Pets in EM, dead languages at St. Catherine’s, and Shuaa wants to come back to Egypt

It is a very slow news day as we head into a long weekend for Eid Al-Adha (here) and Labor Day (in the US / Canada). Enjoy the lull while it lasts — we’re looking at a hectic fall, folks, between the abyss that is a packed legislative season for the House of Representatives — and the fun that will be planning and budgeting for 2018, which we believe will be more challenging than most folks are expecting.

How slow is the news? Bloomberg essentially uses this quote — “‘Geopolitical risk remains high, particularly in the U.S.,’ said Chris Diaz, who oversees about USD 2 bn as a money manager at Janus Capital Management in Denver. ‘Valuations in all risk markets, including EM, are fairly full in our view and this would be a reasonable time to reduce risk’” — to justify this headline: “Wall Street Vets From Dalio to Gundlach Warn on Emerging Markets.”

The Financial Times, meanwhile, is using dog and cat ownership as a proxy for middle class formation in EM (see The Macro Picture, below).

iSheep, rejoice: Apple has reportedly set 12 September as the date for the unveiling of itsnew iPhones and other products — including its 10th anniversary phone — and may do the deed at the new Steve Jobs Theater, which we think would be a rather nice touch. The Wall Street Journal broke the news yesterday. The outlook for our favourite computer maker is solid, the paper notes, writing, “Consumer demand for a new iPhone appears strong. In a recent survey [of US consumers], 52% of people planning to buy a smartphone in the next 90 days said they would buy an iPhone, the highest level since 2010, according to 451 Research, a market-research firm.” Apple Insider has a fast rundown on what you can expect at the event.

With tomorrow being our last work day before a five-day weekend, you would do well to set a reminder to turn on an “out of office” reply. Here to help you is the New York Times with “What You’re Truly Saying With Your Out-of-Office Reply.” Our suggestion: Be honest. In this day and age, you don’t have “limited access to your email” unless you’re paddling somewhere off the coast of Northern Quebec and your next stop is the Northwest Passage. Just let people know you’re on a vacation and will not likely see their email, so they should … contact someone else? Try again on 5 September?

PSA #1: Netflix has given a green light to season three of Stranger Things. Season two is set to drop this coming Halloween, and series creators the Duffer brothers have hinted that season four may be all they need to bring the storyline to a close.

PSA #2: John le Carré’s latest is due out on 5 September. The New York Times has a review here, and Amazon doesn’t yet list a Kindle edition. The Grey Lady also has an interview with Le Carré and non-fiction author Ben Macintyre that’s definitely worth a read if you’re into spy stuff.

PSA #3 comes from MoFA, which would like you to know that you need to enter the Schengen zone through the country that issued your visa. The warning came after a group of Egyptian travelers were turned back at Frankfurt Airport because they hadn’t obtained their visas from the German embassy. Ahram Online has the story.

The customs exchange rate will be lowered to EGP 16 per USD 1 effective from 1 September, Finance Minister Amr El Garhy told Reuters. The rate was lowered from EGP 16.25 per USD 1 and will be in place for one month. El Garhy noted that the customs exchange rate is set at about 90% of the currency’s market value “in line with the currency price’s downward movement over the last period.”

President Abdel Fattah El Sisi will be heading to China and Vietnam next week, a state from State Information Services says. El Sisi will be attending meetings at the 2017 BRICS summit, which kicks off in Xiamen on Sunday, at Chinese President Xi Jinping’s invitation. El Sisi will then head to Hanoi, becoming the first Egyptian head of state to ever visit Vietnam, where he will meet his Vietnamese counterpart. The visit follows a roadshow to Vietnam by Investment Minister Sahar Nasr and Suez Canal Economic Zone boss Mohab Mamish. Sputnik also has the story.

El Garhy on strengthening EGP: A lower customs exchange rate is a natural reflection of the strengthening EGP, the stability of the market, and the gradual increase in FCY liquidity in the banking system, Finance Minister Amr El Garhy told OnLive’s Markets and Business. El Garhy stressed that current FX rates are not controlled by the government and reflect how both the economy and the political arena are faring. The minister also said the economy is finally beginning to pick up and pointed to key indicators such as the reduced budget deficit as reasons to be optimistic (watch, runtime 7:33).

Greenback at EGP 16.50 by mid-2018? Hona Al Asema’s Lama Gebril was also on the new customs rate, speaking to CI Capital Economic Analyst Noaman Khaled, who also noted that the banking sector now has greater USD liquidity. He attributed the 11% rise in the value of the EGP against the USD since March to internal factors including banks’ increased ability to meet LC demands. Khaled said he expects the greenback to be changing hands at EGP 16.50 by mid-2018 (watch, runtime 5:45).

Tourists in Egypt are really spending more today than in 2010? Over on Masaa DMC, Tourism Minister Yehia Rashed told host Eman El Hosary that the average rate of tourists’ expenditures has surpassed pre-2010 levels, saying that the type of tourists Egypt attracts now tend to spend more. That last bit is an assertion our friends in the industry would challenge, and we ourselves wonder whether the “surpass pre-2010 levels” is in EGP or USD terms. Without missing a beat, the minister noted that the influx of Arab tourists has seen a significant increase over the past several months. Rashed also said his ministry is working on ensuring online commentary about visiting Egypt — whether from bloggers or on travel advice websites — is as positive as possible (watch, runtime 8:10). PR pro tip: Telling non-Egyptians what to write about Egypt typically doesn’t end well.

Meanwhile, Yahduth fi Misr’s Sherif Amer covered the Social Solidarity Ministry’s announcement that pensions will be available via ATMs as of the first day of Eid.

Shuaa Capital seeks regulatory approval to re-enter Egyptian market: UAE’S Shuaa Capital is looking to re-enter the Egyptian market and says it “has formally begun discussions with Egyptian regulators for reintroducing its securities business into the Egyptian market,” CPI Financial reports. “Shuaa Capital believes there still exists significant untapped potential to serve clients eyeing the Egyptian market with our Securities business. Moreover, we have ambitious plans to extend our platforms further beyond our local jurisdictions, to allow clients both current and prospective, direct access to other markets through a single trading account, blended with a suite of increasingly comprehensive brokerage services,” General Manager Fawad Tariq-Khan says. Once reinstated in the Egyptian market, Shuaa Securities Egypt will offer high-net-worth clients from across the region access to the Egyptian capital markets. Shuaa had suspended operations in Egypt in 2008 as the global financial crisis swamped the UAE.

MARKET WATCH- Cleopatra Hospital Group is in the market for a 150-bed hospital. The group filed for a capital increase (pdf) of EGP 700 mn through a fully tradable rights issue at the par value of EGP 0.50 per share and will use the proceeds to ensure that EGP 580 mn are available “to support the acquisition of a hospital of around 150 beds.” Cleopatra Hospital Group says due diligence on the transaction is currently in process. The remaining EGP 120 mn of the capital increase proceeds will be used to retire existing debt given what the company describes as “the high cost of debt in the current interest rate environment.”

Are we the only ones who find it spooky that a major corporation decides to raise equity because it’s less costly than raising debt?

INVESTMENT WATCH- Yet another Saudi wants to invest in Egypt. Saudi Prince Khaled Bin Alwaleed Bin Talal Al Saud expressed interest in investing in new projects in Sharm El Sheikh — partnering with companies to expand current projects, or helping financially struggling companies, according to an Investment Ministry statement. Al Saud told Investment Minister Sahar Nasr that it was improvements in Egypt’s investment climate was what drew him to expand in the country in a meeting in Cairo yesterday. Al Saud’s offer is the latest in a series on investment announcements by Saudi investors, including interest from Alwaleed bin Talal in a USD 800 mn project with Talaat Moustafa Group, Al Hokair Group planning to invest EGP 3 bn in Damietta Furniture City, and plans by Abdulrahman Sharbatly and Fahd El Shobokshy to jointly invest USD 2.15 bn.

M&A WATCH- EFG Hermes confirmed it acted as the “sole financial advisor for the shareholders of Native Markets,” which owns the TBS and Four Fat Ladies brands, on a transaction that resulted in a ‘partnership’ between Native Markets and the Abbas family’s Intro Investments Holding. EFG Hermes did not provide any details on the transaction, news of which broke on Sunday, but said the partnership “will see Native Markets accelerate its growth plans, in terms of both store rollout and manufacturing capability. Both parties are keen to capitalize on the new partnership to further develop Native Markets’ position as a leading local F&B retailer and producer.” EFG has advised on ten transactions with an aggregate value of USD 870 mn in the first half of 2017. Al Tamimi Law Office acted as legal advisor. Analysts told Al Mal they expect the market to respond positively to the partnership and see activity in the food and beverages sector increasing as a result.

M&A WATCH- Government-owned National Investment Bank (NIB) has decided to shelve plans to acquire a 40.06% stake in the Egyptian Satellite Company (Nilesat), Al Mal reports, citing unnamed sources. NIB’s decision followed The National Media Authority (NMA)’s objection to the transaction last month. Source say NIB had acted unilaterally on the agreement and moved forward with obtaining the Egyptian Financial Supervisory Authority (EFSA)’s approval for the transaction prior to notifying either Nilesat or NMA. EFSA had also exempted NIB from presenting a mandatory tender offer for the remaining shares of the company.

Germany has reached an agreement with Egypt to slow the flow of illegal migrants, according to The Associated Press. “The agreement announced Monday is part of a wider effort by Germany to work with countries to fight the causes of unchecked migration. Under the agreement, Germany will give Egypt a EUR 28 mn grant to spend on education and training programs to help people find better jobs, as well as provide more funds for Egyptians to study in Germany, Egypt’s Foreign Ministry said in a statement. Germany said it will also help Egypt improve facilities for Syrian and other refugees in Egypt and will “work more closely” to crack down on people smugglers. Reuters also notes the agreement.

This pales in value and scope when compared to the Turkey-style agreement Germany helped broker last year, but it’s a start. We have been expecting for some months now that Germany would provide Egypt with economic assistance in exchange for stemming the flow of migrants. Egypt has been vying for such an agreement since the migration crisis intensified in Europe (background here and here and here), and we were hoping for a wider agreement as Egypt and the EU revisited the terms of their cooperation framework for 2017-2020. German Chancellor Angela Merkel had hinted at the possibility of such an agreement during her meeting with El Sisi in Cairo in March.

This comes as leaders of Germany, Italy, France, and Spain are holding a summit to discuss migration issues with the those of Chad, Niger, and Libya along with EU foreign policy chief Federica Mogherini in Paris on Monday. French President Emmanuel Macron had taken the position that the influx of migrants should be managed in Italy, with hotspots in Africa to run asylum-seeking centers. EU and African countries have come out against the idea.

Fitch Ratings downgraded Qatar’s credit rating on Monday by one notch to AA- with a negative outlook, citing the negative impact of the “Arab Quartet” blockade. Qatar may need to accelerate cuts to spending to offset against oil prices and any further damage to the blockade, Fitch said in a statement. “The move brings Fitch’s rating in line with Moody’s and Standard & Poor’s.

This comes as Russia’s Foreign Minister Sergey Lavrov is in Kuwait at the start of a three-nation tour of GCC states over the ongoing rift, the Associated Press reports.

M&A WATCH- US pharma company Gilead reached an agreement to acquire Kite for USD 11.9 bn, according to the Financial Times. Gilead — the maker of hepatitis C cure Sovaldi — is looking to get its hands on an experimental med which fights cancer by re-engineering the patient’s white blood cells to attack the cancer. The company is willing to pay USD 180 per share to Kite Pharma. This is Gilead’s largest takeover since it acquired Pharmasset for USD 11 bn six years ago.

North Korea fired a surprise test missile over northern Japan yesterday, “markinga sharp escalation of tensions on the Korean peninsula,” Reuters reports. The missile, which landed in the waters surrounding the island of Hokkaido with no harm done, was fired as US and South Korean troops rallied in the area for annual military drills to which North Korea objects. Japanese Prime Minister Shinzo Abe described the act as “unprecedented, serious and a grave threat to our nation.”

Pets — the chic new proxy for growing wealth in emerging markets: Pet ownership in developing countries is on the rise, which according to the FT’s Steve Johnson is indicative of a growing middle class in emerging markets, as well as changing lifestyles and attitudes towards cats and dogs. Dog ownership has grown 51% since 2003 to 243 mn, while cat ownership has risen 49% to 126 mn. “In poor countries people are more focused on a chicken that will lay eggs or a pig that might eat their waste. It’s only as they get a little bit richer that that changes. Pets might be seen as a relative luxury purchase,” said Renaissance Capital’s chief economist Charles Robertson. This comes as the rate for pet ownership in the developed world fell, growing a modest 5% for both cats and dogs since 2003. The development is opening up doors for the pet industry in EMs, says Johnson.

Egyptian fortune teller Menat is the latest character to join the ranks of Capcom’s Street Fighter. Yes, ladies and gents, the Street Fighter saga lives on — on higher-tech consoles with better graphics, moves, sound, and overall gameplay. Street Fighter V is out today, with Menat as the newest member of the gang, wielding an Ancient Egypt-inspired “glowing crystal sphere that can be used for both offense and defense.” Games Radar has more on what you can expect.

Cairo is one of Pyongyang’s leading trade partners in the Arab world and has long been interested in North Korean military technology, Samuel Ramani writes for The Diplomat. The piece traces the history of relations to draw the connection to the US’s decision last week to cancel or suspend USD 290 mn in aid to Egypt, saying, “Cairo’s close relationship with North Korea has remained a consistent feature of Egypt’s Asia-Pacific strategy since the dawn of the Cold War.” He points to Orascom’s Koryolink — the only mobile phone network in North Korea — as an example of civilian cooperation, and writes, unoriginally, that Port Said as well remains open for shipping North Korean arms export to African countries. He does, however, present an interesting counterpoint: “Trump’s decision to cut aid to Egypt could convince Sisi to expand Cairo’s long-standing defense partnership with North Korea. This outcome would underscore the inefficacy of international sanctions against the DPRK and lead to a profound political backlash against Trump’s use of coercive diplomacy with Egypt.”

Scientists reportedly discovered ancient works written in rare dead languages at Saint Catherine’s monastery, according to The Times of London. “Among the discoveries were three ancient Greek medical texts that were previously unknown to scholars, as well as the earliest copies of some from Hippocrates,” the article says. Researchers also stumbled on documents written in the Caucasian Albanian language, which had only even been found inscribed on stone, and used imaging technology to recreate the missing parts of the text.

Other news worth noting in brief this morning include:

• Antiquities looters have been increasingly relying on Egyptologists and archeologists to help them dig out and appraise relics and artefacts found, according to Livescience.
• The arrest of Alexandria Deputy Governor Soad El Kholy has gone global with a pickup from the Associated Press, which points out that she is “the most senior female official to be arrested over corruption charges.”

How South Korea used selectivity to achieve aggressive economic growth: Over the past few decades, South Korea has achieved impressive levels of economic growth and is now one of the top manufacturers of cars, electronics, and ships worldwide. The secret is the fact that the country took the time to thoroughly assess which sectors and industries would be the keys to its growth — and stuck with these select few industries, Alaa El Hadidi writes for Al Shorouk. Rather than trying to manufacture everything, the Koreans implemented policies that actually significantly hampered production of goods that were not among the “chosen ones.” The lesson to be learned for Egypt is that the key to boosting local industry is not necessarily in increasing the breadth of production, but rather in the depth and expertise.

Score one for the Masry dialect, as Disney announced it will return to using the Egyptian dialect in dubbing its animated films, Ahram Online reports. The decisions follows an online media campaign in Egypt to restore the dialect in dubbing movies, after it was replaced by classical Arabic in either in 2012 with Brave or 2013 with Frozen . To mark the occasion, we’ll leave you with some choice hilarity of the Lion King’s Timon and Pumba (please excuse the overuse of subtitles in this video, runtime 1:40).

President Abdel Fattah El Sisi will visit Belarus soon, Foreign Minister Sameh Shoukry said yesterday after meeting with his Belarusian counterpart in Minsk, the Belarusian Telegraph Agency reports. While the visit has yet to be scheduled, El Sisi is expected to sign a roadmap for cooperation between both countries, the minister added. Separately, Egypt is also expected to sign a freetrade agreement with the Eurasian Economic Union that is currently being put in final form.

Shoukry also spoke about Cairo’s position on talks between rival Syrian factions, encouraging UN-sponsored dialogue andconfirming Egypt’s support of a peaceful settlement of the Syrian crisis through the Geneva peace process, according to Sputnik.

Shoukry’s statements on Syria come as Saudi Arabia, Russia and Egypt apparently support the idea of conducting the second meeting between the Syrian opposition, a representative of pro-Assad forces, Nimrud Suleiman, told Sputnik on Monday.

While in Minsk, the Egyptian FM also met with Belarus President Alexander Lukashenko, and Antimonopoly Regulation and Trade Minister Vladimir Koltovich, who co-chairs the Belarusian-Egyptian commission of economic cooperation.

Next on his itinerary are meetings with the Romanian president, foreign minister, and heads of the Senate and Chamber of Deputies in Bucharest, Ahram Gate reports. The minister is expected to sign three MoUs on tourism cooperation, political consultation, and waiving visa requirements for the two countries’ diplomats.

Irish Taoiseach Leo Varadkar discussed the case of Ibrahim Halawa with President Abdel Fattah El Sisi during a phone call yesterday, after the court postponed the verdict in the Irish citizen’s trial, yet again, to 18 September. Irish media had speculated a verdict would be handed yesterday, especially after Varadkar said he would the raise the issue of extraditing Halawa with El Sisi, the Irish Independent reports. Halawa’s family expressed disappointment with the postponement. Foreign Affairs and Trade Minister Simon Coveney said he was “frustrated at the news that the final hearing…was today deferred.”

The Egyptian General Petroleum Corporation (EGPC) is planning to extend its contract with Iraq to continue importing crude oil for a second year, an unnamed official tells Al Shorouk. Negotiations are still expected to take place, the source adds. So far in 2017, Egypt has imported 8 out of 12 mn bbl of Iraqi crude. While Iraq was meant to deliver 1 mn bbl a month under the initial agreement, cost cutting measures saw Iraq delivering a monthly 2 mn bbl. A portion of the refined oil is re-exported back to Iraq. Egypt recently renewed its 2 mn-bbl-per-month contract with Kuwait.

Sinopec Group is studying investing in new oil refining and petrochemicals projects in Egypt, the company’s Vice President Ling Yiqun told Oil Minister Tarek El Molla at a meeting, according to Al Masry Al Youm. Yiqun also invited the minister to visit the company’s refineries in China. Sinopec had acquired 33% of Apache’s concession in the Western Desert in 2013.

The public prosecutor will determine the fate of the 63k tonnes of Romanian wheat found to contain poppy seeds after the Eid Al Adha holiday, judicial sources tell Reuters. The seeds “are banned from being traded or planted in Egypt,” but the potential rejection of the shipment — which sources say was transported by trader Cerealcom Dolj — “could hurt trade” with Egypt, according to UKRAgroConsult. “A final rejection could revive concerns over which government body is responsible for inspecting cargoes into Egypt,” the piece says. An analyst at Rabobank says the impact on tender offers and prices should be limited nonetheless and poppy seeds will affect all exporters, it is a case that “could slightly dent trader confidence, but certainly not to the extent of the ergot specifications.”

Trade and Industry Minister Tarek Kabil ordered the establishment of a new committee on Monday that will draft the health, industrial, and environmental safety criteria that manufacturers seeking permits will have to abide by, Al Ahram reports. The committee, which was mandated by the newly-issued Industrial Permits Act and will operate under the Industrial Development Authority, expects to conclude its work in two months’ time.

Egyptian real estate developer Amaar Group announced on Sunday it has broken ground on its EGP 300 mn commercial and service mall project in Sixth October City, the Standard Republic reports, citing Amwal Al Ghad. Amaar Group is partnering with Saudi Arabia’s Al Saqqaf Real Estate Company to fund and execute three projects for investments north of EGP 1 bn, Amaar chairman Abeer Essam tells Al Mal. In addition to the mall, the two firms will also co-develop the Arena Business Park and the last phase of the residential Sanabel project.

Telecom Egypt (TE) tapped 17 distributors to sell SIM cards for its new network when it launches following the Eid break, sources tell Al Mal. Under the distribution agreements, outlets cannot market contracts for other mobile networks. TE will meet with the distributors on 15 September to discuss marketing strategies ahead of launching data and call services.

Emerging markets investment portal Frontera warns that large IPOs in Egypt since 2004 have been followed by large losses. The caveat there is that they are looking at the offer-to-date return on USD-denominated stock price. The piece is attempting to give context to the government’s plan to list stake in publicly-owned companies on the EGX.

Variable and fixed-rate deposits are back on the central bank’s list of tools at today’s auction after a near-six-week pause, signaling an excess of liquidity in the banking sector, according to Al Mal.

Pensioners will be able to receive their monthly payment through ATMs as of 1 September, Social Solidarity Minister Ghada Wali announced, Al Masry Al Youm reports. The move to make pension allowances available electronically comes as part of the government’s mobile payments strategy to improve financial inclusion.

Russia will provide training for pilots of Ka-52K helicopters set to be deployed on Egypt’s Mistral-class carriers, Russia’s state-owned TASS reports. “Our main efforts are concentrated on preparing crews who will operate Ka-52Ks in Egypt. That is why they are in Russia, working. Next year, their training is planned to be completed,” the Chief Designer of the Kamov Design Bureau Sergei Mikheyev says. Ka-52K helicopters are “designed to carry out patrol missions, provide fire support for amphibious assaults and … anti-amphibious assault defense on the frontline and in tactical depth.” Separately, Egyptian and Russian paratroopers will take part in a joint military exercise in Russia named the “Protectors of Friendship,” Ahram Online reports.

Military heads and experts from a dozen met in Kampala Monday to discuss setting up a response force for crises, Xinhua reports. The 12 nations, of which Egypt is one, make up the African Capacity for Immediate Response to Crisis (ACIRC) which was set up in November 2013 to assess if certain situations need intervention. Members contribute USD 12k annually but USD 30 mn would be needed to setup a military headquarters and a battalion.

Egypt returned antique coins and paper securities to Iraq and China that were smuggled into the country, Al Arabiya reports. 44 Iraqi coins date back to the eras of King Faisal I, King Faisal II, and King Ghazi I were returned, in addition to 13 Chinese paper securities — some which date back to the Qing Dynasty (1644-1911), according to Chinanews.com. A ceremony was held at the Egyptian Museum, where the Antiquities Ministry handed them over to officials from the two nations’ embassies