Wednesday, 16 May 2018

Unemployment edges down again

TL;DR

What We’re Tracking Today

The central bank is expected to keep interest rates on hold when its Monetary Policy Committee meets on Thursday, nine of 11 economists polled by Reuters said yesterday. “We expect rates to remain on hold given a slightly elevated inflation reading in April, and more importantly, given the sharp increase in global oil prices,” EFG Hermes lead economist Mohamed Abu Basha said. Initial data from the CBE on April inflation figures showed the annual headline inflation rate dropping to 13.1% from 13.3% in March, while core inflation was up fractionally to 11.62% from 11.59%. Detailed inflation figures were due out yesterday. The MPC will also be mulling the likely trajectory of interest rates in the United States, CBE Governor Tarek Amer had said earlier this week.

Fitch takes Moody’s EM debt warning a step further, saying fundamentals don’t matter: Having strong fundamentals does not shield emerging markets from the impact of a stronger USD, the global head of Fitch Ratings’ sovereign ratings, James McCormack, writes for the FT. “A stronger [USD] has been associated with lower sovereign ratings, and vice versa, and turning points have been aligned,” he says. “In fact, exchange rates vs. the USD are very much at the centre of EM fundamentals and will be for as long as the USD is the first choice for EM foreign currency borrowing, the numeraire currency in commodity markets, the leading reserve currency and its exchange rate a prime motivator for EM central bank interventions.” As we noted yesterday, Moody’s had warned that emerging markets can weather a slight shift in exchange rates and interest rates, but would see major fiscal imbalances if these shifts were severe. It placed Egypt and six other countries on its list of high-risk EM sovereigns.

Meanwhile, the JPMorgan Emerging Markets Currency index closed in on its biggest single-day drop in trading in a year and its lowest since last December on Tuesday, according to the FT.

But wait: A debate is apparently raging within the Federal Reserve on how far interest rates should rise. San Francisco Fed President John Williams is of the view that the Fed only has a few more rate hikes to go as the long term drivers of US economic growth support a neutral rate. He called bond-buying an important part of the policy-easing tools that the Fed “is going to have to turn to” to fight future downturns, Reuters reports. This starkly differs from a more optimistic Fed Vice Chairman Randal Quarles, who believes that there’s a bit more room to raise rates without putting the brakes on the economy.

Breakthrough on GERD? The next round of talks on the Grand Ethiopian Renaissance Dam (GERD), which kicked off yesterday, “ended successfully,” according to a tweet this morning by Foreign Ministry spokesperson Ahmed Abou Zaid. The tweet, which leaves little by way of detail, said that the foreign ministers of both countries are expected to sign a declaration of the meeting’s outcomes later as Foreign Minister Sameh Shoukry and General Intelligence Directorate head Abbas Kamel met with Ethiopian Prime Minister Abiy Ahmed in Addis Ababa, where Ahmed reaffirmed country’s commitment to strengthening relations, according to Abou Zaid.

President Abdel Fattah El Sisi is hosting his fifth National Youth Conference today, Al Ahram reports. No details were provided on the location of today’s edition. Organizers have set up a website for citizens to submit questions to which El Sisi will respond during the gathering.

The House of Representatives’ general assembly is now in recess until 3 June, Ahram Gate reports. We believe House committees will still meet during the recess to discuss pressing legislation, including the FY2018-19 state budget.

Kiss your assigned seat goodbye: Private offices have already gone the way of the dodo bird. Next up: Your employer is taking away your desk, too, writes Sue Shellenbarger for the Wall Street Journal. “Employers are replacing traditional one-desk-per-employee setups with a smaller number of first-come, first-served desks, plus additional workspaces with names like huddle rooms and touchdown spaces,” and some 77% of employers plan to put “at least some employees in unassigned seating” within three years,” she writes, citing a recent CBRE survey. Hit the link for a rundown of survival strategies.

Egyptian-American actor Rami Malek portrays the late Queen singer Freddie Mercury in what Rolling Stone describes as a “long-awaited Queen biopic” due to hit theaters this fall. The film “traverses Queen’s rise from the 1970s through their triumphant set at 1985’s Live Aid, six years before Mercury died of complications from AIDS.” Enterprise readers will remember Malek from the hit show Mr. Robot, where fellow Egyptian-American show creator Sam Esmail has occasionally peppered the series with little Egyptian touches — including forcing Malek’s character to deal with an Egyptian cabbie in the US of A. Catch the first trailer for the Queen flick here (runtime: 1:37).

We’re nerds for many things here at Enterprise. Finance. Entrepreneurism. Great TV. Hell, we’re effectively just nerds. But we have a special place in our hearts for journalism — and got the feels when one of the founding fathers of the “New Journalism” of the 1960s passed away yesterday. Tom Wolfe died at the ripe old age of 88. The journalist-turned-novelist wrote 1980s bestseller Bonfire of the Vanities and space race tome The Right Stuff (later turned into a classic film) and was a pioneer in using the tools and techniques of a novelist to tell great longform stories. Obits now litter the internet. We’d start with this one from the New York Times, plus the NYT’s Tom Wolfe reader. You can’t help but love a guy who skewers the pretentiousness of others, then has the guts and honesty to “brightly” describe his own sense of style as “Neo-pretentious.”

Ramadan officially starts on Thursday in Egypt, according to a tweet from Dar El-Ifta. Look for a daytime high of 37°C in Cairo tomorrow, kicking off a heat wave that will see temps stuck in the 40s well into next week.

Bank hours for Ramadan will run 09:30 am to 01:30 pm for customers and from 09:00 am to 02:00 pm for employees, CBE announced.

The EGX will run shorter trading hours for the holy month. The trading session will run 10:00 am until 1:30 pm. Tap or click here for the full schedule.

So, when do we eat? Maghrib is at 6:42pm CLT. You’ll have until 3:20 am on Friday to finish your sohour. By the last day of Ramadan, you’re looking at 3:08am for fajr prayers and 6:58pm for maghrib.

On The Horizon

Cyprus, Egypt to resume talks on electricity grid linkup next month: A Cypriot delegation will visit Egypt next month to resume talks on the USD 4 bn project to connect the electricity grids of Egypt, Cyprus, and Greece, government sources said.

Tender for grid connection with Sudan moving along: The Cypriot delegation’s visit comes as the Electricity Ministry invited eight local and global players to make offers for the 300 MW electricity grid interconnection project with Sudan, Chairman Gamal Abdel Rehim tells Al Mal. The companies invited to bid for the EGP 1.5 bn project include ABB, General Electric, Elsewedy, Schneider, Siemens, and State Grid Corporation of China.

Contracts to connect our electric grid to Saudi Arabia’s could also be signed by the end of June, sources say. The Egyptian Company for Metallic Constructions was recently awarded a EGP 56 mn contract to manufacture power transmission poles for the grid connection, company chairman Ibrahim Hammam tells Youm7.

The IMF should issue its progress report on Egypt’s economic reform program in two weeks’ time, Deputy Chief of Media Relations Alistair Thomson tells Al Masry Al Youm. A delegation is in town until tomorrow to finish a review that should unlock another USD 2 bn of the USD 12 bn IMF extended fund facility by June or July.

Enterprise+: Last Night’s Talk Shows

The airwaves covered everything from updates on the violence in Palestine to the seasonal fall of the EGP against the USD.

The EGP falling to 17.86 per greenback is normal and expected due to seasonal factors including Ramadan, former Banque Misr deputy chairman Sahar El Damaty told Yahduth Fi Masr host Sherif Amer. Ramadan sees a spike in demand for food products driving up imports, while umrah season also drives up demand for FX. The rise in exchange rates is only temporary and will be reversed once the seasonal pressures pass, El Damaty said (watch, runtime: 3:15).

Egypt has ample reserves of all commodities heading into Ramadan, Supply Minister Ali El Moselhy told Al Hayah Al Youm. He provided host Tamer Amin with the list of prices for subsidized commodities, including rice and poultry, all of which will be available at the Ahlan Ramadan supermarket expo (watch, runtime: 6:16 and runtime: 5:59).

Guangzhou Goodsense Egypt’s USD 100 mn aluminum composite panels factory will cover half of domestic demand once its three production lines are up and running, Chairman and Saudi investor Mohamed Al Khaldi told Masaa DMC’s Osama Kamal. Al Khaldi noted that Egypt’s demand for aluminum composite panels is relatively high, which encouraged the company’s investors to establish the factory (watch, runtime: 3:08). The panels are used for both construction and decorative purposes, Managing Director Sherif Saleh said (watch, runtime: 3:17). Watch the full interview here (runtime: 23:13).

Kamal also had a chat with Orascom Development CEO Khaled Bichara about sustainable development in the real estate and technology industries, as well as the rising trend among real estate developers to develop small but fully equipped cities. You can watch the full interview here (runtime: 40:19).

48 MPs split from FEP following internal leadership shakeup: 48 members of the Free Egyptians Party (FEP), including former head of FEP’s parliamentary bloc Alaa Abed, have split from the party and plan to form a new political party, an unnamed parliamentary source tells Al Shorouk. The MPs’ departure from the FEP came hours after FEP Chairman Essam Khalil issued a decision to replace Abed with Ayman Aboul Ela. Khalil told Hona Al Asema’s Lamees Al Hadidi that the shakeup in leadership came after deliberations in parliament, and denied that he ousted Abed for wanting to merge the FEP with the Support Egypt Coalition if it were to become a party. Khalil maintained, however, that the FEP has no intention of merging with the coalition and plans to remain independent (watch, runtime: 6:50).

Masaa DMC, Hona Al Asema, and Kol Youm also continued their coverage of the developments in Palestine, including a UN Security Council emergency meeting held yesterday. We have more details in Speed Round, below (watch, runtime: 5:18 and runtime: 3:14).

Speed Round

Speed Round is presented in association with

Unemployment falls to 10.6% in 1Q2018, down from 11.3% in the comparable period last year, CAPMAS announced in its quarterly report. Overall, the labor force grew slightly by 0.1% y-o-y to 29.2 mn people in 1Q2018. Far more women than men remain unemployed: The unemployment rate for women was 22.0% in the quarter against 7.3% for men, stats show. Youth unemployment stood at 75.2% for the quarter. “The rate has been steadily dropping in recent months amid a program of economic reforms,” Reuters notes. The country’s unemployment levels had dropped to 11.8% at the end of 2017, down from 12.5% at the end of the previous year.

CBE to launch sweeping debt-relief program for businesses with non-performing loans? The central bank is reportedly about to launch an initiative that would see as many as 107k businesses forgiven interest payments, late charges and lawsuits over loans they are unable to repay, CBE Governor Tarek Amer tells Al Mal. Those eligible for the initiative will have to pay down the principal amount of the loan before they are eligible for interest relief and the forgiveness of charges, according to Amer. Some 5,000 factories, 27,000 clients of the Agricultural Bank of Egypt, and around 75,000 clients of other banks may be eligible for the program, according to Amer. Amer did not disclose the overall price tag of the initiative or how one becomes eligible for it. The initiative was meant to be launched this week, Amer had said previously, but several banks have expressed their interest in participating in the initiative, leading to the postponement of the launch until next week, according to CBE Sub-Governor Gamal Negm.

IPO WATCH- Government hopes to raise EGP 15-18 bn from first phase of privatization program between June 2018 and early 2019, petrochem companies first on the list: The government is hoping to raise as much as EGP 15-18 bn from the first phase of its privatization program this year, the Cabinet said in a statement yesterday. Phase one, set to run from June until early 2019, will see the government offer additional stakes and list new shares on the EGX of four to six state-owned enterprises in the petroleum and petrochemical industries. Prime Minister Sherif Ismail ordered the establishment of a new committee yesterday to oversee the program. Members include the ministers of investment, petroleum, trade and industry, finance, planning, and public enterprises. The committee will be responsible for setting the exact timeline for the listings after it reviews valuation studies conducted for the list of 23 companies the government intends to privatize.

This is the first official line on the program to be documented in writing. CBE Governor Tarek Amer said last month that Banque du Caire would IPO in late 2018 or early 2019, while Finance Minister Amr El Garhy had earlier said to expect the first companies to list shares by September or October. Oil outfit Enppi is expected to pilot the program. Expectations were also for Eastern Company to be among the first companies in the pipeline to offer additional shares for sale.

REGULATION WATCH- EGX to amend listing regs: Speaking of listings, the board of the EGX met yesterday to amend the listing regulations, sources tell Youm7. The changes, which bring the regulations in line with the latest draft of the executive regulations of the Capital Markets Act, will see amendments to procedures for delisting. It will also see tougher disclosure standards as part of a move to emphasize transparency by listed corporations. The new changes will also facilitate the listing of SMEs. The story offers no further detail on the proposed changes.

AOI, Fiat will assemble Jeeps together in Egypt for another decade: The Arab Organization for Industrialization has inked an agreement with Fiat Chrysler Automobiles that extends their partnership on the production of Jeep automobiles for another 10 years, the Trade and Industry Ministry said in a statement yesterday. The two sides are planning to produce as many as 6,000 vehicles a year, some of which will be exported to Arab and African markets as well as to the US and Portugal.

The Arab American Vehicles Company (AAV) invested USD 2.8 mn in a new Jeep service center, in collaboration with Fiat, AAV Chairman Mohamed Anis tells Al Mal. The new center, which will also include a showroom, will run entirely on solar power, the ministry said. We had reported in March that Fiat executives were in Cairo to decide on whether they would set up shop in the country, especially as the government readies to roll out the Automotive Directive. The proposed law, which is meant to incentivize assemblers to move further up the value chain into manufacturing, is expected to come out sometime this year.

There are 230 days left until 1 January 2019. That’s when customs on vehicles imported from the European Union are set to fall to zero, threatening to force domestic assemblers to turn thousands of skilled workers into the streets in the assembly and auto part industries.

M&A WATCH- TE, MENA Cables reach final agreement on acquisition: Telecom Egypt and MENA Submarine Cables System have reached a final agreement on all the details of TE’s USD 90 mn acquisition of MENA Cables, sources close to the transaction tell Al Mal. Orascom Telecom Media and Technology (OTMT) is selling 100% of the cable operator, as we noted on Sunday. The transaction is now waiting on state and and regulatory approvals. TE announced last Thursday that it would finance the transaction through a shareholder loan to its cable subsidiary.

Advisors: The state-owned fixed-line monopoly had tapped Al Tamimi & Co. as its legal advisor, while Ibrachy Legal Consultancy was advisor to TE, according to the sources. We had also heard that TE was close to tapping EFG Hermes to advise on the transaction.

EARNINGS WATCH- Plenty of our friends in corporate Egypt have reported results in the past 24 hours:

Edita Food Industries reported a 50.8% y-o-y jump in its bottom line for 1Q2018 to EGP 60.9 mn, up from EGP 40.4 mn in the comparable quarter last year. Net profit climbed on the back of higher revenues, which rose by 37.9% y-o-y to EGP 886.1 mn. “The first quarter of 2018 has yielded solid results for Edita with strong volume recovery and volume-driven growth serving as evidence that difficult times are now behind us,” Chairman and CEO Hani Berzi said. “We’re seeing demand rising and consumers increasingly adapting to our new price points, especially at the croissant segment which posted the strongest growth in volumes and was the largest contributor to revenue growth during the period.” The company will continue to emphasize volume recovery in the months ahead, paying special attention to export markets. “I remain confident in our ability to continue satisfying consumer demand and in parallel creating value for our shareholders,” Berzi said. “We are also excited to be venturing further beyond our borders and look forward to increased contributions from export markets as a pillar of our long-term growth strategy.” Tap or click here to view the company’s full earnings release (pdf).

Egypt Kuwait Holding (EKH) saw bottom-line growth for 1Q2018 gain a solid 16% y-o-y to USD 32.6 mn, the company reported (pdf). EKH saw record growth in revenues for the quarter, rising 11% y-o-y to USD 118.8 mn. Revenue growth was driven by improved on-the-ground performance and strong operational results. “Our exceptional performance during the quarter was partly driven by the commencement of operations at ONS, a development that positions us today as the sole, fully-integrated energy company in Egypt,” Chairman Moataz Al Alfi said. A play on subsidy reforms and Egypt as a regional energy hub: “At a time when Egypt is carving its space as a regional natural gas hub with increased liberalization and subsidy reform, EKH stands to benefit through its upstream gas production, its midstream gas distribution, and its downstream gas-fired electricity generation and gas-fed industrials such as fertilizers and petrochemicals,” Al Alfi added.

Qalaa Holdings reports FY2017 results: Qalaa Holdings reported a net loss of EGP 4.71 bn in FY2017, “driven primarily by EGP 4.26 bn in impairments booked during the year, which management expects to be the final round of significant impairments, as well as by EGP 434.1 mn in losses from discontinued operations.” The company’s revenues rose 22% y-o-y to EGP 9.28 bn “on the back of strong growth from its energy subsidiaries TAQA Arabia and Tawazon, as well as ASCOM, its operational platform in the mining sector,” according to the company’s earnings release (pdf). “Qalaa’s full-year results reflect the ongoing transformation across our portfolio companies, with several platforms gearing-up for a new growth phase,” said Chairman and Founder Ahmed Heikal. “Energy, mining, cement, and transportation plays continued to capitalize on the prevailing economic trends and turn new market dynamics into growth opportunities and into avenues to create shareholder value.” Looking ahead: With operations at the Egyptian Refining Company set to start in 2019, Qalaa is confident that “2017 was an inflection point for Qalaa and that 2018 and beyond will witness further improvement in our financial results leading to a positive bottom-line in 2019,” Co-Founder and Managing Director Hisham El-Khazindar said.

Cleopatra Hospitals Group’s consolidated net profit after tax rose 97% y-o-y to EGP 57.2 mn in 1Q2018, up from EGP 29.1 mn, the company said in its earnings release (pdf). Revenues came in 32% higher y-o-y at EGP 347.2 mn. Cleopatra Hospital was the largest contributor to group revenues for the quarter at 45% of the total. “Our strong results in the first quarter of the year reflect the merits of our strategic initiatives and the success of our integration drive that is increasingly delivering value at our top-line and simultaneously allowing us to maximize efficiency and extract cost-savings while staying true to our commitment to patient safety and service quality,” Group CEO Ahmed Ezzeldin said. The group will continue infrastructure upgrades and press ahead with its CAPEX program over the coming period, which will see “complete renovations” in several of the group’s facilities.

Palm Hills Development (PHD) reported a 5.3% y-o-y increase in 1Q2018 net profit after tax to EGP 224.2 mn, up from EGP 212.3 mn in the same period last year, according to an EGX filing (pdf). Revenues came in at EGP 1.47 bn for the first three months, down from EGP 1.59 bn last year.

Orascom Development Egypt (ODE) reported a net profit after tax of EGP 83 mn in 1Q2018, up from EGP 75.9 mn during the same period last year, according to an EGX filing. Revenues also rose to EGP 654.9 mn, compared to EGP 493.8 mn last year.

The National Bank of Kuwait Egypt reported 1Q2018 net profits of EGP 496.9 mn, up from EGP 329.5 mn in the same period last year, according to an EGX filing (pdf).

Egyptera still hashing out structure of July electricity price hike: The Egyptian Electricity Utility and Consumer Protection Agency (Egyptera) is reportedly still working on the final structure of the price hikes it is expected to roll out in July as the government looks to slash electricity subsidies by 47% in the next fiscal year. Sources said that the agency will be ready with the new prices next month. From what we’re reading, it looks like it has reworked the pricing scheme since they last leaked to the press in April. They new system appears to divide up home users into four categories. Those consuming 0-100 KW and 101-200 KW will see price increases of 15-32%. Then there are those who fall under the 201-600 KW and the 601-1000 KW consumption bracket. Sources tell that all those consuming anything higher than 300 KW will see increases of 25-43%. They added that these could be subject to amendments by the Ismail cabinet upon review.

LEGISLATION WATCH- House passes law granting IDA autonomy from Trade and Industry Ministry: The House of Representatives gave its final nod yesterday to legislation that gives the Industrial Development Authority (IDA) autonomy from the Trade and Industry Ministry, according to a ministry statement. MPs had signed off on the act back in January and sent it to the Council of State for a final review. The law grants the agency financial and administrative independence from the ministry and make it responsible for allocating land to investors for industrial purposes and awarding industrial permits and licenses.

The House general assembly also approved yesterday the Public Procurement Act. Products with at least 40% domestic content will now get priority in government tenders over competing products with less domestic input. The law now includes Egyptian-made tech products and software among the categories granted preferential treatment, the head of the Federation of Egyptian Industries’ ICT division, Tamer Mohamed, tells Youm7. Trade and Industry Minister Tarek Kabil also the legislation as necessary to support the growth and development of domestic industry, according to a statement. He noted that the law would impose specific quality standards for local products.

The House Local Administration Act approved on Tuesday the Shopping Centers Act, which would simplify licensing procedures for shopping malls and nightclubs, Youm7 reports. Hotels and tourism facilities have been excluded from the legislation, according to the newspaper. This is the first we’ve heard of this law and the only draft out there is not legible (thanks, Al Shorouk). We’ll be back with more details as they emerge.

The House of Representatives’ general assembly is now in recess until 3 June, Ahram Gate reports. We believe House committees will still meet during the recess to discuss pressing legislation, including the FY2018-19 state budget.

LEGISLATION WATCH- Planning Ministry wants to give civil servants bigger raises: The Planning Ministry has finalized amendments to the Civil Service Act’s executive regulations that would pave the way for public sector employees to receive bigger annual raises, government sources say. As it currently stands, the Civil Service Act stipulates that all public sector workers are eligible for an annual raise equivalent to 7% of their base salary. Public wages are comprised of a (generally low) base salary and a laundry list of bonuses, allowances, and special payouts that are added to employees’ total earnings. The new system the ministry is looking to implement would bring together all of these bonuses and added payments under one single band known as “complementary wages.” The amendments to the Civil Service Act would then grant a 7% annual raise on each of the base and the complementary wages, effectively meaning that public sector salaries will see a jump to offset rising living costs. The new system is also meant to reduce wage disparities between employees of the same seniority, Central Organization for Management and Administration head Saleh El Sheikh had said on Monday. The ministry has sent the amendments to the Ismail Cabinet for review and sign-off, according to the sources.

The death toll from clashes between Gaza protesters and Israeli forces rose to more than 60 yesterday as demonstrations against the opening of a US embassy in Jerusalem continued for a second day.

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Egypt in the News

The laying to rest of 20 Egyptian Christians beheaded in Libya in 2015 tops coverage of Egypt in the international press. The bodies were repatriated earlier this week. The burial is a “chance for some closure” for the victims’ families, who cried at the funeral service but said they are happy their remains were returned to their home villages in Minya, Reuters reports.

Egypt’s equities “have been a performance standout” over the past year as economic reforms have begun to take hold, “breathing life into an economy that had been stymied by the after-effects of revolution,” says Seeking Alpha. Whereas the broad emerging markets index has an average return of 22%, Egyptian equities’ return stand at nearly 53%. This strong performance comes on the back of several landmark reforms, including the November 2016 EGP float and the passing of the Investment Act, both of which have placed Egyptian equities on an upwards trajectory.

On Deadline

Today’s hate-a-rade flavor of choice among opinion writers: Metro ticket prices. The hike in metro ticket prices was both grounded in faulty economic logic and badly sold to the public, the nation’s columnists say. Ziad Bahaa El Din saysin a column for Al Shorouk that since the metro is not used by the rich, cutting subsidies in the vein of fuel is not a sound idea. Mohamed Amin and Talaat Ismail are harping on the messaging of the decision. The ticket price issue comes as part of an overall package of problems in Greater Cairo’s transportation network, Al Shorouk’s Medhat Nafie says. Solutions to congestion need to go beyond the metro, she added.

Worth Reading

Global executives are increasingly seeing a business case for using blockchain, a report from Deloitte LLP found, according to Bloomberg. Of the 1,053 executives surveyed for the report, nearly 75% see a compelling business case for it and 84% forecast the mainstream adoption of blockchain in the near future. Considering that blockchain is “one of the hottest catchphrases among global companies right now,” around 40% of the executives say that their company is planning to invest USD 5 mn or more into blockchain, while around two thirds said they already have a system in production and/or have joined a blockchain-focused consortium. Detractors still exist, however — almost one quarter of the executives just don’t see a “compelling application to justify blockchain’s implementation.”

And no, blockchain isn’t bitcoin, it’s a distributed database. Check out Wired’s simple two-minute video primer here.

Worth Watching

What better captures the spirit and personality of ‘heads of states’ than their hair? The Economist cartoonist KAL, who says he has drawn every major head of state in the news around the globe for the past 40 years, believes hair shape to be an individual’s most defining characteristic. Donald Trump’s “gold-plated” hair, for example, has “captured the whole world’s imagination because it both insults physics and defies gravity,” says KAL, who adds that it makes sense because “when he has this magnificent flock of hair on his head, he turns into that thing that Donald Trump wants to be: the center of attention” (watch, runtime: 03:06).

Diplomacy + Foreign Trade

New arms purchases from Russia coming soon? Current events in the Middle East require the constant development and upgrade of Egypt’s military, Defense Minister Sedki Sobhi said after returning from a visit to Moscow, according to an Armed Forces statement. Sobhi and his Russian counterpart Sergei Shoigu had discussed military cooperation between Cairo and Moscow, and are expected to resume technical talks on said cooperation at an upcoming meeting of the joint Egyptian-Russian military committee. His statement strongly implies that we will see new new arms purchases from Russia in the offing.

Energy

Norway’s TGS completes Red Sea seismic survey

Norway’s TGS has completed a 10,000-km 2D seismic survey along Egypt’s Red Sea border with Saudi Arabia and expects to deliver final data in December this year, Offshore Magazine reports. Schlumberger and TGS-NOPEC are two of five firms that were awarded contracts for scans in the area last year. Red Sea Governor Ahmed Abdallah had announced this week that preliminary seismic studies in the Red Sea indicated there were “huge amounts” of oil in the area that could exceed the magnitude of the Zohr gas field in the Mediterranean.

Shell to begin production at phase 9B of WDDM in 3Q2018 – sources

Shell is planning to begin pumping 100 mcfd from the West Delta Deep Marine (WDDM) Phase 9B project in 3Q2018, EGAS sources tell Youm 7. The first phase of the project will include linking two out of the total eight wells to the national grid in 3Q-4Q2018, followed by a third well in 1Q2019. Phase two will see the remaining five wells linked to the national grid in 3Q-4Q2019, the sources say.

Agiba Petroleum production to exceed 50k bpd within days

Eni JV Agiba is expected to increase production to more than 50,000 bpd within the next few days, after it starts operating nine wells that are currently under maintenance. These are expected to pump out around 2500 bpd, Agiba Chairman Essam El Kaffas tells Youm 7.

Basic Materials + Commodities

GASC purchases 60k tonnes of Ukrainian wheat

The General Authority for Supply Commodities (GASC) purchased 60k tonnes of Ukrainian wheat in an international tender yesterday that attracted only four bids, Reuters’ Arabic service reports. GASC purchased the wheat from Louis Dreyfus at USD 219.9 per tonne free-on-board, traders tell the newswire. Egypt issuing a wheat tender at this time seemed a questionable decision to traders, who note that international prices are currently higher than usual. Egypt is also in the midst of its own harvest season, and has thus far purchased 2.6 mn tonnes from local farmers.

Automotive + Transportation

Brilliance Bavaria Auto looks to begin selling used electric cars

Brilliance Bavaria Auto is looking to begin selling used electric Brilliance cars, the company’s General Manager Khaled Saad said, Al Mal reports. Trade and Industry Minister Tarek Kabil had issued a decree in March allowing imports of used electric cars, provided they are less than three years old. Separately, President Abdel Fattah El Sisi met yesterday with China Poly Group Corporation Vice President Lin Wang to discuss manufacturing electric cars in Egypt, according to an Ittihadiya statement.

Other Business News of Note

EgyptAir resumes maintenance of Libyan Airlines planes

The EgyptAir Maintenance and Engineering Company signed a c.USD 500k contract with Libyan Airlines to conduct maintenance work on an Airbus 330 belonging to the Libyan flag carrier, Chairman Abou Taleb Tawfik tells Al Mal. EgyptAir had stopped providing maintenance services to Libyan Airlines in recent years due to security concerns.

Legislation + Policy

Parliament and Gov’t dispute differ on building violation fees

Parliament’s Housing Committee has yet to settle on a penalty fee laid out in a draft law on settling building code violations, committee member Khaled Abdel Aziz said. He seems to attribute the delay to the government and parliament not seeing eye to eye on the amount. While the Housing Ministry wants to set a fee of 25% of the property’s value, the committee wants fees lowered to 5-10%, he added. The committee will also explore another proposal which could see a pricing formula be set, which factors in land value. The law, which will only be implemented for a period of eight months, also received a number of other amendments in the committee, including how the state should manage and spend penalty fees. Al Mal has a detailed list of the committee’s amendments.

Egypt Politics + Economics

Activist arrested over charges of “insulting the president”

Egyptian activist Shady El Ghazaly Harb was arrested yesterday on a number of charges that included membership in a terrorist organization, Arabic Reuters reports.

On Your Way Out

ENR wins EBRD’s Environmental and Social Best Practice award: Egypt National Railways (ENR) received the European Bank for Reconstruction and Development’s (EBRD) 2018 Environmental and Social Best Practice award this week, for its “pioneering work in addressing gender issues,” including an awareness campaign aimed at improving safety for women and prevent harassment in public transport, according to the bank’s website.

The Market Yesterday

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EGP / USD CBE market average: Buy 17.78 | Sell 17.88
EGP / USD at CIB:
Buy 17.78 | Sell 17.88
EGP / USD at NBE: Buy 17.78 | Sell 17.88

EGX30 (Tuesday): 16,986 (0.00%)
Turnover: EGP 1.4 bn (20% ABOVE the 90-day average)
EGX 30 year-to-date: +13.1%

THE MARKET ON TUESDAY: The EGX30 ended Tuesday’s session almost flat. CIB, the index heaviest constituent ended down 0.9%. EGX30’s top performing constituents were Global Telecom up 5.9%, Emaar Misr up 4.6%, and Orascom Telecom Media & Technology up 3.7%. Yesterday’s worst performing stocks were GB Auto down 2.4%, Juhayna down 2.4%, and Egyptian Resorts down 2.2%. The market turnover was EGP1.4 bn, and regional investors were the sole net sellers.

Foreigners: Net Net | EGP +10.1 mn
Regional: Net Short | EGP -77.5 mn
Domestic: Net Long | EGP +67.4 mn

Retail: 55.5% of total trades | 57.8% of buyers | 53.3% of sellers
Institutions: 44.5% of total trades | 42.2% of buyers | 46.7% of sellers

Foreign: 21.1% of total | 21.5% of buyers | 20.8% of sellers
Regional: 13.2% of total | 10.4% of buyers | 15.9% of sellers
Domestic: 65.7% of total | 68.1% of buyers | 63.3% of sellers

WTI: USD 71.07 (-0.34%)
Brent: USD 78.21 (-0.28%)

Natural Gas (Nymex, futures prices) USD 2.82 MMBtu, (-0.46%, June 2018 contract)
Gold: USD 1,293.10 / troy ounce (+0.22%)

TASI: 8,039.29 (-0.39%) (YTD: +11.25%)
ADX: 4,470.57 (+0.53%) (YTD: +1.64%)
DFM: 2,936.75 (+1.09%) (YTD: -12.86%)
KSE Premier Market: 4,780.63 (+0.34%)
QE: 8,922.00 (-0.14%) (YTD: +4.68%)
MSM: 4,684.75 (-0.10%) (YTD: -8.13%)
BB: 1,273.93 (+0.15%) (YTD: -4.34%)

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Calendar

17 May (Thursday): Expected date for the start of Ramadan.

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.

25-28 November (Sunday-Wednesday): 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).

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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