EGP Rising

The exchange rate has been on people’s minds this week as the EGP appreciated against the USD for the first time in three months on Monday after strengthening c.0.7%. The EGP continued this gain again today with a rate of EGP 17.95 to the USD 1. Most research houses are of the view that these gains will continue to the end of the year on the back of improved FX reserves the result of a substantial hike in inflows and excellent yields.

On that front, the inflows reached USD 618 mn, the largest single-day gain in the CBE’s history, central bank official told Al Shorouk, a claim backed up by Banque Misr Chairman Mohamed El Etreby (more on that in Talk Shows). We had noted yesterday other reports attributed to nameless CBE officials that inflows since the EGP devaluation reached USD 54 bn. We should get a clearer picture from the bank this week when it announces its net FX reserves for June.

Renaissance Capital’s Global Chief Economist Charles Robertson sees the CBE’s direct hand at play here, suggesting that the it may want to be acting to put downward pressure on inflation. He also posits in an email statement that there is an implicit target for the currency in the FY2017-18 and the CBE is now going to edge the currency towards that level. He sees the fiscal year ending with the rate at EGP 17.5.

…Beltone Financial concurs that the appreciation will be the medicine to help keep inflation in line. The Investment bank is cautiously optimistic, stating that removal of transfer caps would be the last remaining test on the resilience of the EGP. Analysts there expect 2017 ending with an exchange rate in the range of EGP 16.6-17.1 and averaging at EGP 16.8 for FY2017-18. Arqaam capital takes it one step further, predicting a rate of EGP 16.0 for the USD 1 by FY2017-18, according to Al Borsa.

We are one step closer to officially entering FY2017-18, as The House of Representatives finally signed off on the FY2017-18 state budget during a plenary session on Tuesday, Al Shorouk reports. The bill is currently awaiting President Abdel Fattah El Sisi’s approval to come into effect and the government will continue to use last year’s budget until then, sources at the Finance Ministry tell Al Mal (tap here for a refresher on the FY2017-18 budget).

Also on Tuesday, the House approved the extension of the nationwide state of emergency for another three-month term, according to Al Shorouk. MPs also signed off on the National Elections Act, which mandates judicial supervision of the elections regulator for a 10-year period.

The House’s Economics Committee should also be sending today its comments on the executive regulations for the Investment Act back to the Sherif Ismail cabinet after reviewing the draft, AMAY says. The government is under no obligation to follow them (thank God).

MPs will hold their final session today before they head for their summer recess. Having worn themselves out with more work in these past few weeks than at anytime we’ve seen, we recommend the recess be prolonged. We sure will miss you guys (sarcasm may not register, so we’re adding this here for good measure).

Today is do or die time for Qatar as its second deadline expires, or as we like to call it “the season finale of Qatar Smackdown.” Saudi Foreign Minister Adel Al Jubeir said yesterday that the deadline for Qatar to comply would not be extended a second time, Bloomberg reports. Egypt, Saudi Arabia, Bahrain, and the UAE announced they have received Qatar’s response to their list of demands, saying in a joint statement in the wee hours of the morning that they will respond “at the appropriate time.” The heads of the Egyptian, Bahraini, Emirati, and Saudi intelligence services reportedly met in Cairo last night, Reuters reports, citing MENA news agency. No details were provided on the outcomes of the meeting. Qatar said it is open to dialogue as long as it is “based on clear principles without the threat of escalation,” according to the Financial Times. Doha announced yesterday it is significantly stepping up its LNG production capacity, signaling its statements of goodwill may be full of air and that the small state is “ready for a protracted dispute with Gulf neighbors,” Reuters says.

Only Turkey was apparently given a reprieve from the laptop ban on flights to the US yesterday, Newsweek reports. The ban from Turkey will be lifted today following inspections of its airports. Turkey was the second of a list of six Middle Eastern countries, including Egypt, that have been slapped with the ban from the US and the UK that caused some turbulence (for lack of a better word) in air travel. Saudi Arabian Airlines expects the in-cabin ban will be lifted by 19 July after implementing new security measures, the Saudi Press Agency said on Tuesday. Considering we’ve been given the same annoying “airport security” song from the Russians for sometime now, it reasonable to think our airport security will pass muster.

We are only one day away from the CBE’s Monetary Policy Committee meeting this Thursday. Conventional wisdom has it that the CBE with hold interest rates, a view held by economists in a Reuters poll which we noted yesterday. HSBC and Beltone Financial both also predict that the CBE will keep current interest rates, according to Al Borsa.

We are expecting to hear sometime this week on a possible hike in electricity prices, according to sources who spoke to Al Mal.

Supply Minister Ali El Moselhy will be meeting with food producers and distributors next week to negotiate ways to keep shipping and transport costs low after the latest hike in fuel prices, Al Shorouk reports. El Moselhy and members of the Federation of Egyptian Chambers of Commerce had agreed on Monday to cap transport fee increases at 10% to curb inflation, expected to rise by 3-4.5% in the coming period as a result of the hike. avoid further burdening citizens.

Depending on who you talk to, we could be getting 4G service in either the next few weeks or the next few months.

The exchange rate and the EGP’s appreciation continued to dominate discussions on the airwaves last night.

The EGP’s appreciation is simply the result of the laws of supply and demand, Banque Misr Chairman Mohamed El Etreby told Amr Adib on last night’s Kol Youm. While the Central Bank broke a record with its single-day gain of USD 618 mn on Tuesday, Banque Misr processed transactions worth c. USD 40 mn yesterday and about USD 37 mn the day before that, El Etreby continued (watch, runtime 3:41).

On Hona Al Asema, Lamees Al Hadidi was worried that the drop might not have been due to market forces, claiming that sources told her it was the result of “administrative intervention” to ease some of the pressure caused by the recent fuel price hikes.

Lamees was also concerned about the results of the Central Bank’s Monetary Policy Committee meeting on Thursdays, saying that she hopes the committee will maintain rates, since any further increases may “paralyze investments” (watch, runtime 4:05)

The host also covered the latest developments in the Qatar story, saying that the meeting in Cairo between the foreign ministers of Egypt, Saudi, the UAE, and Qatar set to take place today may see the end of the diplomatic rift. The meeting in Cairo also proves that the crisis is not limited to the Gulf but that Egypt is a main part of the equation (watch, runtime: 7:47).

Back on Kol Youm, Adib spent the larger part of his episode talking about the need to combat the “wasta” (nepotism) in Egyptian institutions. MP Mostafa Bakry rang Adib to tell him that he filed a formal complaint against the Administrative Prosecution Authority (APA) for practicing nepotism during its last hiring spree, when only a handful (out of c. 70k applicants) of some staff members’ relatives and friends were given positions (watch, runtime 11:25).

Over on Masaa DMC, Osama Kamel was back on the air and interviewing Hungarian Foreign Affairs and Trade Minister Péter Szijjártó, who talked about Egypt’s role in curbing illegal immigration to Europe. Szijjártó also said that Egypt is on a “long and difficult” journey towards economic reform (watch, runtime 16:54).

New export orders continued to grow for its third consecutive month in June, according to last month’s reading in yesterday’s Emirates NBD Egypt PMI (pdf). The gauge came in 47.2 in June, broadly similar to last month’s reading 47.3. This growth in exports came on the back of greater interest from international markets and reports of new contract wins from overseas markets, as the weaker EGP continues to draw interest. “Egypt’s non-oil business continued to deteriorate during June — its 21st consecutive month — but at “a modest pace that was broadly in line with the trend observed throughout the 2Q2017,” said the report. Firms continued to cite weak domestic demand conditions as weighing on activity and new order growth, said the Head of MENA Research at Emirates NBD Khatija Haque. The overall downturn in non-oil business was led by a sharp fall in output, although the rate of contraction was only slightly below April’s nine-month low. There was a sharp rise in output charges was observed in June, although the rate of inflation eased to the weakest in 16 months. Firms signalled the passing on of higher cost burdens to clients where possible.

EFSA to draft new regs for Capital Markets Act once it passes the House: The Egyptian Financial Supervisory Authority (EFSA) will be drafting new executive regulations for the amended Capital Markets Act once the House of Representatives signs off on the bill, EFSA boss Sherif Samy said on Tuesday, according to Al Borsa. The Sherif Ismail cabinet had approved the amendments, which are currently before the House, and sent them to the Council of State for review in late May. Among other things the amended bill is expected to modify the regulations governing private placement, cover the issuance of sukuks, and give the EGX flexibility to set lower listing fees to attract smaller companies.

The EFSA is also waiting on the cabinet to approve the Leasing and Factoring Actso it can be sent to the House to be reviewed and issued, Samy added. The act is expected to include new clauses to regulate SME financing.

The refugee crisis topped the agenda during President Abdel Fattah El Sisi’s trip to Hungary for the Visegrád Group-Egypt Summit, which is getting us all excited about the prospect of Turkey-style agreement with the EU to help curb migration flows to Europe. El Sisi said that Egypt is engaged in meaningful discussions on avenues for cooperation to address the refugees crisis with both the EU and the Visegrád Four, according to an Ittihadiya statement. Hungarian Prime Minister Viktor Orbán said the countries recognized Egypt’s efforts to curb migration, according to a statement.

The statements as the EU is looking to dole out more cash to help countries get a grip with refugees. The European Commission announced EUR 35 mn in extra cash for Rome in response to Italian demands that its neighbors share more of the burden, according to Reuters. European officials maintained that better local rescue services would mean more migrants being taken back to Libya or perhaps to neighboring Tunisia or Egypt.

El Sisi discussed economic cooperation in investments, manufacturing with Czech Prime Minister Bohuslav Sobotka, according to an Ittihadiya statement. Separately, the Egyptian Businessmen Association delegates who attended the Egyptian-Hungarian business forum met Hungarian company representatives to discuss trade and investment cooperation, AMAY reports. The summit’s closing statement mandated the formation of an Egypt-EU cooperation council, according to Al Shorouk.

Russia’s UVZ looks into plans to assemble tanks in Egypt: Russian machine and defense manufacturing company Uralvagonzavod (UVZ) reportedly has plans to assemble its T-90S third generation battle tanks in Egypt, according to Russia’s Sputnik Arabic portal, which cites the company’s annual report 2017. The report apparently says that the company will help an undisclosed customer establish a company to assemble the tanks in Egypt. Reports had emerged in the local press citing then-CEO Oleg Sienko back in 2015 that Uralvagonzavod had successfully concluded negotiations with the Egyptian government on developing Russian military hardware production facilities. “We seek through negotiations with the Egyptian Ministry of Defence to modernise Russian weapons and military mechanisms present in Egypt since the 1960s, provided by the Soviet Union at that time,” Sienko had told Daily News Egypt back then.There was even talk of partnerships with the private sector to develop defense machinery and spare parts.

EMRA tender winners to invest USD 41.3 mn in Eastern Desert exploration: The winners of the Egyptian Mineral Resources Authority’s (EMRA) gold mining tender in the Eastern Desert and Sinai Peninsula will be investing around USD 41.3 mn collectively in exploration activities, sources close to the matter tell Youm7. The UK’s Veritas Mining Limited will spend USD 11 mn on its Omm Ras concession, while Ghassan Spain will invest USD 4 mn to explore the Dahab concession. Resolute Egypt plans to spend USD 18.5 mn at the Boukary and Omm Samra concession. Egypt’s East Gas Company will be allocating around USD 8.2 mn to exploration activities at the Omm Oud and Hangaliya concession.

Egypt’s economic recovery is driving hotel business up, as Cairo’s hotels witnessed a 42.4% year-on-year increase in profit per room during the month of May, despite an 8.9 bps drop in occupancy rates to 63.6%, HOTSTATS reveal in their latest Middle East and North Africa chain hotels review (pdf). The drop in occupancy rates was offset by a nearly 73% y-o-y increase in average room rates, which recorded USD 97.51 during May. “As a result of robust top line performance, profit conversion at Cairo hotels remains strong at 53.5% of total revenue,” well above the MENA region’s average 36.7%.

You know we just can’t get enough of our tourism recovery: Egypt and Greece are the top two destinations for German tourists this summer, with Turkey, Croatia and Portugal trailing closely behind, according to German tour operators, Tornos News reports. Demand for Egypt is up 30%, Thomas Cook’s Stefanie Berk says, “as German holidaymakers regain confidence in the destination.” With Greece overbooked as well, “German clients are booking summer holidays instead in Egypt, Tunisia and Turkey.”

Issues rolling out fuel smartcards? You don’t say: Fuel smartcards are ready to be rolled out, but there are still “some kinks” to iron out with tuk tuks and fishing boats, Oil Ministry official Khaled Othman tells Youm7, without providing details on what these problems are. However, these vehicles have yet to be incorporated into the system, he says — which gives us zero reassurances since we’ve heard this tuk-tuk song before. The government had said earlier this year that it plans to make using the smartcards mandatory in FY2017-18 as part of its plan to cut back on fuel subsidies.

Takaful and Karama to handout cash subsidies to children under six: Children under the age of six will be getting a monthly stipend of EGP 60 from the state’s Takaful and Karama cash subsidy programs for the first time starting August, Deputy Social Solidarity Minister Nivine El Kabbag tells AMAY. The programs, which used to extend only to school children, will cover up to three children per family, taking the youngest by default. Children in primary school will receive an EGP 80 stipend, up from EGP 60 before, while those in middle school will get EGP 100, and those in high school will get EGP 140 a month, El Kabbag added.

On a related note, the move to cash subsidies got a pat on the back from Parliament yesterday. Mohamed Elsewedy, leader of the Support Egypt Coalition (Parliament’s biggest bloc) publically endorsed the move, telling reporters the transition to cash was inevitable. Elsewedy also lauded the government’s recent move to lift fuel subsidies further, saying that the gradual phase-out of fuel and energy subsidies will allow the state to direct resources where they’re most needed, such as social welfare, healthcare, and transportation.

Media Production City pulls the plug on Al Hayat TV: Broadcasting of Al Hayat TV channels was halted on Monday after the Egyptian Media Production City’s (EMPC) management decided to cut off services provided to the network, including electricity, due to overdue payments. The EMPC said in a statement carried by Al Masry Al Youm that it had issued three warnings to the network. Al Hayat’s debts to the EMPC are reportedly north of EGP 20 mn, sources tell the newspaper. The network is currently broadcasting from abroad. The network issued a statement yesterday, carried by AMAY, alleging that it has already paid its bills and that the EMPC is actually indebted to the network to a tune of EGP 16 mn.The two sides are currently in a legal battle over a piece of land Al Hayat had purchased from the EMPC. In a funny case of the pot calling the kettle black, MP Mostafa Bakri issued a statement yesterday saying the EMPC’s decision sends a message that it curbs freedom of expression, according to Al Mal.

MOVES- Our good friend Menatalla Sadek will be resigning her post as Chief Investment Officer for Ghabbour Auto as of 1 August, according to bourse filing. The torch will be passed on to Andre Valavanis and Sarah Maged, who will be co-heading the company’s Investor Relations department. Ms. Sadek joined GB Auto six years ago in December 2011 following a career spanning over a decade in finance in both Egypt and Europe.

CORRECTION – We have a couple of Mia Culpas from yesterday’s issue. It was actually Tanmeyah Microfinance which would be receiving a EGP 500 mn facility from Banque Misr, not Tanmiya Capital Ventures (which currently goes by TCV) as we had noted. We had also misquoted supermarket chain Spinneys’ CEO Mohanad Adly as saying that they noted price increases on 1,100 items, when in fact he stated that they were monitoring these items for any hike. H/t MA.

We are seeing a flurry of activity heading towards Iran these days, as Volkswagen announced plans to sell cars in Iran for the first time in 17 years, taking advantage of easing sanctions to expand. Volkswagen has signed a contract with local importer Mammut Khodro to offer Tiguan compact SUVs and the Passat family car. This expansions comes amid concerns about stalling growth in Europe and China, Bloomberg notes. Peugeot-producer PSA Group was the first carmaker to re-enter after announcing last year to upgrade its Peugeot factory near Tehran and start building Citroen models in the country.

Meanwhile, Total and Iran have reached a preliminary agreement to build three petrochemical plants in an agreement potentially worth USD 2 bn, an Iranian oil industry official said on Tuesday, according to Reuters. Total and China National Petroleum Corporation signed a USD 4.8 bn agreement earlier this week to develop its share of the world’s biggest natural gas field.

In other rogue nation news: the world just apparently got a little less safer, after North Korea announced that it successfully launched an ICBM, with the potential to hit the continental US. US Secretary of State Rex Tillerson called the move a “new escalation of the threat” to the U.S. and its allies that the rogue nation would be brought before the United Nations Security Council.

Old-school TripAdvisor discovered in Ancient Egyptian tombs: Polish archaeologists have found messages tourists carved into the walls of tombs at the Valley of the Kings around 2,000 years ago, according to the Daily Mail, suggesting that people’s love of writing reviews predates the Internet by a few centuries. While most see the messages as graffiti that has vandalized the historic site, Adam Lukaszewicz from the University of Warsaw actually sees great added value in the ancient scribbles, particularly as they serve as a record of who visited the tombs in ancient times, The Times reports. “By systematically recording the inscriptions, Professor Lukaszewicz has found that some of the visitors were philosophers from the Ancient Greek schools, including cynics and followers of Plato,” as well as people at the top of the social hierarchy.

It was an incredibly slow news night for Egypt in the foreign press this morning. Beyond the two stories we are going to mention below, all we can hear on Egypt was cricket chirps.

Surprisingly, topping coverage of Egypt appears to be Irish citizen Ibrahim Halawa, whose trial has been finally set by the Prosecutor General for next Sunday, according to Irish Foreign Affairs Minister Simon Coveney. Official Irish observers will be present at the hearing, a move she welcomed as an indication that the trial is now progressing into its final stages, National Public Service Broadcaster’s RTÉ.ie reports.

Apart from that, it’s been all Qatar all za time. Nothing interesting by way of opinions on the issue, with coverage mostly centering on the countdown to the expiration of Egypt and its allies’ deadline. Gulf Times is running a piece on how apparently Egypt has failed to persuade countries participating in the African Union Summit held in Addis Ababa, to join in on the Qatar smackdown.

Parliament MPs can forget about ludicrous proposals for price controls: The government is well aware of how much prices rise in the local market after each reform measure it enacts, but it will not interfere to put a cap on these prices or exercise any other form of mandatory control, Mahmoud Khalil writes for El Watan.

How China uses countries like Egypt to shirk climate change duties: It appears China seizing the reins of leadership on climate change from the US is a little disingenuous considering that the country is engaged in a number of big coal developments, writes Hiroko Tabuchi for the New York Times. While China halted plans for more than 100 new coal-fired power plants this year, Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal. Over all, 1,600 coal plants are planned or under construction in 62 countries, according to data from the Global Coal Plant Tracker portal. The new plants would expand the world’s coal-fired power capacity by 43%. Some of the countries targeted for coal-power expansion include Egypt, where Tabuchi says coal projects by Shanghai Electric and other global developers are set to bring the country’s coal-fired capacity to 17,000 MW, from near zero, citing data by German environmental group Urgewald. The piece provides an interesting insight into some of the downsides of the Belt and Road initiative. Plus the Global Coal Tracker is actually pretty cool.

Ramadan satire at its finest: Throughout Ramadan, comedy troupe Peace Cake Productions released a series of videos satirizing the (undisputed) worst parts of entertainment in the Holy Month. First on their hitlist: Ramez Galal’s annual prank show. Set in Mecca during the early Islamic period, the comedy troupe’s sketch Ramez Sakr Quraysh (runtime: 1:33) hilariously mimics the entirely unfunny Ramez Taht El Ard. Whatever you do, don’t close the video before it’s over — their olden-day equivalent of hidden cameras is guaranteed to make you laugh. Their sketch poking fun at television content (runtime: 2:38) during Ramadan is also spot on, from the ridiculously small bits of mosalsalat shown between long stretches of ads, to the bizarre ads — the best by a long shot being the one for “Porto Mars.”

Palestinian President Mahmoud Abbas was scheduled to meet with Egyptian President Abdel Fattah El Sisi in Cairo on Sunday, Palestine’s ambassador to Egypt Gamal El Shobky announced yesterday, Ahram Gate reports. Unnamed Palestinian sources in Ramallah are alleging though that Abbas’ trip was canceled after El Sisi told the Palestinian president “he would not discuss pertinent issues including the Gaza Strip, Hamas, or Abbas’ political foe Mohammed Dahlan,” according to i24News. If true, this good signal a shift in Egyptian-Palestinian ties.

Four companies are reportedly bidding for the the Electricity Ministry’s tender for maintenance and operations at the new Siemens power plants, Al Borsa reports. Siemens, Germany’s Steiaj, an Orascom-ADERA Energy consortium, and an Elsewedy-EDF consortium have submitted their technical offers for the tender to the Egyptian Electricity Holding Company (EEHC), which intends to finish reviewing by the end of the month, officials tell the newspaper. A final agreement will be signed with the winning company before the year is out, they add.

Hassan Allam broke ground on civil work at the 650 MW West Cairo power plant for some c. EGP 1.1 bn in investments, Al Mal reported on Tuesday. The firm is days away from signing a funding agreement with the Islamic Development Bank to finance the EGP 6 bn project, which should come on stream by 2019.

The Alexandria Containers and Cargo Handling Company decided to reduce container handling fees by c. 20% for eight of its services starting August, Al Mal reported on Tuesday. The move is a bid to attract customers after the recent fuel price hike, which is expected to have an inflationary effect on shipping and transport fees. In a surprise move the company also increased fees by up to 60% for two services, an unnamed company executive tells the newspaper.

The Arab Company for Drug Industries and Medical Appliances (ACDIMA) established an EGP 800 mn pharma plant to manufacture hormone meds, plant manager Samir Thabet tells Al Borsa. The company, which owns a controlling 55% stake, is targeting EGP 300 mn in sales from the plant by year’s end.

The Heliopolis Company for Housing and Development (HCHD) resolved its dispute with Magic Dreams and signed two new leasing agreements with the company for Merryland Park that extend to February 2032, HCHD said in an EGX filing. Magic Dreams has settled debts worth EGP 5 mn with HCHD and will pay another EGP 7 mn on 1 September, while the rest will be repaid at a 7% interest rate over the course of four years starting 1 October. The companies had reached a preliminary agreement over the park in February that would see Magic Dreams complete the development of the Merryland Park by the end of August, with the Defense Ministry acting as financial guarantor.

Zayed Edge will issue a tender in two weeks for a 14-feddan, EGP 600 mn mall in the Cairo suburb of Sheikh Zayed, Al Borsa reports.

Medical tourism season at the Siwa Oasis kicked off this month, according to an Environment Ministry statement. The season runs until September and offers visitors an array of natural treatments. Last year saw around 5,500 tourist patients flock into the city, mostly from Saudi Arabia, UAE, Kuwait and Libya, according to ministry statistics.

Two policemen were killed and 10 others were injured in an explosion in North Sinai’s Al Arish, Middle East News Agency reports, the Middle East New Agency reports. Reuters puts the death toll at three.

Prosecutor General Nabil Sadek referred 41 suspects yesterday to a criminal court for suspected involvement in an organ trafficking network, Ahram Online reports. The individuals, who were arrested in December, are accused of performing illegal transplants from 2011-2016 that resulted in at least one death and several disabilities. The charges against them include dereliction of duty, bribery and profiteering.