Sunday, 2 July 2017

Fuel prices up 55%

TL;DR

What We’re Tracking Today

** We apologize for being a few minutes late this morning, but there was rather a lot of news in the past week or so.

Welcome back, everybody, and welcome to the new fiscal year. We hope you enjoyed a relaxing Eid break, because the government certainly didn’t, having enacted a flurry of key and landmark decisions over the break. Lucky for you, dear readers, Enterprise is back on its regularly scheduled programing to bring you the rundown, with the key event being last Thursday’s fuel price hikes (more on this in Speed Round, below).

It’s FY2017-18 … but not officially: The House of Representatives passed the FY2017-18 budget, but a number of procedures must be completed before the government officially can begin implementing the budget — including increasing the value-added tax to 14% from 13%. The Council of State has yet to ratify the budget, which will then need to go back to the House for final sign-off. That’s expected to take place this Tuesday, according to Al Masry Al Youm. In the meantime, the Finance Ministry is reassuring the public that the 1 percentage point bump will have a limited impact on prices, with both Vice Minister of Finance Amr El Monayer and VAT Commissioner Abdel Moneim Matter noting that the cost of basic consumer goods including cooking oil and cigarettes will not rise.

The stamp tax on capital markets transactions is in effect. President Abdel Fattah El Sisi signed the measure into law. The 0.125% levy, which will rise to 0.175% in its third year, is expected to generate EGP 1-1.5 bn in FY 2017-18. El Sisi also signed into law amendments to the Income Tax Law which would delay the implementation of the capital gains tax until 2020. Both changes were published in the Official Gazette on Thursday, 22 June, according to Al Mal.

Also now official: El Sisi ratified the Tiran and Sanafir sovereignty handover agreement with Saudi Arabia over the Eid break, Sherif Ismail’s cabinet said in a statement picked up by Reuters. The president also sanctioned Egypt’s formal membership in the World Trade Organization’s Trade Facilitation Agreement, which simplifies export and import processes between signatory countries and ordered the nationwide state of emergency be extended another three months.

Egypt should receive the second USD 1.25 bn tranche of its USD 12 bn extended facility from the IMF in the first or second week of July, Finance Minister Amr El Garhy told Reuters. The disbursal was initially expected to come toward the end of June, but El Garhy said it was delayed due to bank procedures and the timing of IMF executive board meetings.

We’re also on the lookout for a USD 60 mn payment from the World Bank as part of its USD 400 mn funding for the Takaful and Karama social welfare programs, according to statements by Social Solidarity Minister Ghada Wali picked up by Al Shorouk. The World Bank had sent over a delegation during the Eid break to follow up on the programs.

Another plot twist in the special holiday episode of the Qatar mosalsal: Saudi Arabia, the UAE, Bahrain and Egypt issued on the eve of Eid a 13-point list of demands that Qatar must meet before ties can be normalized, Bloomberg reports. The demands include shutting down Al Jazeera and all its affiliated channels (including Al Jazeera English), curbing ties with Iran, shutting a Turkish military base, and paying reparations to the four states. Qatar has until today to accept the list of demands. Meanwhile, the chairman of the US Senate Foreign Relations Committee, Bob Corker, threatened to block arms sales to GCC countries if they do not resolve the spat with Qatar, according to the newswire.

President Abdel Fattah El Sisi is heading to Budapest today to participate in the Visegrád Summit taking place tomorrow. On the agenda: energy security and cooperation with the EU on both economic issues and counter-terrorism, according to an Ittihadiya statement.

What We’re Tracking This Week

New electricity prices will be announced end of this week, sources tell Al Mal. The move to raise prices by an average of 30%, will be part of a general phase out of subsidies which will continue until 2021, unnamed sources tell Al Masry Al Youm. Prime Minister Sherif Ismail reportedly said that the hikes would be reflected in August’s bills, the newspaper reports. There remains confusion as to how expansive the subsidy cuts will be. Government sources say hikes will only apply to high consumption tiers, while Al Mal is reporting that all tiers will see price increases. Separately, water prices will reportedly increase starting October.

On The Horizon

New unified fees for ports nationwide could be issued in a month’s time, Suez Canal Economic Zone Chief Mohab Mamish tells Al Mal. Mamish had agreed with Transport Minister Hisham Arafat earlier this month to harmonize port fees in Egypt to eliminate any competition between them.

We’re getting 4G within two months, an unnamed source tells Al Mal. Mobile network operators received their 4G frequencies last month and are now running trials.

Banque Misr will receive a USD 200 mn loan from the African Export-Import Bank sometime this month, according to Al Masry Al Youm.

Enterprise+: Last Night’s Talk Shows

The Ismail government’s decision to hike fuel and energy prices last week ahead of the new fiscal year dominated the airwaves last night.

On Hona Al Asema,Lamees Al Hadidi hosted none other than Petroleum Minister Tarek El Molla, who noted among other things that the phase-out of energy subsidies will make it easier for the Egyptian General Petroleum Corporation (EGPC) repay arrears to international oil companies (watch, runtime 4:07). The measure will also help curb Egypt’s consumption of fuel, which has been growing 7-9% per year — a much higher rate than the rest of the world, (watch, runtime 23:30).

El Molla also defended a 100% rise in the price of butane gas cylinders, which he said still cost the state c. EGP 115 a piece and which are still heavily subsidized at the new price of EGP 60 a piece (watch, runtime 2:56).

Vice Minister of Finance Ahmed Kouchouk also defended the hikes, arguing that recent measures to strengthen the social safety net, income tax cuts, and development projects are meant to alleviate some of the pressure on lower and middle classes (watch, runtime: 14:03). That won’t stop commodity prices from going up though, Domty Vice Chairman Mohamed El Damaty told Lamees, especially for goods that rely heavily on transport (watch, runtime 3:07). Fares on public transport will rise anywhere from EGP 0.25 to EGP 0.50, a transport official told the host (watch, runtime 6:17).

Naguib Sawiris praised the decision, calling it a “bold move” by the government (watch, runtime 5:28).

Over on Kol Youm, Amr Adib spoke to Supply Minister Ali El Moselhy, who said the government would ensure that the fuel price hikes would have no impact on the cost of bread or other subsidized food staples. El Moselhy will be meeting with business groups on Monday to remind them that the authorities will be monitoring transport costs, warning against unfair increases (watch, runtime 15:17).

Speed Round

Speed Round is presented in association with

Government hikes energy prices: The government raised energy prices by as much as 55% for fuel products and 100% for cooking gas, Prime Minister Sherif Ismail announced on Thursday (watch, runtime 14:40). “We took part of the value of the subsidies allocated to energy to use it for other subsidies that are important for limited-income and poor individuals,” said Ismail. The hike — third for fuel products since July 2014 — comes following a slew of measures enacted before the Eid break meant to strengthen the social safety net, including raises to pensions and ration card allocations. Fuel prices as of last Thursday are as follows:

  • 95 octane petrol at the pumps will now cost EGP 6.60 per liter, up by 5.6% from EGP 6.25;
  • 92 octane petrol rose by 43% to EGP 5.00 per liter from EGP 3.50 per liter;
  • 80 octane petrol increased by 55% to EGP 3.65 per liter from EGP 2.35;
  • Diesel fuel will also sell for EGP 3.65 per liter, up from EGP 2.35 before;
  • Kerosene as well rose to EGP 3.65 per liter from EGP 2.35;
  • Cooking gas cylinders doubled in price to reach EGP 30;
  • Gas cylinders for commercial use also doubled in price to reach EGP 60;
  • Compressed natural gas for automobiles rose by 25% to EGP 2 per cubic meter from EGP 1.60;
  • Natural gas for households increased to between EGP 1 per cubic meter and EGP 2.25 depending on one’s consumption tier;
  • Cement factories will also be paying a paying a higher price of EGP 3.5k per tonne of fuel oil (mazot) compared to EGP 2.5k previously.

The price of natural gas to industry will remain unchanged, according to a report from the Cabinet Information and Decision Support Center (IDSC). The report also states bus, metro, and railway tickets, will not rise, according to Al Shorouk.

Impact of the hike: Inflation, already at around 31.1%, is expected to accelerate 4-5% after this latest reduction of fuel subsidies, said the Prime Minister, according to Bloomberg. According to a CAPMAS report (pdf), transportation costs will rise 5-15%. The governorates of Giza and Marsa Matrouh have already allowed taxi fares to officially increase, while drivers in Cairo and elsewhere have been unilaterally raising prices.

Reactions to the price the hikes coming from the IMF were positive. “The fuel price increases, together with the higher social spending already announced, will help the budget while protecting the poor,” Chris Jarvis, the IMF’s mission chief to Egypt, told Bloomberg.

The private sector appears to have taken the move in stride, with the FEI noting that the move will have a marginal effect costs in most industries, but are vital to economic reform efforts, according to Al Mal. Naguib Sawiris was of the same mind, telling Lamees Al Hadidi on last night’s Hona Al Asema that it was a “brave move.” “The government is getting all the painful measures done” this fiscal year, said Arqaam Capital’s Reham El Desoki. “That’s probably the government’s strategy: ‘Now, the worst is probably behind us,’” she tells Bloomberg.

The House hasn’t taken well to the news: Rep. Mostafa Bakry submitted a request to House Speaker Ali Abdel Aal to discuss the decision on Monday and to summon Sherif Ismail and the petroleum and finance ministers, according to Al Mal. Rep. Mortada El Araby announced he will submit his resignation on Tuesday in protest.

The private sector will adjust pricing as a result of fuel price rises at the same time as the value-added tax rises to 14% from 13%. Cuts to fuel subsidies will make it 3% more expensive to produce food, said an official at the Federation of Egyptian Industries’ (FEI) food industries division. Auto parts will rise 5-7% in price, Al Mal quotes an industry official as saying, and ride-hailing services Uber and Careem are also studying price increases.

But companies (food producers in particular) should tread lightly: The Supply Ministry will be issuing new directives that outline “more severe punishments” for those who engage in price gouging, Supply Minister Ali El Moselhy said after a cabinet meeting on Saturday, Al Shorouk reports. Meanwhile, the Health Ministry has denied the cost of meds will increase after reports claimed the cost of 5k products will rise, according to the newspaper.

The first draft of the executive regulations to the Investment Act is out: After weeks of closed-door sessions, a draft of the Investment Act’s executive regulations is out (which you can view in full here courtesy of AMAY). The 108-page document outlines the state’s investment-promotion framework for everything from manufacturing to healthcare. The regulations also clarify which companies or investments are eligible for incentives. Among the document’s highlights:

  • Projects eligible for the incentive program must begin production or break ground within the first three years of the executive regulations coming into effect;
  • 50% of manufacturing inputs and raw materials must be sourced locally in order for an investment to be eligible;
  • 20% of total output has to be exported for an investment to qualify;
  • Incentives may also be granted based on the level of corporate social responsibility activities;
  • Foreign investors are guaranteed the right and ability to repatriate profits and earnings;
  • Foreign labor must not exceed 10% of the total workforce, except during exceptional circumstances which would allow for a cap of 20% if a General Authority for Freezones Zones and Investment (GAFI) assessment committee concurs that the higher level is required.

As for private freezones, the GAFI will only allow for the establishment of new private freezones if it decides that existing state-run zones won’t serve the same purpose. Additionally, companies established in private freezones must have a capital of no less than USD 10 mn. Companies in private freezones must also employ at least 500 workers and export at least 80% of their total output. Want to produce alcoholic beverages, weapons and ammunition, fuel, fertilizers, or any other energy-intensive product in a private freezone? Forget it — they’re all on the list of proscribed activities. GAFI will also be forming a committee to draft a comprehensive development plan for the areas, Al Mal reported.

Meanwhile, the Investment Ministry will be working on new digital services for the one-stop shop service centers created under the act, meant to serve as a one-stop-shop for all related matters. E-payments platform Fawry has signed on to provide electronic payment solutions that will allow investors to automatically transfer fees, according to AMAY.

The incentives could help Egypt reach its goal of attracting USD 8.7 bn in foreign direct investment in 2017, Investment Minister Sahar Nasr said, Al Mal reports. Total investments will increase to EGP 482 bn by end of 2017, compared with EGP 290 bn in 2014, Nasr added.

EAEF’s James Harmon talks up Egypt’s “right macro fundamentals” to US Congress: Egypt’s economy currently has the “right macroeconomic fundamentals” to attract foreign direct investment, said Egyptian-American Enterprise Fund (EAEF) Chairman James Harmon in a glowing report on Egypt’s economic recovery to the US House of Representatives’ Committee on Foreign Affairs. “This creates a multiplier effect and helps bolster the government’s economic reform agenda,” he added. Harmon praised the passing of the Investment Act and the Ismail cabinet’s approval of the Bankruptcy Act, according to a statement put out by the Investment and International Cooperation Ministry. Harmon’s report did not shy from naming concerns which might hinder this recovery, the prime culprits being Egypt’s “underdeveloped” private sector. “[Egypt] suffers from gaps in financing, infrastructure and talent which curbs its ability to expand and grow the economy, which would result in underserved markets, high unemployment rates and low financial inclusion,” he added in the report.

Ratings agency Fitch has affirmed Egypt’s Long-Term Foreign- and Local-Currency Issuer Default Ratings at B with a stable outlook. The main factors that Fitch says, individually or collectively, could lead to a positive action are: Continued progress on fiscal consolidation leading to declining government debt/GDP, sustained stronger economic growth supported by reforms to the business environment leading to increased investment and employment, and further strengthening of international reserves following a sustained narrowing of the current account deficit and higher net foreign direct investments. The rating assumes the political environment will be more stable than in 2011-13 “although sporadic, and at times serious, attacks on security forces are assumed to continue and underlying political and social tensions will remain.”

Meanwhile, Moody’s said Egyptian banks will benefit from the improved tourism prospects, in an emailed report. “The increase in tourism is positive for Egyptian banks because it enhances the repayment capacity of borrowers directly and indirectly linked to tourism. Set to benefit the most from the increase is CIB “because it has the largest exposure to the sector.”

Compromise on the automotive directive at hand? We might yet live to see the automotive directive issued in the near future as talks between the Trade and Industry Ministry and the legislation’s detractors appear to be progressing, according to statements by Egyptian Automobile Manufacturers Association (EAMA) head Hussein Moustafa to Youm7. He (being one of those detractors) implied a draft which appeals to both importers, who are against the legislation, and manufacturers to be ironed out “soon.” No details were provided on compromises reached. The bill — which offers incentives to encourage local assemblers to move further up the value chain into manufacturing — has been in a deadlock for several months due to opposition from car importers and the EU. But the Trade and Industry Ministry has been engaged in a little shuttle diplomacy (pun not intended) to salvage the legislation, forming a committee to look into breaking the deadlock.

Ride-hailing Apps Bill to include provisions for micro-buses? The Investment Ministry has reportedly requested withdrawing the Ride-hailing Apps bill currently before the House of Representatives to include provisions which would presumably allow hailing micro-buses on demand, according to Al Masry Al Youm which is citing the ministry. While we applaud efforts to expand the growth of ride-sharing apps, why anyone would want to hail the Tazmanian Devil of the roads is beyond us. Untamed wildlife — especially those that shoot smoke in your face — are best kept in their natural habitat (in this case, the endangered species list).

Export Development Authority rolls out five-year strategy: The Trade and Industry Ministry’s Export Development Authority (EDA) has completed its new export promotion strategy for 2017-2023, Minister Tarek Kabil said on Tuesday, Al Shorouk reported. The strategy relies on streamlining export procedures, putting in place an authority to ensure the quality of exported products, increasing Egypt’s participation in international expos, and offering technical assistance programs to exporters. The EDA has also prepared a study on the performance of Egypt’s agricultural exports over the past three years to help exporters improve their operations, according to EDA head Sherine El Shorbagy. The agriculture and trade ministries had previously said they are planning to impose internationally quality standards after Saudi Arabia and other GCC countries banning imports of Egyptian strawberries and peppers.

Hyundai Rotem lands EUR 350 mn contract to supply metro cars: The National Authority for Tunnels signed a c.EUR 350 mn agreement with Hyundai Rotem to supply 32 air-conditioned cars for the Cairo Metro lines Three and Four on Thursday 22 June, according to a statement from the Ismail cabinet. 30% of the order will be assembled and manufactured domestically, said Transportation Minister Hisham Arafat. The order makes up half of the 64 cars the government plans to get for the new metro lines, Arafat added. The agreement follows a USD 575 mn contract with General Electric to supply 100 locomotives.

Meanwhile, the National Railway Authority (NRA) is in talks with potential suppliers to manufacture 1,000 train cars instead of the previously agreed-upon 700, sources from the authority tell Al Borsa. The move is part of the NRA’s plan to supplement its train car fleet with 300 new locomotives over the next five years. Minister Arafat had previously said that it was deliberating two rival bids from Italy and Hungary for the 700 cars, and that Italian companies offered to supply the train cars 30% cheaper than the nearest offer. The NRA expects to complete its negotiations before year-end.

EFG Hermes has topped the securities brokerage league tables during 2Q17, with a whopping 59.6% market share of transactions, according to Al Borsa. HC Brokerage jumped to second place with a reported 22.5% market share, followed by Beltone at 4% and Mediterranean for Brokerage at 3.2%.

Hisham Talaat Moustafa released and back at the helm: former MP and chairman of Talaat Moustafa Group’s (TMG) real estate arm Hisham Talaat Moustafa was released as part of the pardons President Abdel Fattah El Sisi issued over ahead of the Eid break, TMG has already reinstated Mostafa as CEO and Managing Director, according to a regulatory filing to the bourse. Moustafa had been convicted of murdering Lebanese singer Suzanne Tamim. Bloomberg also has the story.

President Abdel Fattah El Sisi appointed on Thursday new heads to three judicial bodies, marking the first appointments by presidential decree after the controversial amendments to the Judicial Authorities Act were passed in April, Al Masry Al Youm reports. The swearing-in ceremony for Magdy Aboulela as President of the Court of Cassation (the nation’s highest appeals court), Rashida Fathallah as Chairman of the Administrative Prosecution Authority, and Hussein Abdo Hamza as Chairman of the State Lawsuits Authority took place yesterday. Under the amendments, El Sisi also has the power to appoint the head of the Council of State, but the current council head has yet to complete his term.

The Ismail cabinet approved draft legislation giving individual government agencies powers to reclaim and seize their respective unlawfully occupied land. The law will also set about regulations for the seizures process, whose costs will be borne by those occupying the land. The move is part of a nationwide crackdown on unlicensed developments on state-owned land. Other key decisions taken by the cabinet over the break include:

  • Approved amendments to the Nuclear Activities Act which would delineate responsibility for any Homer Simpson-type nuclear catastrophe;
  • Gave its preliminary approval of a draft law setting up CCTV cameras in public spaces;
  • Sanctioned the establishment of a special economic zone for the Golden Triangle region;
  • Set new water utility fees on developments;
  • Granted a six-month extension on all contracts with the private sector signed between 1 March and 31 December 2016, making eligible for compensation under the Contractors’ Compensation Act, which the Housing Minister says will be issued within days, according to Al Masry Al Youm;
  • Approved a presidential decree extending the nationwide state of emergency.

Abraaj Group is reportedly planning an IPO of South African food and personal care maker Libstar, which may value the firm at as much as USD 1 bn, according to Bloomberg. Abraaj has reportedly tapped JPMorgan Chase & Co. and Standard Bank to manage the IPO which it hopes would raise USD 300 mn. There is also talk of plans to list shares of Libstar in the London Stock Exchange, though no confirmation has come down from Abraaj on the IPO. The emerging markets private equity firm had acquired Libstar three years ago.

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Image of the Day

Did jellyfish put a damper on your Eid by the beach? Social media was abuzz over the holiday with pictures of jellyfish washing up on the shores of the North Coast and stinging swimmers. The Environment Ministry explained that this species of jellyfish normally resides in the Mediterranean Sea, but has recently proliferated due to climate change, pollution, and overfishing of its predators, Youm7 reports. Others have placed the blame on the widening of the Suez Canal.

Egypt in the News

Topping coverage of Egypt in the international press this morning were reports of the 55% increase in fuel price hikes. Foreign coverage, including from the Associated Press and Al Jazeera appears transfixed on how the move will fan popular discontent over the reform measures adopted by the government, but how this discontent will likely translate to social unrest. “In the light of social fatigue, broad-based fear of instability, the threat of repression and the fragmentation of politics, it’s difficult to see how sustained and organized opposition arises,” Michael Hanna, Egypt analyst at the U.S.-based Century Foundation, said.

Tying in for first place in Egypt-related news was coverage of President Abdel Fattah El Sisi’s ratification of of the islands transfer agreement with Saudi Arabia, with most coverage paying particular attention to the unpopularity of the agreement. The AP’s Hamza Hendawi is noting the timing of the move coincided with last days of Ramadan during the Eid break weekend, a move the newswire claims is meant to dissuade any protest. In a piece for the Carnegie Endowment for International Peace, Maged Mandour notes that the whole affair has exposed the opposition to the government from within the elite and political classes of Egypt, describing the handover the islands a pyrrhic victory for El Sisi.

The Qatar blockade is mostly all about Egypt, writes Marc Champion for Bloomberg. The demands imposed by the “Saudi-led” coalition have more to do with combating the Ikhwan than fighting international terrorism, he says while implying that both are somehow very different. He notes that 26 out of the 59 people placed on the coalition’s wanted list are Egyptian. “Egypt has been dreaming for this moment, where the Saudis and everyone else is applying pressure on Qatar,” according to Mokhtar Awad, a research fellow at George Washington University’s Program on Extremism. Meanwhile, New York Times’ David Kirkpatrick says that former Al Jazeera English Cairo bureau chief Mohamed Fahmy’s USD 100 mn lawsuit against the network and Qatar is the latest of the “bizarre twists and turns.” He notes that although Fahmy was jailed in Egypt, he takes his native country’s side in its feud with Al Jazeera.

Other international coverage over the past week worth noting in brief:

Worth Watching

In 1993, BBC thought Cairo would be a model for urban living in the year 2000: By the year 2000, “humankind will be an urban species for the first time in its history,” says the narrator of a fascinating 1993 BBC documentary about “mega city” Cairo (runtime 38:02). Our capital was presented by BBC as a city that “works” and one that offered an alternative to the dystopian urban future many have predicted at the time. H/t Cairobserver.

Diplomacy + Foreign Trade

Egypt is ready to resume its membership in the Nile Basin Initiative if all countries commit to collective decision making and transparency on Nile projects, President Abdel Fattah El Sisi said at the Nile Basin Summit in Uganda, according to AMAY. El Sisi offered to host the gathering in Egypt next year.

In another move aimed at improving ties with Cairo, Hamas announced it was working on a new buffer zone meant to tighten control along Egypt’s border with Gaza, writes Fares Akram for the AP. These initiatives appear to not go unnoticed by the Egyptian government, which reportedly sent 22 shipments of fuel to Gaza on Friday, according to the Palestinian Press Agency Safa.

Infrastructure

Army’s new EGP 700 mn desalination plant to open in Hurghada in days

The Egyptian Armed Forces’ new EGP 700 mn Yosr water desalination plant in Hurghada is set to begin operations in a few days’ time, AMAY reports. The plant will reportedly be the Middle East’s largest to date.

Basic Materials + Commodities

Turkey could take over from Egypt as top importer of Russian wheat

Turkey could be replacing Egypt as the top importer of Russian wheat since the Ukraine and Romania have been offering it lower prices, Reuters says. Russian exporters have charging premiums on their products as collateral for potential risks in Russia and Egypt, such as the instability of the Russian rouble and Egypt’s flip-flopping on the ergot ban.

Egypt’s date exports rise 32% year-on-year in 1Q2017

Egypt’s date exports rose 32% year-on-year in 1Q2017 to 17.3k tonnes, up from 13.1k tonnes during the same period last year, Trade and Industry Minister Tarek Kabil said, Youm7 reports.

Manufacturing

Danieli to secure loan for USD 1 bn steel complex in SCZone in July

Italy’s Danieli Group is expected to secure a loan in July to begin work on a USD 1 bn steel manufacturing plant in Ain Sokhna, Suez Canal Economic Zone Chairman Mohab Mamish said, according to Al Mal.

Tourism

Hotel occupancy rates soar over Eid break

Hotel occupancy rates in Sharm El Sheikh, Hurghada, Alexandria, and the North Coast soared over Eid break, Al Borsa reports. Hotels in Hurghada and Sharm El Sheikh, where visitors were mostly Egyptian and Arab tourists, reported occupancy rates of 60-70% during the break. Meanwhile hotels in the North Coast, whose prices rose by 40% year-on-year, and Alexandria, where prices have risen 50% since the EGP float, were fully booked over the past week.

Telecoms + ICT

TE to secure EGP 13 bn loan for services upgrade

Telecom Egypt is borrowing up to EGP 13 bn to upgrade its infrastructure and mobile internet services, CEO Ahmed El Beheiry tells Reuters in a piece with scant details.

National Security

Ka-52K agreement signals Russian return to Egyptian market, takes market away from US, expert says

The purchase of Ka-52K helicopters from Russia signals a large-scale return of Russian military orders to the Egyptian market, Russian military expert Viktor Litovkin tells Sputnik. “We are cutting off a large piece of the Egyptian market from the Americans,” Litovkin says, explaining that Russia will also be supplying Egypt with air defense systems like the S-300 and S-400, the Tor, and the Buk to name a few.

On Your Way Out

5,000 Muslims praying in Old Cairo’s Amr Ibn Al Aas mosque in the last days of Ramadan on what is believed to have been Laylat Al Qadr were captured in a photo gallery by Hamada Elrasam for VOA. The mosque — the first to be built in Egypt and Africa — is a favorite for prayers especially on that day, which falls on the night of the 27th of Ramadan.

The markets yesterday

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EGP / USD CBE market average: Buy 18.0400 | Sell 18.1397

EGP / USD at CIB: Buy 18.05 | Sell 18.15

EGP / USD at NBE: Buy 17.95 | Sell 18.05

EGX30 (Wednesday): 13,396 (-0.2%)
Turnover: EGP 1.0 bn (37% below the 90-day average)
EGX 30 year-to-date: +8.5%

THE MARKET ON WEDNESDAY: The EGX30 ended the session on Wednesday, 28 June (last week’s only trading session) down 0.2%. The EGX30’s top performing constituents were: TMG Holding up 6.2%, Elsewedy Electric up 3.0%, and Heliopolis Housing up 2.7%. Wednesday’s worst performing stocks were: Eastern Co down 5.8%, CIB down 1.3%, and Qalaa Holdings down 1.2%. The market turnover was EGP 1.0 bn, and foreign investors were the sole net buyers.

Foreigners: Net Long | EGP +26.3 mn
Regional: Net Short | EGP -8.2 mn
Domestic: Net Short | EGP -18.1 mn

Retail: 51.7% of total trades | 47.9% of buyers | 55.6% of sellers
Institutions: 48.3% of total trades | 52.1% of buyers | 44.4% of sellers

Foreign: 26.4% of total | 27.8% of buyers | 25.1% of sellers
Regional: 4.1% of total | 3.6% of buyers | 4.5% of sellers
Domestic: 69.5% of total | 68.6% of buyers | 70.4% of sellers


***
PHAROS VIEW

Fuel hikes may spur temporary inflation, but are ultimately for the greater good: The government’s decision to hike fuel prices by a 50% average may cause inflation levels to rise temporarily to c. 33% for the first quarter of FY2017-18, but will ultimately help “cure the macroeconomic imbalances in Egypt” and remedy the budget deficit, notes Pharos Research in their latest note (pdf). Inflation levels are expected to cool once the market adjusts and price levels stabilize. In the meantime, the government’s social welfare measures are expected to alleviate some of the pressure.

***


WTI: USD 46.04 (+2.47%)
Brent: USD 48.77 (+2.37%)

Natural Gas (Nymex, futures prices) USD 3.04 MMBtu, (-0.23%, August 2017 contract)
Gold: USD 1,242.30 / troy ounce (-0.28%)

TASI: 7,425.72 (+1.24%) (YTD: +2.99%)
ADX: 4,425.40 (-0.55%) (YTD: -2.66%)
DFM: 3,392.00 (+0.38%) (YTD: -3.93%)
KSE Weighted Index: 399.33 (-0.70%) (YTD: +5.06%)
QE: 9,030.44 (+2.88%) (YTD: -13.47%)
MSM: 5,118.31 (-0.06%) (YTD: -11.49%)
BB: 1,310.04 (0.00%) (YTD: +7.34%)

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06 July (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates. 13-15 July (Thursday-Saturday): AGRENA’s 19th Annual Poultry, Livestock, and Fish show, Cairo International Convention Center, Cairo. 15-19 July (Saturday-Wednesday): SSIGE’s GeoMEast 2017 International Congress and Exhibition, Sharm El Sheikh. 23 July (Sunday): Revolution Day, national holiday. 03-05 August (Thursday-Saturday): Watrex Expo Middle East, Cairo International Exhibition & Convention Center. 17 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates. 26 August (Saturday): 27th Egyptian-Jordanian Joint Higher Committee meeting, Amman Jordan. (TBC). 02-05 September (Saturday-Tuesday): Eid Al-Adha, national holiday (TBC). 13-16 September (Wednesday-Saturday): Cairo Fashion & Tex exhibition, Cairo International Conference Center 17-19 September (Sunday-Tuesday): Pipeline-Pipe-Sewer-Technology Conference & Exhibition, Intercontinental Citystars Hotel, Cairo. 18-19 September (Monday-Tuesday): Euromoney Egypt conference, venue TBD. 20-23 September (Wednesday-Saturday): 2017 Automech Formula car expo, Cairo International Convention Center, Nasr City, Cairo. 22 September (Friday): Islamic New Year, national holiday (TBC). 25-27 September (Monday-Wednesday): Egypt Downstream Summit and Exhibition, Kempinski Royal Maxim Palace, Cairo. 28 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates. 03-05 October (Tuesday-Thursday): J.P. Morgan’s Credit and Equities Emerging Markets Conference, London, UK. 18-19 October (Wednesday-Thursday): Middle East Info Security Summit, Sofitel El Gezirah, Cairo. 06 October (Friday): Armed Forces Day, national holiday. 11-12 October (Wednesday-Thursday): 2030 Mega Projects Conference, Nefertiti Hall, Cairo International Convention Center, Cairo. 11-13 October (Wednesday-Friday): Middle East and Africa Rail Show, Cairo International Convention Center, Cairo. 18-20 October (Wednesday-Friday): AfriLabs annual gathering with the theme “Smart Cities,” The French University, Cairo. Register here. 16 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates. 01 December (Friday): Prophet’s Birthday, national holiday. 03-05 December (Sunday-Tuesday): Solar-Tec, Cairo International Exhibition & Convention Centre. 03-05 December (Sunday-Tuesday): Electrix, Cairo International Exhibition & Convention Centre. 08-10 December (Friday-Sunday): RiseUp Summit, Downtown Cairo. 28 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee to review policy rates.

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