It’s interest rate week, and economists are split on whether to expect a rate cut this Thursday

It’s interest rate week. Will the central bank cut rates when its monetary policy committee meets on Thursday? Economists are split, with six of the 10 with whom we spoke suggesting that a rate cut is possible. We have the rundown in this morning’s Speed Round, below.

How is it already the last full week of 1Q? Time doesn’t really accelerate as you age, but it sometimes feels that way, no? The best antidote: Do something new, science suggests. Take up painting. Learn a new sport. Pick up a musical instrument. Really.

Keep your eye on the EGX this morning as we ask: Are we at the end of a dead-cat bounce? Global markets were rattled on Friday “as stocks fell, German government bond yields turned negative and a widely followed US Treasury market indicator raised fears of a recession,” the Financial Times reports. It sent shivers through emerging markets, the paper notes elsewhere, as “signs of a deepening global economic slowdown and negative headlines out of Turkey and Brazil sent investors scrambling out of riskier assets.” Stock gauges in the US and Europe fell just under 2% while the MSCI Emerging Market Index slipped 1%. We have lots more in this morning’s Macro Picture, below.

Also today: Jordanian, Iraqi and Egyptian officials will meet today for a mini-summit with an emphasis on security (foreign ministers and intelligence chiefs met yesterday), and Egypt is hosting the World Tourism Organization commission for the Middle East for the next two days

Can Egypt’s overcrowded delivery space learn from KSA’s Mrsool? A delivery app in Saudi, Mrsool, is edging out the likes of Uber and Facebook by giving customers the thing they love the most — the chance to haggle, Bloomberg says. The app gained an edge by allowing couriers to bid to run errands to customers —and allowing shoppers to reject expensive offers. This creates a personal back-and-forth of “chatting and sharing photographs or voice notes.” Mrsool’s founders see Egypt as the “crown jewel” of peer-to-peer local delivery, but their plan is to set a foothold in the GCC before heading westward.

A very British coup? As uncertainty over Brexit continues to wrack the UK, PM Theresa May is on the verge of being ousted by rebellious cabinet ministers, if inside sources who talked to The Times are to be believed. Hundreds of thousands of people took to the streets of London yesterday to demand a second referendum, the biggest protest since the Iraq War demos in 2003, the BBC reported.

Across the pond, the long-awaited details of the Muller investigation could be out today. America’s attorney general is reviewing the special counsel’s report into “Russian interference in the 2016 presidential election and whether the Trump campaign coordinated with Moscow,” Reuters writes. The news is electrifying the US of A, and there’s no better place to start than with the New York Times’ news analysis piece, which suggests the release of the report’s finding as early as today could be a reckoning that “will shape the remainder of Mr. Trump’s presidency and tests the viability of American governance.”

Khalas to the Caliphate: US-backed Kurdish fighters overwhelmed the final stronghold of the self-declared Islamic State yesterday, leading the New York Times to pronounce the Caliphate dead. But is it really?

PSA- Expect clouds this morning with continued gusts of wind and a chance of a shower, according to the national weather service. Skies should clear up this afternoon. Look for a daytime high of 24°C today.

Tuktuks are under assault once more as Egypt looks to seven-seater microvans as replacements, Local Development Ministry Spokesman Khaled Kassem told Hona Al Asema (watch, runtime: 02:42). We have more in this morning’s Speed Round, below.

E-commerce and how to regulate it earned some airtime on Hona Al Asema (watch, runtime: 11:37). E-commerce supports SMEs and therefore the economy as a whole, said Mohamed Azzam, head of the Federation of Egyptian Chambers of Commerce’s digital economy and technology division. Taking part in the on-the-air discussion, Jumia’s Hisham Safwat said fashion products and cosmetics sell most.

Unionaire has launched two new factories to produce refrigerators and televisions to meet domestic demand (watch, runtime: 02:28).

Zahi Hawas has apparently put aside his Indiana Jones hat for a minute to pursue more contemporary hobbies … the former Antiquities Minister told El Hekaya’s Amr Adib last night that the last discovered ancient Egyptian papyrus confirmed that Al Ahly football club would win the league this year (watch, runtime: 00:43).

SURVEY- CBE could cut key interest rates this Thursday: The Central Bank of Egypt (CBE) could cut its key interest rates by 50-100 bps when its Monetary Policy Committee meets this Thursday, six out of 10 economists surveyed by Enterprise said. Respondents cited the EGP’s recent appreciation as well as steady inflows in portfolio investment. “Fundamentals have improved further; the EGP appreciation, portfolio inflows, the Fed maintaining rates and Egypt’s upgrade to B+ [by Fitch Ratings] are additional supporting factors to cut policy rates,” said Hany Farahat, senior economist at CI Capital, who called last month’s unexpected rate cut of 100 bps. The CBE cut its overnight deposit and lending rates by 100 bps last month to 15.75% and 16.75%, respectively, citing positive indicators, including lower inflation and unemployment.

The EGP hit a two-year high against the greenback this month due in part to the central bank’s scrapping in December of its parallel repatriation mechanism, which had kept a portion of foreign currency inflows from entering the banking system. The mechanism was put in place during the USD shortage crisis to reassure foreign investors by allowing them to repatriate their USD from the country at any point.

Would a cut drive the carry trade away? Economists think not.Foreign holdings in Egyptian treasuries jumped to USD 15.8 bn by the end of February, up from USD 13.36 bn at the end of January, signaling an end to an outflow trend that kicked off in April last year amid an emerging-market slump. “Another 1% cut will not drive portfolio investors away or make the local debt less attractive. We have very positive feedback from debt investors, despite February’s cut,” said Pharos Holding’s head of research Radwa El Swaify.

A cut would also compliment the government’s new debt strategy, El Swaify and veteran economist Hany Tawfik pointed out.

Don’t forget the Fed: The US Federal Reserve left interest rates on hold last week with the majority of central bank officials hinting rates could remain unchanged throughout 2019 to avoid an economic slowdown. It was good news for EM, because (in general) higher rates in the US = outflows from emerging markets.

A surge in inflation in February prompted almost half of the economists we surveyed to predict the CBE will leave rates on hold this Thursday. Four economists saw the CBE delaying its easing cycle on expectations that inflation would experience a seasonal surge during Ramadan, followed by a further increase following planned energy subsidy cuts in July. “We think the CBE will keep its rates unchanged in the coming period until the expected inflationary pressure following Ramadan, Eid and the planned subsidy cuts before the new fiscal year eases. We could see rate cuts by the end of 3Q2019 or the beginning of the fourth quarter,” said Multiples Group’s Omar El-Shenety.

Annual headline urban inflation jumped to 14.4% in February compared to 12.7% in January while annual core inflation, which excludes volatile items such as food and fuel, shot up to 9.2% compared to 8.6%. The state statistics agency said the increase came as a result of a jump in the price of vegetables, meat and chicken. Household utilities and transportation also contributed to the unexpected jump.

Global oil prices climbing are also a concern, added EFG Hermes’ Mohamed Abu Basha. “We’re expecting rates to remain on hold, largely due to the elevated inflation reading in February. On the margin, oil prices are slowly moving up, hitting nearly a five-month high.”

Fitch Ratings has upgraded Egypt’s long-term foreign-currency issuer default rating to ‘B+’ with a ‘stable’ outlook. The agency said that Egypt’s rating upgrade is supported by “further progress in implementing economic and fiscal reforms, which are driving improved macroeconomic stability, fiscal consolidation and stronger external finances.” These reforms, the ratings agency said, are expected to continue beyond the expiration of the IMF Extended Fund Facility. Barring renewed political instability or an unexpected negative shock to economic growth, Egypt’s outlook generally looks good, Fitch says. Tap or click here for the full report.

Fitch sees Egypt’s budget deficit narrowing to 8.6% of GDP during the current fiscal year, and the primary budget surplus recording 1.6%. The government is targeting a deficit and primary surplus of 8.4% and 2%, respectively. Interest payments are “likely to peak” in FY2018-19, when they are expected to come in at 10.2% of GDP, but will likely fall at least 1 percentage point in FY2019-20.

As for the next fiscal year, Egypt’s expenditures on wages, subsidies, and social spending are likely to drop on the back of what Fitch describes as “political commitment for further fiscal consolidation.” Government spending on wages in FY2019-20 is expected to drop to below 5% of GDP, down from 8% in FY2015-16, while subsidies and social spending should account for around 5.3% of GDP next fiscal year, down from 8% in FY2016-17. GDP growth should record 5.5% (which is slightly below the government target of 6%), while inflation is forecasted to come in at an average of 10% next fiscal year, “building in another round of subsidy reforms” in June and July of this year.

The ratings upgrade will increase investors’ confidence in Egypt and help drive down Egypt’s borrowing costs, Finance Minister Mohamed Maait said, according to a ministry statement. Vice Minister of Finance Ahmed Kouchouk stressed that Egypt remains committed to pushing ahead with the reform agenda, the statement says.

M&A WATCH- CBE gives Banque du Caire the nod to buy out Cairo International Bank: The Central Bank of Egypt has given Banque du Caire the greenlight to buy out Cairo International Bank in Kampala, Uganda, to expand its reach in Africa, Chairman Tarek Fayed told Al Masry Al Youm. BdC currently owns 60% of the bank while National Bank of Egypt and Banque Misr jointly own 40%. “We’re in the process of completing the acquisition of NBE and Banque Misr’s remaining shares, especially after the greenlights from the CBE and the board of directors,” Fayed said.

SODIC lands 500-acre plot in Egypt’s Sheikh Zayed: SODIC signed on Thursday a EGP 15.3 bn purchase agreement with the New Urban Communities Authority (NUCA) for a 500-acre plot in Sheikh Zayed, the real estate developer said in a statement (pdf). SODIC is paying NUCA EGP 2,470 per sqm in installments over 11 years. Some EGP 8.8 bn of the sum is in fixed installments, in addition to 15% of the annual collections. The new plot, which is enough to develop as many as 5k residential units, brings SODIC’s undeveloped land bank to 7 mn sqm, said SODIC boss Magued Sherif.

NUCA also signed land purchase agreements with Al Ahly for Real Estate Development and Arkan Palm, according to a Cabinet statement. Under the agreements, Arkan Palm will develop mixed-use project on 205 acres in Sheikh Zayed, while Al Ahly will develop a plot in 6 October City.

GE subsidiary in Egypt is banned from bidding on AfDB power contracts: The African Development Bank (AfDB) has banned a GE subsidiary in Egypt and another in Germany from bidding on power contracts for up to 76 months as part of a settlement of earlier cases of misconduct, Reuters reported. The two units, which were part of Alstom before GE acquired them in 2015, were charged with fraud and bribery in 2006 and 2011.

Did the government have (another) change of heart on tuk-tuks? Egypt’s governors are looking into issuing public transport licenses for seven-seater minivans as a replacement for three-wheeled tuk-tuks and plan to push the minivans as alternatives for tuk-tuk drivers, according to a Cabinet statement. The Local Development Ministry will look into providing jobs as minivan drivers under its youth-focused employment initiative, Mashrou3ak. Prime Minister Moustafa Madbouly had ordered in December a temporary freeze on licensing the three-wheel vehicles, but the Alexandria Traffic Authority began in January issuing new licenses.

Business lobby proposes 1% surtax on net profit to fund healthcare system: The Federation of Egyptian Industries Tax and Customs Committee has proposed to the Finance Ministry an amendment to the Universal Healthcare Act that would see companies taxed 1% of profit rather than revenue, Youm7 reported. A government official told Enterprise last week that the ministry is considering levying a 0.25% tax on net profits, not revenues. The state’s EGP 600 bn health insurance plan mandated under the Universal Healthcare Act will be rolled out incrementally throughout Egypt over the course of 11-13 years, but the Finance Ministry is expected to start levying a designated tax to fund the scheme during the current fiscal year.

El Sisi orders gov’t to drop appeal against mandatory annual pension increases: President Abdel Fattah El Sisi issued an order on Thursday for the Madbouly government to drop its appeal against a Supreme Administrative Court ruling enshrining pensioners’ right to an annual increase in their pensions, according to an Ittihadiya statement. The matter will now be referred to the Council of State (Maglis El Dawla) for a final decision, and El Sisi ordered that all outstanding pension payments be settled through the FY2019-20 budget.. The lawsuit was originally filed in March 2018 by the Pensioners Union, according to Ahram Online.

EGX completes procedures for electronic linkage between African exchanges: The Egyptian exchange has completed the necessary procedures to activate the African Exchanges Linkage Project (AELP), EGX Chairman Mohamed Farid said on Thursday, according to a bourse statement (pdf). The EGX is currently in talks with brokerage firms to brief them on the initiative and the steps needed for their participation, Farid told a delegation from the African Development Bank. The AELP, which the EGX joined last month, is meant to simplify and increase intra-African investment.

MOVES- Amr Shaat has resigned as deputy transport minister, a source from the ministry tells Al Shorouk. Shaat held the position since August 2018 and was tapped in September to act as chairman of the National Authority for Tunnels. His resignation came a month after the Ramses Station train collision and two weeks after the appointment of new transport minister Kamel El Wazir.

Emerging markets can’t rely on a dovish Fed for much longer: Dovish moves by the US Federal Reserve are having less of an impact on emerging markets, Jonathan Wheatley writes in the FT. The Fed’s decision to leave rates on hold last Wednesday did little to prevent EM indices falling at the end of the week on global growth concerns. JPMorgan’s EM Currency Index fell 1.7%, the MSCI Emerging Market index closed 1% down, and the MSCI Emerging Market ETF tumbled almost 3%. “The incremental bounce that you get from dovish surprises is becoming less and less,” Robin Brooks, chief economist at the Institute of International Finance (IIF), told the FT.

Less impact, less frequency: It’s one thing that dovish announcements are having less impact on emerging markets. But, according to Citi’s chief EM strategist Luis Costa, they are also set to become less frequent. “It is difficult to imagine another sizeable help to EM assets … given that the markets already have a very good idea of the ultimate size of the [Fed’s] balance sheet,” he said last week. Any further surprises, he notes, will be because of a serious decline in the US growth prospects — something that could do more harm than good for risky EM assets.

And overcrowding does not help the situation: A Bank of America Merrill Lynch survey last month found that for the first time ever, emerging markets were the “most crowded trade” following the huge spate of inflows in the opening weeks of 2019. Retail and institutional investors have increased their exposure to EM assets, with year-to-date net fund inflows currently at USD 15.7 bn, against USD 61.8 bn leaving developed markets. And according to IIF analysis cited by Brooks, the falling EM positions of international investors last year was due to falling prices, rather than capital flight. All of this means that EM holdings are sizeable and there may not be much headroom for them to increase. “The basic message is that after all these years, people are sort of risked up,” Brooks says. “For each dovish surprise the incremental flow is less, and of worse quality.”

The traveling Tutankhamun exhibition has opened its doors for Parisians. The exhibition, titled “Tutankhamun: Treasures of the Golden Pharaoh,” offers 150 items on show in its second stop in Paris as part of a 10-city tour, France 24 reports. The current tour will be the last time the pieces will be shown outside of Egypt before they settle at the Grand Egyptian Museum near the Pyramids.

A performance ban on singer Sherine Abdel Wahab leads the conversation about Egypt in the international press this morning. The Musicians Syndicate banned the singer after she made a comment during a concert in Bahrain that lawyer Samir Sabry, known for going after high-profile figures, deemed critical of freedom of speech in Egypt. Sabry had previously sued the pop singer in January after she had dodged a six-month prison sentence for joking about falling ill from drinking Nile water. The Associated Press, the Times of London and The Telegraph, among others, have all picked up the story.

An Egyptian hero in Italy: Also getting international attention is the story of the Italy-born Egyptian teenager Ramy Shehata, who is being hailed as a national hero after saving 51 schoolmates from a bus hijacking last week. CNN reports that Shehata hid his phone and called his father to alert the police while pretending to pray in Arabic. Italian Interior Minister Matteo Salvini’s office later said it will speed up the process of granting Shehata Italian citizenship — and of revoking it from the driver, identified as a 47-year-old Senegalese Italian. The AP and the BBC were among those taking note.

The Supreme Council for Media Regulation rebuked the BBC in a statement on Friday, accusing the British broadcaster of having made a “huge mistake” in hosting an Egyptian designated as a terrorist to discuss local issues, Egypt Today reports.

Other headlines worth noting in brief:

• Sudan + Red Sea exploration blocks: Sudan’s summoning of Egypt’s ambassador over oil and gas exploration in the Halayeb region earned some digital ink from Reuters, AFP, and the AP.
• UK tourism: Egypt is no less safe than any other travel destination, simply because “troubled times” know no borders, the Telegraph’s Chris Leadbeater writes.
• The Jerusalem Post is out with a series of pieces on Egyptian-Israeli relations since the Camp David Accords were signed nearly four decades ago. One reflects, two analyzes, three comments, four uses a horrible pun for a title, while five tells a contemporary story and six a much earlier one. The spotlight comes as Israeli PM Benjamin Netanyahu is catching flack over the 2015 sale of German submarines to Egypt, Haaretz reports.
• Some of Egypt’s state-owned newspapers might be merged to offset their losses, which Al-Monitor concludes means they are on the brink of extinction.
• Linwood Mosque imam is Egyptian: Reuters speaks with the Egyptian imam of Linwood Mosque in New Zealand’s Christchurch a week after the mass shooting.
• Egyptian-American detained at Rabaa wants out: Egyptian-American Moustafa Kassem sent another letter to US President Donald Trump pleading for release from an Egyptian prison, Newsday reports.

El Sisi and Iraqi PM express commitment to fighting terrorism: President Abdel Fattah El Sisi’s meeting with Iraqi Prime Minister Adel Abdul Mahdi topped the front pages of all three state-owned newspapers this morning (Al Ahram | Al Gomhuria | Al Akhbar). The two countries expressed their commitment to fighting terrorism and enhancing cooperation across a range of fields.

It was a busy weekend on the diplomatic front. Starting with stories that have an economic angle, Egypt and Argentina have agreed to step up economic cooperation, according to an Investment Ministry statement following a meeting between Sahar Nasr and Argentina’s Minister of Foreign Affairs Jorge Faurie. The two met on the sidelines of UN conference on South-South Cooperation, which wrapped up on Friday in the Argentine capital.

In other news from the diplomatic front worth noting this morning:

• Egypt on Trump’s impromptu Golan Heights call: Egypt joined the chorus of regional nations opposed to US President Donald Trump’s call to recognize Israeli possession of the occupied Golan Heights. Both the Foreign Ministry and Al Azhar issued statements
• Egypt and Iraq must work together to stem the flow of terrorism and terrorist finance, Iraqi Prime Minister Adel Abdul Mahdi told President Abdel Fattah El-Sisi on Saturday, Reuters reports. Mahdi was in Cairo for his first trip abroad since assuming office in October.
• Food security was on the agenda as El-Sisi met with the executive director of the World Food Programme, David Beasley, on Saturday, Al Ahram reports.
• The European Union launched a EUR 120 mn water security program in Egypt yesterday in celebration of international water day, according to Al Mal.

Siemens Gamesa, German wind energy company Senvion, and Danish wind turbine manufacturer Vestas have been shortlisted to build Lekela’s 250 MW wind energy plant in Ras Ghareb, Lekela Egypt General Manager Faisal Eissa said. The winning company will be selected within months, Eissa said. Actis-backed Lekela had signed the power purchase agreement for the plant in February (pdf). Lekela is planning to invest USD 500 mn in building two wind energy plants with a combined production capacity of 500 MW.

Dutch maritime contracting company Van Oord is planning to participate in the deepening of Damietta Port’s waterway and turning basin as part of the port’s expansions, Damietta Port Authority said in a statement. Port officials are in talks with Van Oord to receive financing for the project from a Dutch bank.

Housing Minister Essam Al Gazzar met yesterday with representatives from several local and international companies focussed on utilities development projects to explore opportunities for cooperation on projects in drinking water refinement and desalination as well as waste management, according to a ministry statement. Al Gazzar also met with a delegation from the World Bank to discuss strategies to involve private sector real-estate developers in the execution of social housing projects, per a separate ministry statement.

Egypt began exporting potatoes to Turkey as of last Thursday, the Agriculture Ministry said in a statement. According to the ministry, Egypt has also been exporting onions to Turkey for the past three months.

Egyptian production of wheat is expected to exceed 9 mn tonnes this season for the first time, according to statements from Agriculture Minister Ezzedin Abu Steit cited by Al Mal. The yield represents a cultivated area of 3.25 mn feddans.

Unionaire inaugurated on Thursday two new television screens and refrigerator production facilities in 6 October City at a combined investment of EGP 300 mn, according to a Trade and Industry Ministry statement. The facilities include five production lines at the refrigerator factory and another seven at the television screens factor. Unionaire has earmarked 50% of the factories’ output for exports. The company is also set to inaugurate soon a washing machine production line.

The Military Production Ministry signed on Thursday a memorandum of understanding (MoU) with Poland’s Chimide Polska to set up a local joint venture to manufacture portable cabins, the ministry said in a statement.

The Arab Organization for Industrialization (AOI) inked a cooperation protocol with a Malaysian company to plant and process 1.5 mn Medjool date palms in Kharga Oasis, New Valley governorate Mohamed El Zamaloot said, according to Al Shorouk. The story does not get into the project’s value or timeline, but its description of the potential venture as “industrial agriculture” suggests it is more than simply a date packaging operation. The AOI is also in talks with Austria-based engineering firm Andritz AG to set up a factory to locally manufacture water pumps, Chairman Abdel Moneim El Teras said separately, according to the newspaper.

Prime Minister Moustafa Madbouly discussed with China’s NetDragon plans to set up mobile classrooms in Egypt as a means to address high student density in public schools, according to a Cabinet statement.

The Baheya Foundation for Early Detection and Treatment of Breast Cancer is planning to establish a new EGP 880 mn hospital in Sheikh Zayed, Chairman Tamer Shawky said. Baheya will break ground on the facility by year-end, and is planning to have the hospital up and running after three phases — the first of which will cost EGP 480 mn, the second EGP 220 mn, and the third EGP 180 mn. The announcement came during a sponsorship renewal signing ceremony between Baheya and Juhayna Food Industries.

Transport Minister Kamel El Wazir met on Thursday with a delegation from Progress Rail Locomotive to speed up the financial closure and signing of the final contracts for the purchase and maintenance of new locomotives, according to a Cabinet statement. The agreements include the purchase of 50 new locomotives, the maintenance of 91 existing trains, and a 15-year service contract for all 141. The two sides also discussed the renovation of 240 other rail engines. The Egyptian National Railways signed a memorandum of understanding for the contracts last September.

Vodafone Egypt has withdrawn EGP 2.1 bn worth of financing from two bank loans, bank sources familiar with the matter told Masrawy. The company took EGP 900 mn from a EGP 4.5 bn credit facility agreed last week with Banque Misr. The other EGP 1.2 bn was withdrawn from a previously agreed syndicated loan.

The Holding Company for Metallurgical Industries signed on Thursday a memorandum of understanding (MoU) with Switzerland-based metals industry-focused Research and Consulting Group (RCG) to revamp assembly lines at four of the state-owned company’s subsidiaries, according to a Cabinet statement. Under the MoU, RCG will conduct a technical appraisal and suggest development plans to support the lines’ efficiency as part of the Public Enterprises Ministry’s plan to turn around state firms. The state-owned company launched a tender last October to hire an industrial consultancy for its subsidiaries Egyptian Copper Works, Nasr Forging Company, Metalco, and El Nasr Steel Pipes and Fittings.

CI Capitall’s shareholders approved on Thursday the investment bank’s rebranding to CI Capital Holding for Financial Investments, CI Capital said in a bourse filing (pdf).

President Abdel Fattah El Sisi issued presidential pardons for 408 prisoners, most of whom were released last week, according to Ahram Online. In other news from the justice system, the Court of Cassation, the nation’s highest appeals court, has upheld prison sentences handed to 66 defendants convicted of acts of violence during the 2013 dispersal of sit-ins by supporters of ousted Ikhwani President Mohamed Morsi, Ahram Online reported.

Cultivating scorpion venom for fun and profit: A group in Cairo is turning a profit by way of scorpion breeding, Nigeria’s TVC News reports. Venom Farm sells scorpion venom to pharmaceutical companies for a range of applications, but it’s not easy going: It takes 1,000 scorpions to produce a single gram of dried venom, which is then sold within Egypt for around USD 800.