Sunday, 15 April 2018

Ratings agencies still don’t get Egypt

TL;DR

What We’re Tracking Today

The House of Representatives will formally kick off its budget debate today,with Finance Minister Amr El Garhy and Planning Minister Hala El Said set to brief MPs on the state budget FY2018-19, according to Ahram Online. The House Budget Committee began deliberating on the budget a week ahead of schedule last Sunday, and initial reactions appeared largely positive. The Finance Ministry’s pre-budget report, which we delve into in detail below in the Speed Round, sees inflation dropping to a low of 10% during the upcoming fiscal year, despite the continued phase-out of energy subsidies.

The House Constitutional and Legislative Committee is set to discuss today amendments to the Competition Protection Act, Ahram Gate reports. The proposed amendments would allow the Egyptian Competition Authority (ECA) to review and approve mergers and acquisitions prior to their execution. The legislative change would effectively allow the authority to block transactions if it feels they would violate antitrust laws in a manner that would be familiar to readers who have worked in European Union or North American regulatory environments. The Egyptian Competition Authority had been expected to finalize drafting the amendments in March 2017.

Dominating global business headlines this morning: Top-secret Saudi Aramco financials have leaked, and it looks like that USD 2 tn MbS is hoping for might be a stretch. Bloomberg claims to have gotten a look at Saudi Aramco’s pro-forma IFRS financials and found it made USD 33.8 bn in profit in the first half of 2017. That could make it the world’s most profitable company: Apple turned in USD 28.9 bn in profits in the same period, while Samsung delivered USD 14.0 bn. The company distributed USD 13 bn in cash dividends to the Saudi state (its only shareholder). The company paid the state USD 58.4 bn, split into USD 18.5 bn of royalties on its revenue and an additional USD 39.9 bn in income taxes. Aramco’s debt-light balance sheet compared with its peers has gotten plenty of attention: It has net debt of just USD 1.3 bn, with total borrowings of USD 20.2 bn offset by cash and cash equivalents of USD 19 bn.

Also getting attention in global business centers:

  • WPP chief Martin Sorrell has stepped down at the world’s largest advertising agency after allegations of misconduct. (CNBC, Reuters)
  • The global economy could be “torn apart” unless countries “steer clear of protectionism,” IMF chief Christine Lagarde says. (Financial Times)

Otherwise, expect the next couple of days to be heavier than usual on news from the diplomatic front:

The United States, Britain and France launched joint airstrikes on Syria on Saturday morning, the biggest international escalation in the seven-year conflict and the sharpest intervention yet by the West. The three countries launched 105 missiles overnight in retaliation for a suspected poison gas attack in the Syrian town of Douma a week ago, targeting three chemical weapons facilities, including a research and development center in Damascus, Reuters reports. US President Donald Trump when on later in the day to declare “Mission accomplished,” echoing a phrase one of his predecessors came to regret. Trump also turned his attention on Iran and Syria, saying “To Iran, and to Russia, I ask: What kind of a nation wants to be associated with the mass murder of innocent men, women, and children?” When it comes to Syria, “Russia must decide if it will continue down this dark path, or if it will join with civilized nations as a force for stability and peace,” he added, according to a White House statement.

Egypt’s Foreign Ministry issued a statement expressing concern at the escalation of the conflict. The statement did condemn the use of chemical weapons.

President Abdel Fattah El Sisi is in Saudi Arabia today for an Arab League Summit at which we believe Iran and Qatar (the latter is not officially on the agenda) will be among the top issues discussed. El Sisi has already met on the sidelines of the gathering with his Palestinian counterpart, Mahmoud Abbas, and UN-backed Libyan Prime Minister Fayez Al Sarraj.

This gathering comes as US President Donald Trump is pushing for the end of the Arab Quartet’s boycott of Qatar, reportedly on fears of rising Iranian influence on the statelet. During a phone call this month with Saudi Arabia’s King Salman, Trump demanded a resolution within three weeks. The US leader is hoping to reach a settlement on Qatar before a 12 May deadline he imposed for the European Union to agree on a revised version of the 2015 nuclear agreement with Iran, Reuters reports. The quartet remains unswayed and is maintaining its requirement that Doha abide by its 13 demands to reinstate diplomatic ties, the newswire reports.

The Qatar rivalry played out in the international bond market last week as both Saudi Arabia and Qatar issued bonds nearly simultaneously. Qatar appears on track to sell USD 12 bn of debt across five-, 10- and 30-year maturities, according to the Financial Times. Investors appear to have filed USD 53 bn in orders for the issuance, topping the USD 28 bn in orders for Saudi’s USD 11 bn issuance.

What We’re Tracking This Week

Finance Minister Amr El Garhy will head to Washington, DC, on Monday for the IMF and World Bank’s Spring Meetings from April 16-22. Investment Minister Sahar Nasr and Central Bank Governor Tarek Amer are also attending, Al Masry Al Youm says. You can check out the landing page for the spring meetings here.

On The Horizon

Egypt calls for fresh round of GERD talks next week: Egypt has invited Sudan and Ethiopia to another round of negotiations over the Grand Ethiopian Renaissance Dam (GERD) in Cairo on 20 April, Foreign Minister Sameh Shoukry told Ahram Gate. The ministry also released a statement on Thursday rejecting reports that Egypt was the reason last week’s talks failed, saying that Egypt is “keen” to reach consensus on the issue. Sudanese Foreign Minister Ibrahim Ghandour had said that the talks were “constructive” but failed to reach an agreement due to technical issues. The story got coverage last night on Amr Adib’s Kol Youm (watch, runtime: 9:58).

Our friends at Renaissance Capital will hold their third annual Egypt Investor Conference in Cape Town on 24-25 April. The event will see senior management from leading Egyptian companies meet one-on-one with South Africa-based investors.

French President Emmanuel Macron will reportedly visit Egypt in early May for talks with President Abdel Fattah El Sisi on bilateral relations and regional issues, according to Foreign Ministry sources.

Enterprise+: Last Night’s Talk Shows

Airstrikes by the US, UK, and France against Syria dominated the debate on the airwaves last night.

Egyptian officials were not given prior notice of the strikes, according to Foreign Minister Sameh Shoukry, who told Kol Youm’s Amr Adib that Cairo has always been against military escalation in Syria. Shoukry also said that Egypt has no confirmation that Bashar Al Assad’s regime was responsible for the chemical attack that prompted the strikes (watch, runtime: 9:58).

Egypt will not take sides, according to Foreign Ministry Spokesperson Ahmed Abu Zeid, who told Al Hayah Al Youm’s Khaled Abu Bakr that the government’s top priority will always be the welfare of the Syrian people (watch, runtime: 17:30).

The airstrikes were a military and political failure, Syrian MP Muhannad Al Haj told Masaa DMC’s Eman El Hosary, alleging that the US had notified Russia about the airstrikes ahead of time to avoid escalation between the superpowers (watch, runtime: 15:10). Amr Adib claimed the Syrian regime had evacuated the buildings hit by the strikes and demanded that the Arab League send a delegation to Syria to look into the alleged chemical attack (watch, runtime: 47:07).

It’s unlikely that the Arab League will come up with an appropriate response, said Hona Al Asema’s Lamees Al Hadidi, who described the airstrikes as “aggression” and an “insult” to Arabs, especially since it took place days before the Arab League Summit taking place in Saudi Arabia today (watch, runtime: 11:13). Arab League Assistant Secretary General Hossam Zaki told Lamees that while developments in Syria are on the agenda for the summit, which has already been set, Saturday’s airstrikes are not included. Foreign Minister Shoukry also told Adib as much on Kol Youm.

The Qatar rift is not (formally) on the agenda, as the issue was never actually tackled by the Arab League, Zaki told Lamees. Qatar’s permanent envoy to the League will represent Doha at the meetings, since Emir Tamim bin Hamad has decided to bow out, he added. Seventeen of 22 Arab leaders are expected to attend the summit in Dammam (watch, runtime: 6:44).

Vice Minister of Finance Mohamed Maait made an appearance on Al Hayah Al Youm to discuss the details of the FY2018-19 budget, which we cover in detail in the Speed Round (watch, runtime: 6:20). Maait said that Egypt’s population boom is one of the reasons behind soaring inflation (watch, runtime: 8:29). MPs Yasser Shabih and Mohammed Badrawy were also in the studio with Maait (Watch full discussion, runtime: 1:15:17).

Speed Round

Speed Round is presented in association with

BUDGET WATCH- Government sees inflation dropping to low of 10% in FY2018-19: The Finance Ministry issued its pre-budget report for FY2018-19 on Friday (pdf) in which it outlines the broad strokes of the budget and its priorities for the economy and public spending. The government is predicting that inflation will continue to cool into 2019, predicting an average annual headline inflation rate of 13.2%, with levels seen dropping as low as 10% during FY2018-19. (The central bank has previously said it sees inflation falling to 13% by the end of 4Q2018.)

The report is out as the House formally kicks off its budget debate today with scheduled appearances by Finance Minister Amr El Garhy and Planning Minister Hala El Said.

The budget assumes that yields on government debt will be 14.7%. Falling yields have raised concerns that Egyptian treasuries will be less attractive, especially after the central bank began its monetary easing in February. Foreign holdings in Egyptian treasuries, which have surged over the past year on the back of the country’s high yielding debt, continued to rise, to USD 23.1 bn at the end of March 2018.

Other highlights:

  • GDP growth of 5.8%, up from an estimated 5.2% in FY2017-18;
  • A budget deficit of 8.4%, up from 9.8% in the current fiscal year on the back of a 21.6% increase in revenues to EGP 989.2 bn — EGP 770.3 bn of which from tax collections — and a 15.4% y-o-y rise in public spending;
  • A primary budget surplus of 2%, up from 0.3% this current fiscal year;
  • Public debt will stands at 91-92% of GDP;
  • Unemployment will fall below 11%.

Six-month import cover, no change in FDI target: The ministry says it wants to see foreign currency reserves sufficient to cover more than six months of imports. Separately, the government is aiming to grow foreign direct investment to USD 10 bn next fiscal year, Investment Minister Sahar Nasr tells Al Shorouk. The target is unchanged from the current fiscal year, as FDI has been growing slower than expected.

The report is effectively the Finance Ministry’s policy statement for the new fiscal year. On the revenue side, the ministry wants to grow the tax base, in large part through financial inclusion initiatives. We know that the government is planning adopt an SMEs Act, which it hopes will offer incentives to encourage small business owners to join the formal economy. Economic growth is also expected to be reflected in the increase in revenues. Looking at expenditures, the ministry is also hoping to increase spending on infrastructure and services to EGP 100 bn, in addition to raising social welfare spending on both food subsidies and the Takaful and Karama cash benefit programs. These would be balanced by cuts to energy subsidies. The ministry also said it would prioritize a “more efficient energy price” and market — signaling that it plans to move forward with energy deregulation. The ministry is also looking to maximize cost-cutting and efficient spending through the state IPO program. The ministry has allocated funding to population control programs, including the “Two is enough” program.

Report sees oil prices as largest risk to achieving budget targets: Oil prices moving beyond an expected average of USD 65-70 per bbl led the list of risks the Finance Ministry estimates would negatively impact the budget as OPEC and Russia continue with production cuts. The FY2018-19 budget assumes oil prices will average USD 67.20 per bbl. Bloomberg had noted last week that Saudi Arabia may try and push the production cuts to a price of USD 80 per bbl. Other major risks noted by the Finance Ministry include:

  • The US Federal Reserve increasing interest rates substantially, potentially cutting inflows to emerging markets;
  • Regional political instability could dissuade foreign investors from the market;
  • Slower growth in the European Union — Egypt’s largest trading partner — on the back of Brexit;
  • A US-China trade war, and a growing trend in international protectionism;
  • A substantial change in the FX rate.

What the report doesn’t say: First and foremost, the report does not clarify the extent of the energy subsidy cuts expected next fiscal year. A document obtained by Reuters had said that the government wants to cut fuel subsidies by about 26% y-o-y to EGP 89.08 bn — and simultaneously slash electricity subsidies by almost half to EGP 16 bn from EGP 30 bn. The report also makes no mention of how much the government plans to spend on health and education. It does note that the year will see the first implementation of the Universal Healthcare Act. Earlier statements had put total social welfare spending at EGP 322 bn.

Fuel subsidy spending in FY2017-18 could drop on lower consumption: Finance Minister Amr El Garhy said that Egypt’s consumption of petroleum products has fallen by 2-3% since the beginning of FY2017-18. The government expects fuel subsidy spending to fall this current fiscal year to EGP 110-115 bn, from an initial allocation EGP 120 bn, he said in a statement on Thursday.

Why aren’t ratings agencies seeing the same picture as investors when it comes to Egypt? “Egypt is bucking the conventional wisdom when it comes to gauging a country’s ability to repay its debt,” writes Bloomberg’s Ahmed Feteha. With a B3 rating from Moody’s and B- from S&P, Egypt is ranked below Nigeria and Argentina by both agencies. Yet the cost of insuring Egypt’s debt against default for five years is lower than Nigeria’s and almost the same as Argentina’s, says Feteha. Inflows to Egypt’s debt have risen to over USD 20 bn since the EGP float, raising USD 2.4 bn through a eurobond issuance last week. Its equities have outperformed peers, rising 18% since the beginning of 2018, the third-best performer out of 106 indexes tracked by Bloomberg. “No matter what they say, investors prefer strong macro and political continuity,” said Elina Ribakova, head of EMEA Research at Deutsche Bank AG in London. Argentina is still struggling to get inflation under control, while Nigeria’s foreign currency regime is “far from transparent,” she said.

Disney extends contracts with Egyptian companies manufacturing its products until December 2019: The Walt Disney Company has given Egyptian companies that manufacture products carrying its trademark and logo an extension on their production licenses until December 2019, the Trade and Industry Ministry announced in a statement yesterday. The extension allows manufacturers to expand the size of their existing contracts and leaves more room for them to expand their network of international buyers, ultimately helping Egypt boost its overall exports of textiles and ready-made clothes, according to Minister Tarek Kabil. The Walt Disney Company’s decision comes just a month after the International Labor Organization (ILO) gave Egypt preliminary approval to resume its Better Work Program — which seeks to improve working conditions and enhance business competitiveness — until the end of 2018. Last July, the company had lifted a ban on having its merchandise manufactured in Egypt, after authorities began implementing the ILO program in May.

Three Egyptian law firms have won nods in Global Arbitration Review’s list of top 100 law firms for international arbitration in its 2017 review, including Zulficar & Partners, Youssef & Partners and Matouk Bassiouny. The review “is a guide to the international arbitration capabilities of law firms.”

Matouk Bassiouny advised on legislation establishing EGP 200 bn sovereign wealth fund: Matouk Bassiouny’s head of finance and projects and name partner Mahmoud Bassiouny provided legal counsel to the investment and planning ministries on drafting the legislation establishing Egypt’s EGP 200 bn sovereign wealth fund, according to an emailed statement. The fund, the establishment of which received Cabinet approval last week, will be charged with investing state funds locally and abroad across asset classes and will be tapped to manage under-utilized assets.

EARNINGS WATCH- Orascom Construction (OC) reported net income attributable to shareholders increasing by 61.2% y-o-y of USD 78.5 mn in 2017. The figure, excluding a one-off non-cash tax effect, shows a 112.5% y-o-y increase to USD 103.5 mn. OC’s revenues dropped 8.8% to register USD 3.68 bn.

MOVES- Saleh El Sheikh was appointed as the new head of the Central Authority for Organization and Administration (CAOA), Al Masry Al Youm reports. El Sheikh succeeds Mohamed Gamil, who has been heading CAOA since April 2016.

LEGISLATION WATCH- There will soon be a new authority to drive development in Upper Egypt. Parliament’s Local Administration Committee approved on Wednesday a bill to set up the Supreme Authority for Upper Egypt Development, Al Mal reports. The committee is recommending that the executive regulations for the bill require a financial and progress review of the authority’s projects every 3-5 months, committee undersecretary Ahmed El Segeny tells the newspaper.

Parliament’s ICT Committee also signed off on clauses of the Cyber Crimes Act pertaining to user data security. The committee approved during its meeting on Thursday clauses that would require service providers to protect data privacy except in cases where the government presents a legal order to access said data, according to Ahram Gate. Violators would be fined EGP 5,000-20,000 and could face a prison sentence of at least one year, the newspaper reports. The committee also passed an article in the legislation that would penalize internet service providers for failing to implement bans imposed on websites deemed to pose a threat to national security, Al Masry Al Youm reports. The committee had approved last month a clause of the legislation allowing the Prosecutor General to ban websites that publish content deemed criminal. Final voting at committee on the Cyber Crimes Act will begin today, House ICT Committee chair Nedal Al Saeed has said, according to Ahram Gate.

Your friendly neighborhood sayess is about to be legalized? The Local Administration Committee passed on Thursday a draft law to regulate public parking and the work of “sayess” (parking attendants). The draft law would require attendants to obtain a license scouting as much as EGP 1,000 and would entitle them to charge customers a set, regulated parking rate per hour, Ahram Gate reports. Attendants would be required to be literate, above the age of 21, and hold a valid driver’s license, among other stipulations.

The World Bank has approved a USD 500 mn loan to support Egypt’s national strategy to develop K-12 education, Investment Minister Sahar Nasr announced in a statement. Funding deployed under the five-year Supporting Egypt Education Reform Project includes earmarks for improving early childhood education (USD 100 mn), training teachers and ‘education leaders’ (USD 100 mn), comprehensive assessment reform (USD 120 mn), enhancing education service delivery through connected systems (USD 160 mn), and other areas including project management, communication, and monitoring and evaluation (USD 20 mn), according to the World Bank (pdf). Implementation of the project will begin in the upcoming academic year starting September 2018.

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Image of the Day

A little more than fashionably late: Saudi Arabia hosted the first-ever Arab Fashion Week at the Ritz-Carlton Hotel in Riyadh on Tuesday, Reuters reports. The event is being positioned as part of social change being enacted under Crown Prince Mohammed bin Salman, which has granted women the right to drive and lifted a ban on cinemas. The catwalks also did not feature any abayas and are meant to be used to showcase local fashion talent. “Yet, restrictions persist. Tuesday’s reception was open to men and cameras, but only women are permitted at catwalk events and outside photography is barred.” Baby steps, everyone.

Egypt in the News

On a slow news weekend for Egypt in the international press, pickups of wire coverage of the deaths of eight soldiers and wounding of 15 more in a terror attack in central Sinai dominate coverage. Fourteen terrorists were killed in the ensuing gun battle, according to a military statement. The attack came hours after President Abdel Fattah El Sisi signed a decree published in the Official Gazette (pdf) to extend the state of emergency across the country for three months. El Sisi first imposed the state of emergency last April, and has since signed off its renewal in July, October, and January.

With the approach of Ramadan, lantern makers are obsessed with Mohamed Salah, selling lanterns in the shape of the national team football player ahead of the Holy Month, according to the BBC.

FedEx signing on to transport USD 1 bn worth of King Tut artifacts has provided the company with “significant brand exposure,” Adweek says. “The brand supplied a tricked out Boeing 777 with gadgets that monitor humidity, temperature and light exposure and staffed the plan with round-the-clock security, including an ever-present Egyptian courier, for the 7,500-mile trip.” The company is shipping 150 pieces, many of which have never been outside Egypt, to 10 US cities and then Europe as part of a promotional tour celebrating the 100th anniversary of the discovery of Tut’s tomb.

Meanwhile, look for some noise out of the US after the arrest by US Immigration and Customs Enforcement officers of Islamist teacher Ahmed Abdelbasit, who reportedly faces a death sentence in Egypt, per the Huffington Post.

On Deadline

The nation’s columnists are blockading about what some of them are describing as the “tripartite aggression” against Syria. Al Shorouk’s Emad El Din Hussein says that targeting Bashar Al Assad won’t help Syria any more than targeting Gaddafi or Saddam helped Libya or Iraq. Al Masry Al Youm’s Samir Farag whines that the US, UK and France didn’t wait for a fact finding mission before the strikes, while El Watan’s Mahmoud Khalil is just generally cranky. Hazem Mounir wonders how Arab leaders will handle the strikes at today’s Dammam summit.

Worth Watching

Egypt’s Baladi dog breed has been gaining new fans, BBC reports. Attitudes towards Baladi dogs, which constitute the majority of strays, are changing due to their “character, faithfulness and street-smarts,” according to the report. Owners list their qualities that range from guarding, and intelligence to trainability and strong immune systems. “Gallant, faithful, clowns, family, regal, and loyal” are some of the words the owners used to describe their Baladi dogs, who have made it as far as the UK with their new fans. (Watch, runtime: 02:42).

Diplomacy + Foreign Trade

El Sisi, Portugal’s de Sousa talk illegal migration, SCZone investments: President Abdel Fattah El Sisi discussed cooperation on illegal migration and investing in the Suez Canal Economic Zone (SCZone) with his Portuguese counterpart Rebelo de Sousa, according to an Ittihadiya statement (pdf). The two leaders stressed the importance of Europe’s cooperation with Egypt on the migration issue. They also signed two MoUs to increase Portuguese investment and development of the SCZone, and for cultural and educational cooperation.

Egypt signed on Thursday an agreement for service industry cross-border trade between Arab countries, according to a Trade and Industry Ministry statement. The signing took place on the sidelines of the Arab League’s Economic and Social Affairs Council meeting in Riyadh.

Energy

SDX announces discovery at South Disouq

SDX Energy announced a gas discovery at its Ibn Yunus-1X exploration well at South Disouq, of which it is the operator and has a 55% working interest. “The Ibn Yunus-1X well was drilled to a total depth of 9068 feet and encountered 100.8 feet of net conventional natural gas pay in the Abu Madi horizon, which had an average porosity in the pay section of 28.5%.” SDX President and CEO Paul Welch commented, saying “we are extremely encouraged with today’s discovery, our second consecutive discovery at South Disouq.”

EBRD issues procurement notice to consult EETC on developing auction framework for renewables

The European Bank for Reconstruction and Development (EBRD) issued last month a procurement notice for a consultancy firm to advise the Egyptian Electricity Transmission Company (EETC) on developing a new framework for renewables projects. The new procurement mechanism would replace the feed-in tariff scheme, according to an EBRD statement. The winning firm or consortium would also advise the EETC on the procurement of three solar plants and one wind power plant with a combined production capacity of 750 MW. The bank set USD 4 mn as the cost estimate for the assignment. The deadline to submit applications expires tomorrow.

Egypt, Saudi Arabia to sign MoU to cooperate on petroleum and mining

Oil Minister Tarek El Molla agreed with his Saudi counterpart Khaled Al Faleh to prepare an agreement for Egypt and Saudi Arabia to cooperate in petroleum and mining exploration, according to a ministry statement. El Molla and Al Faleh also agreed to arrange meetings between the Egyptian General Petroleum Company and various Saudi oil companies.

Tourism

Gov’t looks into setting up JV with Emirati company to develop Shepheard hotel

The Public Enterprises Ministry is in talks with an unnamed Emirati company to set up a joint venture with the Egyptian General Company for Tourism and Hotels (EGOTH) to develop the Shepheard hotel in downtown Cairo, Al Mal reports. The agreement would see the Emirati company and EGOTH each holding a 50% share of the JV, according to EGOTH Chairman Sherif Bendary. The hotel’s development is expected to cost as much as EGP 1 bn.

Air Cairo to launch first Alex-Milan flight on 29 April

Charter airline Air Cairo is planning to launch its first weekly Alexandria-Milan flight on 29 April, Youm 7 reports. Air Cairo boss Yasser El Ramly recently announced that his company would add weekly flights to Sharm El Sheikh from Azerbaijan, Sweden, and Romania.

Transport Ministry considers high-speed train connecting Marsa Alam and Luxor

The Transport Ministry is studying the development of a high-speed train connecting Marsa Alam and Luxor to facilitate tourist access to and between the cities, Al Masry Al Youm reports. The project could also attract more investments to the two tourist destinations.

Automotive + Transportation

Careem raises fares, captains’ profit margins

Ride-hailing app Careem decided to raise fares on its GO and GO+ services, and increasing the payout for its drivers working for those services, Al Mal reports. The fare hikes come as ride-hailing companies, drivers, and customers are all waiting on the Ride-Hailing Apps Act to regulate the industry.

Transport Ministry to tender USD 50-100 mn Qena river port in two weeks

The Transport Ministry is planning to launch a tender for the USD 50-100 mn Qena river port project in two weeks’ time, according to River Transport Authority head Abdel Azeem Mohamed. The project is one of several river ports the ministry plans to develop. Minister Hisham Arafat had said earlier this month that the ministry would not issue tenders until the Nile traffic bill is issued.

Banking + Finance

PHD expected to issue EGP 560 mn in securitized bonds this month

Sarwa Capital is expected to complete a EGP 560 mn securitized bond issuance for Palm Hills Development (PHD) this month, according to Sarwa Managing Director Ayman El Sawy. The offering will be split into two, with the first EGP 260 mn tranche set to be issued this week, with another EGP 300 mn tranche to follow, El Sawy reportedly said, adding that Tharwa has received the Financial Regulatory Authority’s (FRA) approval on the transaction. We had said in late February that PHD was seeking FRA approval to issue EGP 300-350 mn in securitized bonds, and was considering upping the offer to EGP 1.6 bn. Sarwa Capital was tapped in 2016 to manage the transaction, for which CIB and Attijariwafa Bank were chosen as preliminary underwriters.

State-owned banks scrap high-yielding CDs, introduce new variable interest certificates

The country’s largest state-owned banks have decided to scrap their high-yielding certificates of deposits two weeks after the central bank cut key interest rates by 100 bps. Banque Misr stopped issuing its high-yielding 17% CDs as of last Thursday, Vice Chairman Akef El Maghraby said, while the National Bank of Egypt also scrapped its 17% certificates, both introducing instead variable rate, three-year CDs with yields that are 0.25% above key rates. Similarly, Banque du Caire announced it would be offering similar CDs as of Sunday and canceling its 17% certificates. Private banks had also lowered their rates and suspended high-yielding CDs earlier this month in response to the CBE’s decision.

Bloomberg Terminal ranks NBE as Egypt’s top bank in 1Q2018, Africa’s best in syndicated loans

The National Bank of Egypt was rated the country’s top bank in 1Q2018 in a Bloomberg Terminal report picked up by Al Masry Al Youm. NBE was also named the continent’s top bank in the syndicated loans category, of which it holds a 48% market share after contributing EGP 36 bn to syndicated facilities in the first quarter. We were unable to view the report to verify these figures.

Egypt Politics + Economics

State security prosecution summons eight AMAY reporters, former editor-in-chief

The state security prosecution summoned on Thursday former Al Masry Al Youm editor-in-chief Mohamed El Sayed Saleh and eight of the newspaper’s reporters over their coverage of the presidential election, Press Syndicate Secretary General Hatem Zakaria told Reuters. The newspaper had gotten into hot water for publishing a story alleging coercing by government officials to bolster turnout during the election. The Supreme Media Council slapped the newspaper with a EGP 150k fine and ordered the syndicate to investigate Saleh following a complaint from the National Elections Authority.

Hisham Genena referred to military court for spreading false news

Former Central Auditing Organization head Hisham Genena was referred on Thursday to military court for spreading false news seen as insulting to the Armed Forces, Genena’s lawyer said, Al Ahram reports. Genena was first detained by military prosecutors in February after claiming in an interview with HuffPost Arabi that he had “incriminating evidence” against the Supreme Council of Armed Forces. Genena’s first court hearing is scheduled to take place tomorrow.

Court upholds life sentence against ex-Ikhwan leader Mohamed Badie

The Court of Cassation upheld yesterday a life sentence against ex-Ikhwan leader Mohamed Badie, Reuters reports. Badie received a life sentence on charges of “leading an illegally founded organization, plotting to stir chaos and publishing false news, among other crimes.”

National Security

Egypt’s Special Forces join “Khaled Ibn Al Waleed 2018” military drill in Bahrain

Egyptian Special Forces left for Bahrain yesterday to take part in the “Khalid Ibn Al Waleed 2018” joint military drill with Bahraini forces, according to an Armed Forces statement. The drill will take place for several days at Bahrain’s Isa Air Base.

On Your Way Out

Egypt is the 122nd happiest country in the world, according to the United Nations’ 2018 World Happiness Report (pdf), which ranks 156 countries based on how happy they are using metrics such as absence of corruption, existence of social protection and justice, and freedom. The report also ranks 117 countries by the happiness of their migrants, in which Egypt ranked 62. Egypt came in last out of 29 countries that are the least-accepting of migrants.

The Market Yesterday

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EGP / USD CBE market average: Buy 17.63 | Sell 17.73
EGP / USD at CIB:
Buy 17.62 | Sell 17.72
EGP / USD at NBE: Buy 17.57 | Sell 17.67

EGX30 (Thursday): 17,616 (-1.8%)
Turnover: EGP 1.6 bn (39% ABOVE the 90-day average)
EGX 30 year-to-date: +17.3%

THE MARKET ON THURSDAY: The EGX30 ended Thursday’s session down 1.8%. CIB, the index heaviest constituent ended down 2.3%. EGX30’s top performing constituents were AMOC up 2.7%, Telecom Egypt up 1.9%, and Juhayna up 0.4%. Thursday’s worst performing Madinet Nasr Housing down 5.7%, Emaar Misr down 5.2%, and Amer Group down 5.1%. The market turnover was EGP 1.6 bn, and local investors were the sole net buyers.

Foreigners: Net Short | EGP -19.8 mn
Regional: Net Short | EGP -96.9 mn
Domestic: Net Long | EGP +116.7 mn

Retail: 64.6% of total trades | 67.9% of buyers | 61.3% of sellers
Institutions: 35.4% of total trades | 32.1% of buyers | 38.7% of sellers

Foreign: 16.7% of total | 16.1% of buyers | 17.3% of sellers
Regional: 17.6% of total | 14.6% of buyers | 20.5% of sellers
Domestic: 65.7% of total | 69.3% of buyers | 62.2% of sellers

WTI: USD 67.39 (+0.48%)
Brent: USD 72.58 (+0.78%)

Natural Gas (Nymex, futures prices) USD 2.74 MMBtu, (+1.82%, May 2018 contract)
Gold: USD 1,347.90 / troy ounce (+0.45%)

TASI: 7,824.12 (+0.27%) (YTD: +8.27%)
ADX: 4,653.03 (-0.78%) (YTD: +5.79%)
DFM: 3,094.40 (-1.23%) (YTD: -8.18%)
KSE Weighted Index: 415.78 (+1.52%) (YTD: +3.58%)
QE: 8,918.48 (-1.07%) (YTD: +4.64%)
MSM: 4,776.55 (-0.27%) (YTD: -6.33%)
BB: 1,291.45 (+0.20%) (YTD: -3.02%)

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Calendar

17-18 April (Tuesday-Wednesday): Creative Industry Summit, Four Seasons Nile Plaza Hotel, Cairo.

24-25 April (Tuesday-Wednesday): Renaissance Capital’s 3rd Annual Egypt Investor Conference, Cape Town, South Africa.

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

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

02-03 May (Wednesday-Thursday): Cisco Connect Egypt 2018, Nile Ritz-Carlton Hotel, Cairo.

03 May (Thursday): Egypt’s Emirates NBD PMI reading for April released.

4-6 May 2018 (Friday-Sunday): International Conference on Network Technology (ICNT 2018), venue TBD, Cairo.

07 May (Monday): International Data Corporation’s CIO Summit, The Nile Ritz-Carlton Hotel, Cairo.

07-08 May (Monday-Tuesday): Fourth annual Egypt CSR Forum, InterContinental Semiramis Hotel, Cairo.

15 May (Tuesday): Expected date for the start of Ramadan (TBC).

17 May (Thursday): CBE’s Monetary Policy Committee meeting.

15-17 June (Friday-Sunday): Eid Al Fitr (TBC), national holiday (Look for possible Monday off given the first day falls on a Friday).

28 June (Thursday): CBE’s Monetary Policy Committee meeting.

16 August (Thursday): CBE’s Monetary Policy Committee meeting.

21-25 August (Tuesday-Saturday): Eid Al Adha (TBC), national holiday.

04-05 September (Tuesday-Wednesday): Euromoney Egypt Conference 2018, Cairo.

11 September (Tuesday): Islamic New Year (TBC), national holiday.

24-25 September (Monday-Tuesday): Egypt Water Desalination Forum, venue TBD.

27 September (Thursday): CBE’s Monetary Policy Committee meeting.

06 October (Saturday): Armed Forces Day, national holiday.

23-24 October (Tuesday-Wednesday): Intelligent Cities Exhibition & Conference 2018, Fairmont Towers Heliopolis, Cairo.

15 November (Thursday): CBE’s Monetary Policy Committee meeting.

20 November (Tuesday): Prophet’s Birthday (TBC), national holiday.

22 November (Thursday): US Thanksgiving.

24-25 November (Monday-Tuesday): 22nd Cairo ICT, Cairo Convention Center, Nasr City, Cairo.

25 December (Tuesday): Western Christmas.

27 December (Thursday): CBE’s Monetary Policy Committee meeting.

01 January 2019 (Tuesday): New Year’s Day, national holiday.

07 January 2019 (Monday): Coptic Christmas.

25 January 2019 (Friday): Police Day, national holiday.

25 April 2019 (Thursday): Sinai Liberation day, national holiday.

28 April 2019 (Sunday): Easter Sunday, national holiday.

29 April 2019 (Monday): Easter Monday, national holiday.

01 May 2019 (Wednesday): Labor Day, national holiday.

06 May 2019 (Monday): First day of Ramadan (TBC).

05-06 June 2019 (Wednesday-Thursday): Eid El Fitr (TBC).

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