Sunday, 29 January 2017

Egypt scores big in eurobond sale

TL;DR

What We’re Tracking Today

It looks like Egypt will be hitting the bond market hard in 2017, as the USD 4 bn bond issue dominates the economic conversation over the long weekend. Last week’s roadshow saw Egypt’s three-tranche bonds 3x oversubscribed, with yields ranging from 6.1%-8.5%, according to statements by Finance Minister Amr El Garhy. Egypt could issue USD 5-6 bn “all in all” in eurobonds through 2017, El Garhy had said in a Bloomberg interview last November. We look to a presser today by El Garhy and Deputy Minister Ahmed Kouchouk, where he is expected to announce the results and details of the eurobond roadshow, according to AMAY.

All was quiet on 25 January, amidst reinforced security presence around main protest areas across the country. A number of people gathered in Tahrir Square to celebrate the anniversary, according to AMAY. Authorities also beefed-up security in the Sinai Peninsula, where an army soldier was killed and another was injured in separate attacks on forces in Rafah and Al-Arish on 25 January, AMAY reported.

US President Donald Trump’s initiation of his Muslim Ban (on Holocaust Remembrance day not less) was the prominent news item to come out of the international over the weekend.

Trump signed an executive order on Friday to “indefinitely” ban Syrian refugees from entering the United States and “temporarily suspend” immigration and visits from Iran, Iraq, Libya, Somalia, Sudan, and Yemen. The move has begun to be enforced worldwide, including in Egypt. While we are thankful that Egypt was spared, the move gives us no comfort. The Times also has a neat breakdown of the decision, complete with comments on excerpts from the order.

in one of the rare good news to come out of Trumpland, the Trump administration is considering adding the Muslim Brotherhood to the State Department and US Treasury lists of foreign terrorist organizations, unnamed sources told Reuters. The pushing faction is led by Trump’s National Security Advisor Michael Flynn. The other advisors argue that the Muslim Brotherhood has evolved peacefully in some countries, and believe such a move would complicate relations with Turkey.

President Abdel Fattah El Sisi is heading to Ethiopia today to participate in the 28th African Union Summit, on the sidelines of which El Sisi is expected to meet with his Sudanese and Ethiopian counterparts to discuss the Grand Ethiopian Renaissance Dam, Al Masry Al Youm reports. Foreign Affairs Minister Sameh Shoukry also flew to Addis Ababa and has met with a number of his African counterparts, according to the newspaper.

Egypt’s national team will be facing off with Morocco in the quarter-final round of the African Cup of Nations tonight at 9 pm, four days after we managed to defeat Ghana 1-0 on Wednesday, BBC reports (The Guardian has a play-by-play in case you missed it). We apparently haven’t been able to beat Morocco’s team since 1986, despite having won several AFCON championships.

What We’re Tracking This Week

The new Ismail cabinet lineup will be announced this week, Cabinet spokesman Ambassador Ashraf Sultan said in a phone-in to Al Hadath Al Youm’s Khat Ahmar. According to Sultan, discussions on the incoming ministers remain ongoing and there remains a possibility that some ministries will be merged. Apart from that, Sultan was very tight-lipped on the shuffle.

The 48th annual Cairo International Book Fair kicked off last Thursday and will be on until 10 Feb, according to Al Borsa. Around 35 countries are participating this year.

On The Horizon

The Emirates NBD PMI Egypt will go out on Sunday, 05 February, where we look to hopefully break the months-long declines.

The Central Bank of Egypt’s Monetary Policy Committee will be meeting.on Thursday, 16 February.

Enterprise+: Last Night’s Talk Shows

The USD 4 bn eurobond issuance covered the funding gap in the FY2016-17 budget and part of FY2017-18 financing gap, said Finance Minister Amr El Garhy in call-in to Hona Al Asema’s Lamees Al Hadidi. El Garhy said that the turnout for the issue — which was 3x oversubscribed — was more than expected, especially for the 30-year bonds. “This reflects the confidence investors have in Egypt’s economic reform program,” he said. “We met more than 100 investors in the US, Europe and the Middle East and we got more than 720 requests to subscribe,” El Garhy said. The revenue of the bonds will reach in the public coffers by 31 January or the 1st of February, he said.

After Lamees expressed concern over the repaying the interest on the bonds, El Garhy told her that Interest rates were not high when compared to other countries making similar issuances. Timing was crucial, said El Garhy, who added that If Egypt tried to do pull off the issue three or four months ago we would not have the same result (watch; runtime: 9:30).

Lamees also covered President Abdel Fattah El Sisi’s visit to Aswan for the National Youth Conference. “I ask the president to hold this conference at a different governorate every month, because Egyptians simply do not move unless a high-ranking official is visiting,” she said (watch; runtime: 2:32).

In the weekly 4+1 debate, Lamees’ panel discussed the commemoration of the 25 January, raising salaries of ministers and Donald Trump’s policies (watch; runtime: 33:38).

Electricity Minister Mohamed Shaker told Al Hayah Al Youm’s Lobna Assal that the ministry has allocated EGP 4.4 bn to be spent on developing transmission and distribution projects over the next two years in Upper Egypt. “We boosted power capacities by 12 GW in Upper Egypt since 2014,” Shaker said, adding that six turbines in Beni Suef power plant have entered trial operations phase, at a capacity of 400 MW for each (watch; runtime: 7:30).

Housing Minister Mostafa Madbouly — who spoke at the youth conference — called in to state that 66,000 homes have been built and delivered under the Social Housing program in Upper Egypt out of 106K homes slated for the region at a total cost of EGP 16 bn. “Another 40,000 homes will be completed in 1H17,” he added (watch: runtime: 4:29).

Kol Youm’s Amr Adib and Yahduth fi Masr’s Sherif Amer were off last night.

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Egypt raised USD 4 bn across three tranches from its recent eurobond sale, Finance Minister Amr El Garhy told Bloomberg TV. The issue was comprised of USD 1.75 bn of five-year bonds yielding 6.125%, USD 1 bn of 10-year bonds carrying a yield of 7.50%, and USD 1.25 bn of 30-year bonds yielding 8.50%. Demand was “very strong and covered multiple times,” he added, setting Egypt up to be a frequent issuer in 2017. Egypt began marketing a triple-tranche USD-denominated eurobond last Tuesday. The bonds will be listed on the Luxembourg Stock Exchange. "The issuance is successful because it offers relatively attractive yields compared to global returns on the [USD] at a time when the macro risks related to the Egyptian economy are diminishing and the turnaround story is about to commence," CI Capital economist Hany Farahat told Reuters.

Egypt is fully committed to postponing the capital gains tax for another three years, he added, and is still studying introducing a stamp duty, which is unlikely to deter investors. Speaking on the possibility of a currency swap agreement with Russia, El Garhy stated that Egypt could consider more currency swaps if needed.

Subsidies are a very inefficient way of helping the poor, especially with fuel subsidies, writes Patrick Werr for The National. Perhaps it would be much better just to give people direct payments and let them decide how to spend it by themselves, he adds. When petrol is artificially inexpensive, people are more likely to buy bigger cars and live farther out of town. If natural gas is cheap, investors will put their money into energy-intensive industries that if left to the market would be uneconomical. If bread is at almost no cost, people will feed it to their chickens, goats and rabbits at great cost to the state, says Werr. The devaluation raised the cost of government subsidies beyond targets set with the IMF, Planning Minister Ashraf El Araby had said previously. Egypt promised the IMF fuel prices would increase, or other measures would be taken to offset extra costs, if the EGP devalues further. Regardless of whether Egypt chooses to distribute the credit universally, or transfer credit to the smart cards used for subsidized bread, it would “save itself a bundle of money from a rapid elimination of subsidies, and the country as a whole would win.”

Talks between Cairo and Riyadh for the second tranche of the USD 1.5 bn loan to develop the Sinai are on hold after the Administrative Court in Cairo issued a ruling earlier this month rejecting the transfer of the Red Sea islands Tiran and Sanafir to Saudi Arabia, Amwal Al Ghad reports. Political tension between the two countries has also been rising recently due to disagreements over the situation in Syria and Yemen. The agreement with the Saudi Fund for Development was signed in March 2015 and the first USD 300 mn tranche was delivered in August last year. President Abdel Fattah El Sisi officially ratified the agreement last week in a decree, according to Ahram Gate. This would be the second major piece of economic assistance the Saudis hold back in its temper tantrum against Egypt, after Aramco practically and unilaterally cancelled fuel shipments to the country.

Egypt asks World Bank for USD 400 mn in funding? International Cooperation Minister Sahar Nasr discussed with Asad Alam, the World Bank’s regional director for Egypt, a request for USD 200 mn to support labor intensive projects and another USD 200 mn to support SMEs. The Ministry’s statement did not give more details on the new funding request, but Al Mal says the funding would be provided in participation with the UK.

Egypt is still committed to repaying IOCs

Schedule to repay IOCs pushed back, says Oil Minister: Egypt remains committed to repaying arrears of USD 3.5 bn owed to international oil companies, but low FX reserves had delayed the schedule, Petroleum Minister Tarek El Molla told Reuters last Tuesday. Egypt has been making monthly payments to international oil and gas companies to prevent its overall debts from rising, El Molla added. Ministry officials had announced earlier that the government will use the second tranche of the World Bank’s USD 3 bn loan to repaying the arrears.

This comes as the government will be buying oil and gas from IOC’s at a fixed exchange rate of EGP 17 for the greenback after the EGP floatation, according to a memo from the EGPC to sector companies picked up by Al Borsa.

India’s TCI Sanmar Chemicals is looking to increase its investments in Egypt to USD 1.5 bn from USD 300 mn currently, Investment Minister Dalia Khorshid told Ahram Gate. The company has offered to raise funds from Indian banks to finance a capacity increase to bolster its export capacity. The report says TCI Sanmar wants to expand its polyvinyl chloride (PVC) production to 400k tonnes annually, the same target it said it wants to hit last July during talks with Trade and Industry Minister Tarek Kabil.

Auto importers look to dominate the debate on the automotive directive: Car importers and auto feeders are looking to stake their claim over the automotive directive as the House of Representatives resumed discussions on the legislation last week following an announced hiatus. Importers, including Volkswagen, Seat, Kia Motors, and Ford distributors Auto Jameel, insisted at a meeting with MPs that they include their input, and are preparing a report to send to the House with their demands, a parliamentary source told Al Borsa.

The group successfully lobbied MPs to make changes to the legislation, including raising the minimum requirement for component manufacturing companies to benefit from the directive to 100% from 25%. MPs also agreed to amend clauses that govern imported cars and components, the newspaper reports without clarifying which clauses. As we have noted previously, the battle lines for the directive have been drawn along assembler and importer-feeder lines, with the latter having intensified its lobbying efforts over the past three months to make serious changes to the legislation favored by assemblers. These have culminated in the CBE stepping in to suggest an alternative strategy. All experts who spoke with Al Borsa, acknowledge that no matter where one stands on the debate, these challenges will cause further delays in passing the law.

In other legislative news, the Egyptian Council of State (Maglis El Dowla) has completed reviewing the Investment Act and will be passing it on to Parliament its way to parliament for approval, Al Borsa reports. The act is part of a bundle of laws the Maglis plans to send out to the House, which include the new Labor Act, amendments to prison and the protest laws, and the Agriculture Act — which imposes harsher punishments on the construction of non-agriculture buildings on agricultural land, according to the newspaper. Next up on the Maglis’ to-do list is its review of the Bankruptcy Act.

The Egyptian embassy in Berlin has successfully managed to get Germany to lift restrictions to flights to Sharm El Sheikh, the Foreign Affairs Ministry announced. The German transportation ministry removed a restriction on German airlines that required them to fly at a minimum altitude of 26,000 feet above South Sinai. The restriction was imposed in October 2015, in the wake of the Metrojet flight crash, and lifting it means airlines can now resume flying directly to Sharm El Sheikh and St. Catherine international airports without paying additional insurance fees.

Meanwhile on the Russian front, Civil Aviation Minister Sherif Fathi will also be visiting Moscow on 8-9 February to resume talks on the return of Russian flights to Cairo with state officials, according to Russian news agency TASS. Russian Deputy Prime Minister Arkady Dvorkovich told the media that a meeting with Fathi is yet to be scheduled but that “the decision on Cairo is close,” refusing to give any set dates, according to Russia’s state-owned Sputnik. Russian Transport Minister Maksim Sokolov had said earlier that air travel could resume as early as January or February, first to Cairo then the Red Sea coast. Sources told TASS last week, however, that air travel was not likely to come back before March.

… In contrast, Israel advised its citizens to leave Sinai last Tuesday, “warning of the threat of an imminent attack,” Reuters reported. "The directorate warns of the possibility of attacks against tourist sites in the Sinai area in the immediate term," a statement said.

President Abdel Fattah El Sisi announced a number of decisions aimed at improving living standards in Upper Egypt at the National Youth Conference held in Aswan over the weekend. These include establishing the High Authority for the Development of Southern Egypt which will be responsible for developing programs to tackle unemployment, upgrading services, and preserving Nubian heritage, with investments of EGP 5 bn over the next five years. El Sisi also pledged to establish industrial zones for SMEs, expanding Egypt’s social safety net through the Takaful and Karama programs, and establishing Aswan as an economic and African cultural capital, Al Ahram reports. On the overall economy, the president repeated that Egypt will see improved conditions, but “after a lot of time,” and stressed on the importance of domestic production in reining in prices, according to Al Masry Al Youm. El Sisi added that the government is targeting support for import-dependent industries, Al Borsa reports. You can also read the transcript of El Sisi’s speech at the conference here (Arabic).

His speech follows two others on the anniversary of 25 January, where he delved deeper into social issues, specifically, the country’s high divorce rate. El Sisi proposed drafting a law that would ban the ages-long practice of verbal divorce and necessitate the presence of a cleric to officiate it (watch, runtime 1:15). El Sisi emphasized how Egypt is on the right track and will continue to work towards economic, political, and social development (watch, runtime 6:16). The speech stressed that Egypt is fighting a battle against terrorism and corruption, and an even greater battle for reform and development.

The EGX announced its semi-annual revision to its indices last week. The EGX 30 will now include Oriental Weavers (ORWE), Juhayna (JUFO), Sidi Kerir Petrochemicals (SKPC), and Credit Agricole Egypt (CIEB). Out of the EGX 30 now are Egypt Kuwait Holding (EKHO), Edita (EFID), Arabia Invest Development Holding (AIND), and Elsaeed Contracting & Real Estate Investment Company SCCD (UEGC). The were also other revisions to the EGX’s other indices, including the EGX 70.

MOVESDr. Ismail Selim will be taking over as the head of the Cairo Regional Center for International Commercial Arbitration for a four-year term, replacing Dr. Mohamed Abdel Raouf, Al Borsa reported.

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Egypt in the News

The reflowering of the Egyptian-Iranian relations blossomed in direct proportion to the souring of Egyptian-Saudi relations, particularly during 2016, writes Gregory Copley for Yahoo Finance. Egypt resisted attempts by Saudi Deputy Crown Prince Mohamed Bin Salman to commit militarily to the Saudi-led Coalition fighting in Yemen, a conflict which the Egyptian Government felt was ill-advised, he says. Hope for an improvement in Saudi-Egyptian relations vanished after the Tiran and Sanafir court ruling. Egypt and Iran also have a common position, for different reasons, at odds with Saudi Arabia on overthrowing the Syrian state.

Radio France International (RFI) aired an interview about Egypt being multinational pharma producers’ second most-preferred destination for clinical trials in Africa, according to a report published by Swiss organization Public Eye. The report said these trials raised a number of ethical concerns, saying companies coopt Egyptians into being ‘guinea pigs’ their whole life, researcher Ayman Al Sebaie says. RFI also ran a piece about Egypt’s medication shortages.

The future is not so clear for Egypt and the foundations of its political system may not be as stable as they seem, suggests Jack Shenker in an another dreary, played-out opinion piece for The New York Times. While it may appear to be heading towards less chaotic times, Egypt “lurches from crisis to crisis, each revealing new cracks in the architecture of political authority,” such as rising inflation and austerity, lowered living standards, an ongoing state of emergency that infringes on democratic freedoms, and continuing human rights violations. “No one knows what twists and turns will come next in Egypt’s era of unrest.”

Over on the Seattle Times, Scott Shane uses Egypt and Saudi Arabia’s exclusion from the list of countries which will receive visa restrictions, as a means to argue the failure of the decision. His premise? Not once since 9/11 was a terrorist attack committed by anyone from the countries on the list.

President Abdel Fattah El Sisi’s statement on potentially banning verbal divorce made it into international headlines and has apparently stirred the pot for the ultraconservative Salafists, according to Gulf News. While El Sisi believes that officiating a divorce only in the presence of a cleric can help curb its rising rates, the suggestion was criticized for seeking to defy an Islamic tradition upheld for generations.

Also in the international news:

  • Human Rights Watch is unhappy that a criminal court put 1,500 Egyptians on a terrorist list for alleged support of the Ikhwan. It says the move imposes “penalties on people without giving them a chance to defend themselves seriously violates their rights to due process.”
  • Declassified CIA documents “confirm” Egypt aided Algeria against Morocco in the 1963 Sand War, Ezzoubeir Jabrane writes for Morocco World News.
  • Egypt and Morocco are seeing a return in startup investment, Lily Kuo writes for Quartz. “There’s been a trend towards investment returning to Egypt and other North African countries having been scared off by years of political turmoil,” Kuo adds.
  • H.A Hellyer attempts to write about the 25th January uprising and how the West should learn from its mistakes, or something of sorts, we don’t know, we fell asleep by the third paragraph.
  • The BBC World Service correspondent Ed Butler presents two reports on economic hardships and social instability in Egypt’s Currency Crisis, and the over 30% youth unemployment rate in Egypt’s Jobless Youth.

On Deadline

If you’re an Egyptian who supports Donald Trump, MP Amr El Shobaky wants to remind you that The Donald is racist. While Trump shares a common interest with Egypt in eradicating terrorism, his dealings with Mexico have shown that he will likely run his foreign policy with a business mindset, and may easily come to the conclusion that supporting Egypt is not a financially sound policy, El Shobaky says in a column penned for Al Masry Al Youm.

Worth Watching

All eyes on Mohamed Salah, including El Sisi’s: We would be remiss if we didn’t post the stunning free-kick goal by Mohamed Salah during last Wednesday’s game with Ghana, one of the best in the tournament so far (bias notwithstanding). The goal (watch; runtime: 3:06) is the perfect way to get hyped before Egypt’s match against Morocco tonight. President Abdel Fattah El Sisi caught the game with a group of Egyptians and tourists in Aswan, according to Ahram Online. A video from his official Facebook page (runtime 1: 02) shows the plainclothed president greeting a group of Asian tourists before the game.

Diplomacy + Foreign Trade

A Turkish business delegation is in town today and tomorrow to develop their investments in Egypt after receiving an invitation from the head of the Federation of Egyptian Chambers of Commerce, Al Mal reports.

The Sudanese government has reportedly expelled Egyptian Ikhwanis who had fled to the country after the 30 June 2013, AMAY reports. President Omar El Bashir was scrutinized by the group’s Sudanese branch, who accused him of “making concessions for America” with the aim of lifting economic sanctions.

The Irrigation Ministry is expected to sign off on conducting the first feasibility studies for the Lake Victoria-Mediterranean Sea river transport route this week. The studies were funded by a grant from the African Development Bank, Al Masry Al Youm reports.

Energy

SDX Energy prices Circle Oil’s assets in Egypt, Morocco at USD 30 mn in cash

SDX Energy said it is proposing to acquire the oil and gas assets of Circle Oil in Egypt and Morocco for a total cash consideration of USD 30 mn, Reuters reported. SDX had announced entering into a non-binding heads of terms with Circle Oil for the acquisition in mid-January. In Egypt, SDX will acquire a 40% interest in North West Gemsa concession, in which it currently holds a 10% stake as part of the agreement. The company will finance the acquisition through conditional placing of new common shares in SDX at a placing price of 30 pence per placing share.

Oil Ministry approves USD 8 bn strategy to develop petrochemicals sector

The Oil Ministry has approved a USD 8 bn strategy to develop refining facilities and the petrochemicals sector, Oil Minister Tarek El Molla told Al Mal. The strategy aims to upgrade machinery at existing facilities to maximize production, and build several new projects in Cairo, Alexandria, Assiut, and Suez, he added.

Basic Materials + Commodities

Hamama West holds 341k ounces of gold equivalent -Aton

Aton Resources announced that Hamama West, one of three contiguous zones that comprise the Hamama Project, holds an inferred mineral resource of 341k ounces gold equivalent (AuEq) and an indicated mineral resource of 137k ounces AuEq. Aton says Hamama West has excellent potential to grow resources along strike and at depth, attractive open pit characteristics, opportunity to improve grade, increase resources, and upgrade the resource category in the oxide cap. The focus of the company’s exploration program in 2017 will be expanding resources at both Hamama and at the Abu Marawat gold deposit.

EMRA shows no intention of amending terms of gold bid round

The government has indicated it has no intention of amending the terms of the gold bid round issued by the Egyptian Mineral Resources Authority (EMRA) or moving to a tax and royalty system, Reuters reported. "For those who find the bid round suitable for them under these terms, they are welcome in Egypt. For those who don’t find them suitable, I don’t want to hear anyone’s advice," EMRA’s head Omar Taima says. David Hall, CEO of Thani Stratex Resources, reiterated comments he made last week, saying junior firms are unlikely to enter the round based on the high bonus payments alone. Omar El Alfy, head of precious metals at Qalaa Holdings agrees, saying “unfortunately the terms don’t seem to be getting any better … The framework that’s currently on offer in Cairo isn’t really attractive for the smaller players to really get involved and hence the reason you’ve only got one gold mine."

Damietta port begins trial runs on UAE-funded shounas project

The Damietta port has begun the trial runs on new shounas funded by a grant from the United Arab Emirates, Al Ahram reports. According to the port head, General Ayman Saleh, there are several other projects worth EGP 5 bn in the pipeline, and are expected to be completed over the next three years.

Russia to provide 410k tonnes of wheat

The General Authority for Supply Commodities (GASC) issued a tender for 410k tonnes of Russian wheat, which is set to be delivered during the first 10 days of March, Al Ahram reported.

Health + Education

International schools want to report to Investment Ministry now

International schools do not want to report to the Education Ministry anymore and would rather have the Investment Ministry instead, Al Mal reported. The schools say the Education Ministry can still retain the right to review curricula but would rather have their operations treated as investments. Schools may have been emboldened by a decision earlier this month that to form a joint committee with the Investment Ministry to determine pro-investment policies for the sector. The Education Ministry had place International School of Choueifat and the American International School of Cairo under administrative and financial control last year.

Tourism

Airlines reduce plane ticket prices in hopes of attracting tourists to Sharm El Sheikh

Airlines are reducing the prices of plane tickets to Sharm El Sheikh and will offer 10 trips daily to various touristic destinations in Egypt, while the Tourism Development Authority will subsidize the prices of tickets to Sharm El Sheikh to bring the final cost to EGP 900, a member of the committee told Al Masry Al Youm.

Telecoms + ICT

Only 10% of Egypt’s micro and small handcraft enterprises use internet -UNCTAD

Only one in 10 micro and small handicraft enterprises, defined as those with 10 workers or fewer, use the Internet in Egypt, according to a survey conducted by UNCTAD and the government as part of a project to develop of a national e-commerce strategy. “Among those that do use the internet to market their products, social media is by far the most popular channel, with only 2% using an online marketplace… 3% of the micro and small enterprises that used the Internet had made online purchases, while only 5% had received orders online for their products.”

Automotive + Transportation

Hyundai Rotem may supply Egypt with train cars

Hyundai Rotem have been named the sole preferred bidder for an agreement to supply 256 train cars at a cost of USD 420 mn, Yonhap News reported. The train cars will make up half of the 500 cars on Cairo Metro Line Three, a company official said. The agreement will be signed once the company receives an offer letter from Egypt, the official added.

Mitsubishi orders recall on 2003-2012 Lancer models for suspected airbag faults

Mitsubishi agent Diamond Motors announced a recall on 2003-2012 Lancer models for a suspected fault in passenger-side airbags, Al Mal reported. The announcement is part of a wider recall ordered by Mitsubishi Corporation. We had earlier reported that Al Futtaim Automotive had ordered a recall on six Honda models in Egypt to replace airbags.

Banking + Finance

QNBA to discuss capital raise at 16 February EGM

Qatar National Bank Alahly (QNBA) shareholders will vote on increasing the bank’s authorized and issued capital at the 16 Feb EGM, now that the bank has received the Egyptian Exchange’s approval on the raise, according to Al Borsa. QNBA will be raising its authorized capital by EGP 5 bn to EGP 15 bn and its issued capital by EGP 1.48 bn to EGP 8.9 bn through a bonus share issue financed through reserves.

Other Business News of Note

Industrial Development Authority gives investors one month to explain project delays before withdrawing licenses

The Industrial Development Authority (IDA) is granting “non-serious” investors a grace period of one month to explain why they have failed to launch the projects on the land allocated to them in industrial zones, before revoking the licenses and land from investors without valid explanations, according to Al Borsa. According to an unnamed government source, the IDA found that projects are being stalled on 4300 pieces of land, particularly in Badr, El Sadat, and 10th of Ramadan cities.

Legislation + Policy

EFSA issues real estate valuation guidelines

The Egyptian Financial Supervisory Authority (EFSA) has issued its first guidelines for the Egyptian real estate valuation standards. EFSA says the standards aim to improve valuations and fair value assessments. Chairman Sherif Samy said the standards adopted global best practices and will now be adopted by financial market participants.

Law

Dispute between Skoda and ARTOC reaches court

Skoda has hired Matouk Bassiouny as its legal representatives in its dispute against ARTOC Auto, according to Al Mal. ARTOC Auto had commissioned the Arab International Law firm to file a case against Skoda for unilaterally canceling the distribution agreement with them and refusing to supply spare parts. ARTOC had contacted us in December to suggest it was planning legal action against Skoda.

Egypt Politics + Economics

No EGP 32.5 mn missing from state coffers -Finance Ministry

The Finance Ministry issued a statement denying rumors that EGP 32.5 mn have gone missing from the state coffers from the final balance of FY2014-15. The entire amount is held at the central bank, the Ministry says. The amounts, in accordance to law, were added to the central bank’s reserves in foreign currency equivalent and held in EGP for the Ministry in a temporary account used in spending to support plugging the state’s budget deficits. The Ministry said the funds were used over multiple years to spread their impact as EGP 20.3 bn were used to cover the deficit in FY2013-14, EGP 7.1 bn in FY2014-15, EGP 2.3 bn in FY2015-16, and the same policy will continue to be adopted in the current fiscal year. The Finance Ministry added that this helps reduce the government’s debt burden and improves its creditworthiness.

Companies with pre-float LCs want banks to resume dealing while repayment guidelines are set

The Union of Egyptian Investor Associations are asking the Central Bank to order all financial institutions to resume dealings with companies until guidelines for settling their pre-EGP float LCs are available, Al Borsa reported. During a meeting with CBE Governor Tarek Amer last week, Union members had proposed a seven-year repayment period at a 5% interest rate, but the CBE has yet to approve.

SCZone talks with Singapore’s PSA International over East Port Said container terminal ongoing, Deputy Head confirms

Talks are ongoing between the Suez Canal Economic Zone (SCZone) and Singapore port-operator PSA International for the building and management of a second container terminal in East Port Said that can hold an additional 3-4 mn units, Deputy Head Abdel Kader Darwish confirmed to Al Borsa. The two parties are expected to meet in February to resume discussions. We had reported in July that PSA International was considering backing out of the MoU it had signed in 2015, prior to the establishment of the SCZone.

National Security

Rationale behind recent weapons purchases questionable, Maged Mandour writes

The internal and external security threats Egypt faces do not offer a clear rationale for the type of weapons the country has purchased recently, Maged Mandour writes for the Carnegie Endowment for International Peace. “Some analysts have argued that the recent weapons imports are instead aimed at diversifying the suppliers to the Egyptian military, he suggests. Mandour questions if the weapons purchases show a concern of a Syria-type internal conflict domestically.

On Your Way Out

Six Khedivate-era lamps stolen last December from the El Refai Mosque were recovered by the Tourism and Antiquities Police, Ahram Online’s Nevine El Aref reported. Two suspects who were working with a film crew that was shooting at the mosque were arrested, and one remains at large. The thieves intended to sell the lamps for EGP 900,000, police says.

Our collective prayers have been answered: Al Nahar TV presenter/the spawn of Satan Rehaam Saeed was sentenced to six months in prison and fined EGP 10k for defaming actress Zeina on her show, Al Mal reports.

And guess who has crawled out of their dank lair 3,000 ft underground. Why, none other than the Abdel Aaty, the instigator of kofta-gate and inventor of the kofta device to cure hepatitis C, AIDS, ad old age (but apparently not charlatans). And he is unapologetic as ever, saying that an international pharma conspiracy was behind the backlash against the device, which he insists still works. He denied that he had been imprisoned or that he was in hiding, stating that he was buckling down and improving the device and his research into what we can only translate as “quantum medicine.”

The markets yesterday

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EGP / USD CBE market average: Buy 18.77 | Sell 18.89

EGP / USD at CIB: Buy 18.70 | Sell 18.80

EGP / USD at NBE: Buy 18.7 | Sell 18.75

EGX30 (Thursday): 13,091.05 (+1.62%)
Turnover: EGP 1.313 bn (196% above the 90-day average)
EGX 30 year-to-date: +6.04%

THE MARKET ON THURSDAY: The EGX30 ended Thursday’s session 1.6% up. Thursday’s top gainers were Qalaa Holdings, Eastern Co, and Amer Group. Thursday’s worst performing stocks included EFG Hermes, Orascom Construction, and Palm Hills. The market turnover was EGP 1.3 bn and foreign investors were the sole net buyers.

Foreigners: Net long | EGP + 43.7 mn
Regional: Net short | EGP – 0.1 mn
Domestic: Net short | EGP – 43.6 mn

Retail: 60.2% of total trades | 60.2% of buyers | 60.3% of sellers
Institutions: 39.8% of total trades | 39.8% of buyers | 39.7% of sellers

Foreign: 24.0% of total | 25.8% of buyers | 22.3% of sellers
Regional: 11.3% of total | 11.2% of buyers | 11.3% of sellers
Domestic: 64.7% of total | 63.0% of buyers | 66.4% of sellers


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The government has been hard at work implementing a number of reform measures over the last several months, but several more phases of reform remain in the pipeline. Upcoming phases will include legislative reform, such as with the investment and bankruptcy laws aimed boosting investments, and the tax law to overhaul the tax payment and refund system, in addition to the IPOs of public sector companies to improve the liquidity of the Egyptian stock market. Another phase will likely revolve around the overhaul of the subsidy system while expanding the country’s social safety net and make a transition to cash transfers for poor citizens. An increased financial penetration ratio is also expected, along with higher access to mortgage and SME financing and higher financial inclusion, paired with tighter risk management within banks and the strengthening of capital adequacy ratios. We believe the fruits of reform, whether in terms of a rebounding growth rate or receding inflation rates, will not appear immediately, but rather over the coming two FYs. Tap here to read the full note.

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Calendar

22-31 January (Sunday-Tuesday): 28th African Union Summit, Addis Ababa, Ethiopia.

26 January – 10 February (Thursday-Friday): Cairo International Book Fair, Nasr City fairgrounds.

28-29 January (Saturday-Sunday): International Conference on Computers, Data Management and Technology Applications, Intercontinental City Stars, Cairo.

30 January – 01 February (Monday-Wednesday): Beltone Financial’s Africa’s Era, Egypt’s Moment Conference, Cairo.

30 January – 02 February 2017 (Monday-Thursday): Arab Health Exhibition, Dubai International Convention & Exhibition Center, UAE.

05 February (Sunday): Emirates NBD PMI Egypt release.

08 February (Wednesday): N Gage Debate on National Food Safety Authority, Four Seasons Hotel Nila Plaza, Cairo.

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

15-16 February (Wednesday-Thursday): International Conference for Globalization & Emerging Economies, Alexandria.

16 February (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

06-08 March (Monday-Wednesday): 13th EFG Hermes One on One Conference, Dubai, United Arab Emirates.

07-09 March (Tuesday-Thursday): Microfinance forum, Nile Ritz-Carlton, Cairo.

09-11 March (Thursday-Saturday): Egypt Projects Summit, Cairo International Convention Center, Cairo.

29-30 March (Wednesday-Thursday): Cityscape Egypt Conference, Nile Ritz-Carlton, Cairo.

30 March (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

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

01 April (Saturday): SEOcon, The Greek Campus, Cairo.

03-06 April (Monday-Thursday): Agri & Foodex Africa, Khartoum International Fair Ground, Khartoum, Sudan.

08-10 April (Saturday-Monday): Pharmaconex, Cairo International Convention Center, Cairo.

16 April (Sunday): Coptic Easter Sunday.

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

20 April (Thursday): Closing date for the Egyptian Mineral Resources Authority bid round number 1 for 2017 for gold and associated minerals.

24-25 April (Monday-Tuesday): Renaissance Capital’s Egypt Investor Conference, Cape Town, South Africa.

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

30 April – 03 May (Sunday-Wednesday): Cement & Concrete 2017, Riyadh International Convention & Exhibition Center, Saudi Arabia.

01 May (Monday): Labor Day, national holiday.

16 May (Tuesday): Official expiry date for the decision to suspend capital gains taxes on stock market transactions.

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 (Sunday): Revolution Day, national holiday.

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

17-19 September (Sunday-Tuesday): Pipeline-Pipe-Sewer-Technology Conference & Exhibition, Intercontinental Citystars Hotel, Cairo.

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.

08-10 December (Friday-Sunday): RiseUp Summit, Downtown Cairo.

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

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