, consider they have had a good year confounding their adversaries in the Middle East — and that the west, and its allies in the region, is in exploitable disarray.” Egypt, naturally enough, features heavily in the narrative.

Egypt in the News

It’s was a wonderfully quiet holiday long weekend for Egypt in the international press, with the top story this morning being the government’s decision to return the islands of Tiran and Sanafir to Saudi Arabia. You can check out coverage from the Reuters, or see how it is playing in the UK (the Guardian), Iran (PressTV) or Israel (Haaretz, which relies on the AP).

Also making news this morning: Ongoing pickups of the New Year’s Eve decision to begin handing over to families the remains of the 66 passengers and crew who died in the crash of EgyptAir flight MS804 from Paris to Cairo last year.

On Deadline

Egypt won’t attract investors until we show them what they want, namely an active and productive economy supported by an adequately educated population, Nashwa El Houfy says in a column penned for El Watan. The writer says she cares little for official visits and instead places emphasis on “getting the engine or production started” in all fields and sectors, which will improve the economy and eventually attract investors.

Constitutionally speaking, 2017 is the year to find whoever will have the fortitude to run against President Abdel Fattah El Sisi in the 2018 presidential elections, but the lack of active political parties and opposition figures suggests we’re looking forward to an election season reminiscent of the one-man show of the Mubarak era, Fatheya El Dakhakhni writes for Al Masry Al Youm.

Worth Reading

There are lessons for Egyptian policymakers in how China built “iPhone City.” Unless you’re an iSheep, you’ve probably never heard of Zhengzhou, home to a sprawling plant that can produce about 500k iPhones a day — or about half of Apple’s total iPhone production capacity. And it’s all because the local government stepped up to lure Apple to this impoverished region of China. You want to talk about investment incentives? “The local government has proved instrumental, doling out more than USD 1.5 bn to Foxconn to build large sections of the factory and nearby employee housing. It paved roads and built power plants. It helps cover continuing energy and transportation costs for the operation. It recruits workers for the assembly line. It pays bonuses to the factory for meeting export targets.”

Even if you could care less about iPhones the story is worth reading for the list of investment incentives in a chart about half way through. Read “How China Built ‘iPhone City’ With Bns in Perks for Apple’s Partner.

Image of the Day

Among NASA’s photos of the year: This image of Lake Nasser. This image of Lake Nasser is one of 16 gorgeous images selected by NASA’s Johnson Space Center as its “top photos of Earth from the International Space Station” in 2016. Click here or tap the image for the full photo gallery in the Washington Post.

Diplomacy + Foreign Trade

Turkish business delegation to visit seeking investment opportunities: A delegation of business leaders from the Federation of Turkish Chambers of Commerce will be visiting Cairo on 30 January to explore investment opportunities in industries including automotive parts and components, readymade garments, and food and beverages, AMAY reports.

The Trade and Industry Ministry is preparing to sign MoUs on economic cooperation with Azerbaijan, Bahrain, Portugal, and Morocco to bilateral trade, AMAY reported. The ministry is also preparing a study on 44 markets to better understand their dynamics and import needs.

Energy

EGPC issues tenders for 1.012 mn tonnes of diesel to cover its Feb, March needs

The Egyptian General Petroleum Corporation (EGPC) has issued two tenders to purchase nearly 1.012 mn tonnes of diesel to cover its requirements for the months of February and March, Al Borsa reports. The window for bidding will close on 10 January.

Basic Materials + Commodities

Kuwait removes all restrictions on Egyptian strawberry imports

Kuwait has agreed to remove restrictions it imposed on imports of Egyptian strawberries, Trade and Industry Minister Tarek Kabil said, according to Al Masry Al Youm. Kuwait had imposed a requirement that imports of Egyptian strawberries be accompanied by a certificate certifying they’ve been tested and are fit for human consumption. Al Masry Al Youm says Egyptian strawberry exports to Kuwait are worth close to USD 51 mn annually.

Military-run NSPO raises infant milk prices for consumers to EGP 43 from EGP 30

The military-controlled National Service for Projects Organization (NSPO) has raised the price of its infant milk brand Tahya Misr to EGP 43.50 per packet from EGP 30, to make up for its increased import costs after the EGP floatation, Al Borsa reported. The hike came into effect on 17 December, according to the newspaper.

Health + Education

Vezeeta secures USD 5 mn series B funding

Automated clinic and physician booking platform Vezeeta raised a USD 5 mn series B funding let by UAE’s Beco Capital, Wamda reported. Egypt’s Vezeeta eases the accessibility of booking a doctor’s appointment, allowing the user to choose a doctor by specialty, geographic area, insurance purveyor and fees. “The investment, closed in September 2016, also included Vostok New Ventures, TDF and Silicon Badia. It is also Beco’s first investment in Egypt,” Lucy Knight writes.

Tourism

Tourism is making a slow comeback, CAPMAS head suggests

There may be hope yet for Egypt’s ailing tourism sector after all with tourist arrival figures for October showing growth of 7% over the same month last year — the first signs of improvement and the eventual return of tourism, said CAPMAS Chief Abu Bakr El Guindy, AMAY reported.

Telecoms + ICT

Orange Egypt fined EGP 49.1 mn for losses from rerouting calls in North Sinai

An economic court issued a ruling that will see Orange Egypt pay Telecom Egypt EGP 49.1 mn for losses the latter incurred after Orange — which was Mobinil at the time — allegedly adapted a transmitter in North Sinai and rerouted international calls, Al Borsa reports. The case dates back to 2012.

Automotive + Transportation

Transport Ministry negotiating loan with South Korea’s Hyundai Rotem for new metro cars

The Transport Ministry is in talks with South Korea’s Hyundai Rotem on financing for 64 new cars for Cairo Metro Line 3. Talks with South Korea regarding the funding of Cairo Metro Line 5 are also ongoing, and Transport Minister Galal Saeed met with South Korea’s ambassador in Cairo yesterday to discuss the matter.

Egypt Politics + Economics

Finance Ministry focused reform in 2016 on nine measures -El Garhy

The Finance Ministry said it focused on nine points in its reform measures in 2016, according to a statement by Minister Amr El Garhy. The measures focused on fiscal adjustment, legislative reform, improving the international standing, and enhancing social protection. The Ministry says it also focused on improving partnership with the private sector, improving its communication and transparency, enhancing its own institutional and technical capabilities, communicating the positive impact of reform, and expanding its social responsibility role.

On Your Way Out

The government has reportedly begun implementing the fuel smart card system for motorists as of Sunday. The Oil Ministry’s spokesperson told Al Masry Al Youm those who do not yet have cards will be allowed to refuel using spare cards available at stations until they are issued their own, adding that there are no immediate plans to restrict quantities or to increase selling prices. He explained that the cards will be used primarily to account the quantities of fuel distributed and to build a user database, Al Shorouk reported.

The markets yesterday

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EGP / USD CBE market average: Buy 18.0674 | Sell 18.3817
EGP / USD at CIB: Buy 17.95 | Sell 18.2
EGP / USD at NBE: Buy 18 | Sell 18.25

EGX30 (Thursday): 12,344.89 (+0.69%)
Turnover: EGP 1.4 bn (243% above the 90-day average)
EGX 30 year-to-date: 0%

THE MARKET ON THURSDAY: The EGX30 ended Thursday up 0.7%. Index heavyweight CIB supported the index, rising 1.9%. The top performing stocks included Domty, up 5.6%, Ezz Steel, up 5.0%, and EFG Hermes, up 3.8%. Thursday’s worst performing stocks included Egyptian Resorts and Amer Group (both of which declined 6.3%) and Elsaeed Contracting, down 4.4%. Market turnover was EGP 1.4 bn and local investors were the sole net sellers. The market was closed yesterday for the New Year’s Day holiday.

Foreigners: Net long | EGP +164.0 mn
Regional: Net long | EGP +110.6 mn
Domestic: Net short | EGP -274.6 mn

Retail: 69.0% of total trades | 65.0% of buyers | 72.9% of sellers
Institutions: 31.0% of total trades | 35.0% of buyers | 27.1% of sellers

Foreign: 10.7% of total | 16.2% of buyers | 5.2% of sellers
Regional: 9.8% of total | 13.5% of buyers | 6.1% of sellers
Domestic: 79.5% of total | 70.3% of buyers | 88.7% of sellers


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PHAROS VIEW

EFG Hermes poised to be the “Lucky Charm” of 2017

With numerous potential IPOs lined up for 2017 and a brokerage market share just over 35% things are looking well for EFG Hermes. Pharos has reiterated its ‘Overweight’ rating on the stock and upgraded its FV to EGP 35.13 from EGP 25.0, as it expects the company’s “operational performance [to] witness a gradual turnaround over the next 2-4 quarters,” to reflect ongoing improvements in the country’s investment climate and market turnover rates following the float. There is great potential for growth, particularly as things begin to look up for investment banking activities in 2017. EFG Hermes’ share price performance has mirrored the EGX30’s turnover rate since 2000, and this new year should also see the company begin to execute plans for new ventures and expand its presence and activities in frontier markets, which justifies the higher upside potential. Tap here to read the full note.

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WTI: USD 53.72 (-0.09%)
Brent: USD 56.82 (-0.05%)
Natural Gas (Nymex, futures prices) USD 3.72 MMBtu, (-2.05%, February 2017 contract)
Gold: USD 1,151.70 / troy ounce (-0.55%)

TASI: 7,238.0 (+0.4%) (YTD: +0.38%)
ADX: Market closed.
DFM: Market closed.
KSE Weighted Index: Market closed.
QE: Market closed.
MSM: 5,744.7 (-0.7%) (YTD: -0.66%)
BB: 1,220.45 (+0.59%) (YTD: 0.00%)

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Calendar

07 January (Saturday): Coptic Christmas, national holiday.

13 January (Friday): Egypt to attend Africa-France Summit 2017 in Mali.

25 January (Wednesday): Revolution (police) day, national holiday.

30 January – 2 February 2017 (Monday-Thursday): Arab Health Exhibition, Dubai International Convention & Exhibition Center, UAE.

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

31 March – 03 April (Friday-Monday): Cityscape Egypt conference, Cairo International Convention Centre, Cairo. Register here.

16 April (Sunday): Coptic Easter Sunday.

17 April (Monday): Sham El Nessim, national holiday.

25 April (Tuesday): Sinai Liberation Day, national holiday

01 May (Monday): Labour Day, national holiday

27 May (Saturday): First day of Ramadan (TBC)

26-28 June (Monday-Wednesday): Eid Al-Fitr (TBC)

30 June (Friday): 30 June, national holiday

23 July (Monday): Revolution Day, national holiday

02-05 September (Saturday-Tuesday): Eid Al-Adha, national holiday (TBC)

22 September (Friday): Islamic New Year, national holiday (TBC)

06 October (Friday): Armed Forces Day, national holiday

01 December (Friday): Prophet’s Birthday, national holiday

01 January 2018 (Monday): New Year’s Day, national holiday

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