Fawry private placement 15.9x oversubscribed.
Plus: Global markets aren’t looking happy.

It’s official, folks: Eid Al Adha falls this Sunday. Dar Al Iftaa announced on Thursday that the first day of Eid Al Adha will be Sunday, 11 August. This sets us working people up for a five-day break (Friday-Tuesday). We have yet to hear anything official from cabinet for the public sector, and from the EGX and CBE for banks and businesses.

A handful of news triggers coming up over the next several days:

• PMI: The purchasing managers’ index for Egypt, the UAE, and Saudi Arabia will be released tomorrow morning.
• Foreign reserves: The CBE is due to release Egypt’s net foreign reserve figures for July sometime this week.
• Inflation: Monthly inflation figures are due out this week. Inflation fell to a three-year low in June, coming in at 9.4%.

Shoukry heads to Iraq: Foreign Minister Sameh Shoukry is in Baghdad today for talks with his Iraqi and Jordanian counterparts, according to a ministry statement. The three countries have been developing closer ties in recent months: industry ministers agreed in May to establish common industrial zones, and in March President Abdel Fattah El Sisi hosted a tripartite summit with Jordanian King Abdullah and Iraqi PM Adil Abdul-Mahdi.

The Fab15 conference draws to a close today at the Greek Campus in downtown Cairo.

Fresh China tariffs extend market losses: Global markets continued to slide on Friday after US President Donald Trump announced on social media a new 10% tariff on USD 300 bn of Chinese imports, escalating the trade war between the world’s two largest economies. Investors were already rattled after US Federal Reserve chairman Jerome Powell hinted last week that Wednesday’s 25 bps rate cut was not the start of an extended easing cycle. Trump’s announcement compounded market woes, with US equities suffering their worst week of the year and the main European indices — already buffeted by concerns over Brexit and an economic slowdown in Germany — suffered heavy losses.

China threatens retaliatory measures: China, which is already facing a 25% tariff on USD 250 bn of its exports, promised to respond with “necessary countermeasures,” CBS reports. Beijing has previously hinted that it could restrict exports of rare earth minerals — vital to US defense, technology and energy sectors — or blacklist US companies from doing business in China.

EM currencies hit by Powell comments: Emerging-market currencies suffered their biggest daily fall in 2019 on Thursday on fears that the Fed will not continue cutting rates later this year, Reuters reports. The MSCI EM Currency Index fell 0.62% after Powell described last week’s rate cut as a mere “midcycle adjustment.”

Has Trump forced the Fed’s hand? The escalation of the trade war may leave the Fed with little choice but to cut rates again when it next meets in September. Fed fund futures — which predict movements in US interest rates — now show a 100% chance of a September rate cut, having risen from 58% before the latest tariff announcement.

Kristalina Georgieva nominated for top IMF job: The EU has nominated World Bank CEO Kristalina Georgieva to replace Christine Lagarde as the IMF’s managing director, beating out former Dutch finance minister Jeroen Dijsselbloem and Bank of Finland governor Olli Rehn. IMF members can continue to make nominations until 6 September, after which the IMF board will interview candidates. The new managing director will be appointed by 4 October. CNBC has more.

Berkshire Hathaway operating earnings fall on weak insurance underwriting: Warren Buffett’s Berkshire Hathaway saw its operating earnings fall 11% in 2Q due to weak insurance underwriting profit, the company said in a statement (pdf) yesterday. The company posted an operating profit of USD 6.14 bn (USD 3,757 per Class A share), down from USD 6.89 bn (USD 4,190 per Class A share) in the same period a year earlier. Insurance underwriting profit fell 63% to USD 353 mn, from USD 943 mn in 2Q2018.

But net earnings rise 17%: The company posted net earnings of USD 14 bn in 2Q (USD 8,608 per Class A share), up from USD 12 bn (USD 7,301 per Class A share) in the same period a year earlier.

Facebook takes down “inauthentic” pages in Egypt, KSA, UAE: Facebook has identified two operations ― one originating in Egypt and the UAE and the other in Saudi Arabia ― that used fake accounts to engage in “coordinated inauthentic behavior,” on Facebook and Instagram, the company disclosed in a statement. The people behind the operations used fake accounts to disseminate content, impersonate public figures and artificially boost engagement, the social media giant says. The operation based in Egypt and the UAE targeted several countries in the MENA region and East Africa, while the operation in Saudi mainly targeted the MENA region. The two campaigns were not linked. Reuters and the FT have more.

Sudanese military, opposition reach constitutional pact: Military and civilian leaders in Sudan have reached an agreement to create a new transitional government, Reuters reports. The Forces of Freedom and Chance (FFC) opposition coalition will appoint a prime minister to head the new government and the military will select the defense and interior ministers. A 300-member legislative assembly will be appointed, 67% of which will be allocated to the FFC and the rest will go to political parties not associated with ousted former president Omar Al Bashir. Both sides are expected to sign the declaration today. Further rounds of negotiations will take place to iron out the details for the 39-month transitional period which will lay the groundwork for elections in 2023.

More reforms are afoot in Saudi Arabia, where an official decree has granted women the right to travel without permission from a male guardian, and to receive and file or official family documents, according to the New York Times. The reforms come in the wake of criticism from Human Rights Watch about the subjugation of women in the Kingdom, and around a year following the removal of the ban on women driving.

Suez Canal revenues rise: The Suez Canal Economic Zone reported EGP 3.6 bn in revenues for FY2018-2019, breaking records for the second consecutive year. The company posted a net profit of EGP 2.2 bn for the year, Hona Al Asema’s Reham Ibrahim said (watch, runtime: 01:21).

Port Saidis hit clinics to get medical care: About 28% of Port Said’s residents, or 77,846 people, have so far registered themselves to benefit from the government’s universal healthcare system, Ibrahim cited the Health Ministry as saying (watch, runtime: 03:11). With 22 health centers in Port Said, which piloted the act last month, some residents have already had procedures and surgeries that had never been done in that part of the country before, Ibrahim noted.

Who qualifies as a “Kramer”? The government announced over the weekend the criteria used to determine Kramer from non-Kramer in the fourth phase of an initiative to restructure its subsidy program (watch, runtime: 01:17). We have more on this in this morning’s Speed Round, below.

IPO WATCH- Fawry’s private placement 15.9x oversubscribed: Investors oversubscribed 15.9x to the private placement portion of Fawry’s ongoing IPO, EFG Hermes said in a statement (pdf). Sources close to the matter had incorrectly told the local press last week that the private placement was around 6.5x oversubscribed. About 69.3 mn shares, or 9.8% of the company, were offered to qualified institutional and high net worth investors in the private placement at EGP 6.46/share, suggesting the company raised about EGP 447.8 mn. According to the statement, the private placement generated about EGP 7.1 bn, which appears to be the value of demanded shares received. The retail offering will close tomorrow. Reuters also picked up the story.

Advisors: EFG Hermes is global coordinator and bookrunner. Zulficar & Partners is serving as the offering’s local counsel, while Zaki Hashem & Partners is local counsel to the issuer.

Background: Fawry’s IPO will be Egypt’s first since last October, testing the waters of an anemic IPO market that has seen no action since Sarwa Capital went public last year. The IPO could set the tone for the market ahead of other planned offerings, including those in the state privatization program. The e-payments platform’s shares are expected to debut on the EGX on Thursday, 8 August.

STARTUP WATCH- Food delivery service Carriage closes operations in Egypt: Kuwait-headquartered food delivery company Carriage has shut down operations in Egypt five months after launching, MENAbytes reports. Germany’s Delivery Hero acquired the company in 2017, but now reportedly wants to put all its resources in Egypt into Otlob. The food ordering and delivery platform leads the market, but faces increasing competition from UberEats, Glovo, and others.

The decision to close comes as a surprise to the market: Carriage, which operates in Kuwait, Saudi Arabia, Qatar and the UAE, reportedly ended exclusivity agreements with its restaurant partners in Egypt over a month ago, but without giving any details. No public announcement has been made by Carriage about its decision to close, and both partners and employees were reportedly informed of the decision only days ago. Employees have been given the option to work for other Delivery Hero companies or to be compensated for the full duration of their contract period.

It’s not the first time Delivery Hero has tried to see off the competition: In May, Spanish delivery app Glovo ― which is partly owned by Delivery Hero ― announced that it was exiting the Egyptian market, and the app started directing users to Otlob. The Egyptian Competition Authority then accused Glovo and Delivery Hero of anti-competitive practices and ordered Glovo to resume operations in Egypt, which it did in mid-June.

The Central Bank of Egypt (CBE) launched on Thursday CONIA, an interest rate benchmark that is effectively no-risk to “support the development of a more efficient domestic money market,” according to a European Bank for Reconstruction & Development (EBRD) statement. “The new benchmark, the Cairo Overnight Interbank Average (CONIA), was developed by the Egyptian Money Market Contact Group (MMCG), which brings together the central bank, commercial banks and the EBRD. CONIA reflects rates on interbank transactions that are virtually [no-risk] because of their very short tenors.” The benchmark is meant to help spur “the development of a broader set of products for financial sector participants and improve the resilience of the capital markets and the overall economy,” the statement reads.

M&A WATCH- Prime Holding has acquired close to 10% of Al Tawfeek Leasing (AT Lease) in a transaction worth nearly EGP 29 mn, Prime CEO Khaled Rashed told Al Mal. Prime is planning to take an “activist shareholder” approach to AT Lease by presenting a business plan to the company’s board and top management team to improve its share price — which the financial service provider believes is trading below fair value on the EGX. The acquisition is part of a diversification strategy which could see Prime announce a new acquisition target soon, Rashed said without disclosing who the target is.

Egypt’s economic conditions could allow CBE to accelerate easing cycle, fully reverse monetary tightening by 2020 -HC Securities: Improving economic conditions and the anticipated cool-down of inflation once the full effect of fuel subsidy cuts wear off should give the Central Bank of Egypt (CBE) enough breathing room to begin an accelerated easing cycle, HC Securities & Investment wrote in a report (pdf). “We now expect the CBE to accelerate its planned rate cuts, with a possible 100-200 bps cut in 2H19e before another 200-300 cut bps in 2020e, fully reversing the initial 700 bps hike. On our numbers, this should take average [net interest margins] NIMs for banks under coverage to 4.5%-5.0% by 2024e from 5.5%-6.9% over 2017-18.”

Reminder: Capex borrowing won’t pick up until interest rates drop. The investment bank notes that a bank survey found that private businesses are waiting for interest rates to drop 300-400 bps to resume capex borrowing. Our own survey of nine companies across several industries found that businesses are waiting for interest rates to fall within pre-float levels of 10-13% before ramping up capex borrowing.

Watch out, Kramers: Families that consume more than 1,000 KW of electricity, own three cars or pay more than EGP 200k in value-added taxes will be removed from the state subsidy program under the fourth phase of the Great Subsidy Rolls Purge, Supply Minister Aly El Moselhy said at a press conference on Saturday, Al Ahram reported. The ministry is giving citizens who are eligible for social welfare until August to legalize their status to avoid being taken out of the program, AMAY reported Meselhy as saying. The government is aiming to remove another 400k Kramers from the subsidy program during the fourth phase, which began on 4 July and will finish at the end of September. Egypt has so far removed 8 mn citizens from its subsidy program, Al Shorouk cited the minister as saying.

Other news from the presser: The ministry aims to implement 21 projects over 11 governorates at the cost of EGP 40 bn to create 400k direct and indirect jobs in collaboration with the Internal Trade Development Authority, Al Shorouk separately noted. The minister also told reporters that Egypt plans to establish a commodity stock market by the end of the year, and announced that this year will see the inauguration of a trade and logistics project in Gharbiya. He did not provide more details on these plans.

El Sisi, Shoukry, Kamel meet Kushner to talk Mid East peace: President Abdel Fattah El Sisi, Foreign Minister Sameh Shoukry, and intelligence chief Abbas Kamel met on Thursday with White House advisor Jared Kushner to discuss the Trump administration’s Israel-Palestine peace plan, according to an Ittihadiya statement. El Sisi reiterated during the meeting that Egypt supports reaching a peaceful solution that would see the establishment of a Palestinian state with East Jerusalem as its capital. The statement is otherwise scant on details of the discussion.

Background: Kushner’s sit-down with El Sisi came one day after he met with Jordan’s King Abdullah II, who told the US envoy much as the same as El Sisi, according to a statement on Wednesday picked up by Jordan’s Petra News Agency. The White House adviser is trying to drum up support for the plan with a regional tour featuring stops in the UAE, Saudi Arabia, and Qatar. Israeli media reported last week that the plan will be unveiled before the 17 September Israeli elections. Palestinian sources alleged in June that Kushner’s “Peace to Prosperity” plan involves trying to persuade us to give up a chunk of Sinai in order to create a greater Gaza area stretching to El Arish. Shoukry dismissed the plan on the eve of Trump’s Bahrain conference in June, telling Russian media that “there will be no renouncing one bit, one grain of sand from the lands of Sinai.” Egypt would receive USD 9 bn of investment for transportation, energy and development projects under the economic plan released by the White House in June.

EFG Hermes topped the EGX’s brokerage league table for July with a market share of 33.5%, according to figures released by the EGX (pdf). CI Capital came in second with an 8.4% market share, followed by Beltone Financial (5.0%), Arqaam Securities (4.6%), and Mubasher Securities and Pharos Securities which each had a 3.4% market share.

EFG also topped the league in 1H2019 (pdf) with a 26% market share, followed by CI Capital (9.9%), Beltone (4.7%), Pharos (4.2%), Arqaam (4.1%), and Pioneers Securities (3.7%).

CABINET WATCH- New ministerial committee to regulate public companies’ contracts: The Madbouly Cabinet signed off on setting up a ministerial committee tasked with creating a system to regulate public sector companies’ contracts and agreements during its weekly meeting on Thursday, according to a statement. The committee will be headed by the prime minister, and will be responsible for putting in place a strategy to create and develop the new system. During the meeting ministers also:

• Ratified decisions taken by the Supreme Committee for Compensation (which was set up to oversee the disbursement of compensation to contractors and other suppliers and public service providers);
• Approved amendments to the National Railways Authority law;
• Approved decisions from the cabinet’s engineering committee to increase direct order agreements for housing and education projects.

EARNINGS WATCH- Abu Dhabi Islamic Bank’s net profits after tax rose by 74% y-o-y to EGP 658.5 mn in 1H2019, up from EGP 378.2 mn a year earlier, according to a bourse filing (pdf). Revenues increased to EGP 1.8 bn during the period, a 25% y-o-y rise.

Juhayna Food Industries’ 2Q2019 profit fell 31% y-o-y to EGP 108 mn, the dairy producer said in its earnings statement (pdf). Revenues during the quarter increased 5% to reach EGP 2 bn.

It was a relatively quiet weekend for Egypt in the foreign press. Reuters was out with a special report on Thursday claiming that Egypt’s constitutional amendments were not the brainchild of our esteemed representatives, and were instead created by members of the government in meetings that date back to September 2018.

Other headlines worth a skim:

• Egyptian workers looking to enter Libya may have better luck in the near future as the two countries work together to ease access to the country, the Arab Weekly notes.
• Fragments of defaced posters on walls throughout Cairo are a symbol of silenced anger and “the erasure of collective memory,” a piece in Open Democracy argues.
• A team of researchers will sail a reed boat from the Bulgarian coast to Alexandria to prove that ancient Egyptians were able to make the same voyage 6,000 years ago, the Times reports.

Cairo through time: From the Fatimids to the birth of modern Egypt: From the day the Fatimids laid its foundation stone in 969 CE, Cairo has endured, charmed, and evolved into the pandemonium that stands today. From Bab Zuwayla to Al Hussein and Al Hakim mosques and nearby “alleyways and breath-taking monuments,” the capital has much to speak of, writes Nadir Habib for Ahram Online. Cairo’s story is that of a “victorious” name, legacies of “changing faces,” an unlikely golden age, and of Muhammad Ali Pasha, “The Greatest.”

Three books roundly capture the city’s history: Cairo: City of Art and Commerce, an expansive account by 20th century French orientalist Gaston Wiet; Cairo from the Rule of Mohamed Ali to the End of Ismail’s Era, historian Hossam El Din Ismail’s account of the 19th century voyage; and Streets and Tales of Cairo, a contemporary narrative by novelist Hamdi Abu Galil.

Egyptian, Sudanese irrigation ministers discuss GERD: Irrigation Minister Mohamed Abdel Ati discussed negotiations over the Grand Ethiopian Renaissance Dam (GERD) with his Sudanese counterpartSalah Ahmed Mohamed Ibrahim during a visit to Sudan last week, according to a cabinet statement. Abdel Ati will travel to Ethiopia for talks after visiting Sudan. Ethiopian Foreign Minister Gedu Andargachew last week told President Abdel Fattah El Sisi that the government is keen to restart negotiations over the project. The planned construction of the 6 GW GERD has been a source of tension between Egypt, Sudan, and Ethiopia for several years, and the issue remains unresolved.

UK PM calls for closer ties with Egypt: Newly elected UK Prime Minister Boris Johnson expressed his intention to deepen economic and political ties with Egypt during a phone call with President Abdel Fattah El Sisi last night, according to an Ittihadiya statement. El Sisi congratulated Johnson on his victory in the recent Conservative Party leadership election.

BP aims to increase natural gas production to 500 mcf/d by the middle of 2020 when it completes the development of its Baltim South West field, a source from EGAS told the press. Work is still ongoing to develop the field and link it to the national gas grid. Eni estimated the field to hold 1 tcf of natural gas after it was discovered in 2016. Six wells in the development lease were originally slated to be linked to production in 2H2017. Little has been heard of the field since then. Eni (through its Italian Egyptian Oil Company subsidiary) and BP both hold 50% stakes in the field.

Egypt’s imports of crude oil and petroleum products could fall 21.8% to 22.2 mn tonnes in FY2019-2020, down from 28.4 mn tonnes last year, senior government officials said. This would reduce import costs to USD 13.1 bn, from USD 16.1 bn in FY2018-2019. Egypt’s ongoing natural gas boom is helping the government to reduce its dependency on energy imports, and last month it achieved a 1.56 bcf/d gas surplus.

Egypt received USD 48.2 mn in profit share and royalties from Centamin’s Sukari gold mine in 1H2019, the company said in its earnings release (pdf). The Egyptian Mineral Resources Authority (EMRA) received USD 39.4 mn in profit share (unchanged y-o-y), with Centamin paying USD 8.8 mn (down 2% y-o-y) mn in royalties to the state. This came as the company reported a 3% y-o-y fall in its top line for the first half of the year to USD 288.1 mn. Gold sales declined 2% y-o-y to 224.1k ounces. The company expects production “to deliver stronger production and increasing free cash flow” in the 2H2019.

China’s Konka Group has inaugurated a USD 30 mn LED TV factory in Beni Suef with an annual production capacity of 600k units, Xinhua reported. The company plans to invest USD 70 mn in setting up an industrial park that can expand production to 1 mn units per year. It is expected to become Konka Group's manufacturing base for the Middle East, Africa, Europe and the United States. The manufacturer is planning to invest a total of USD 100 mn in Egypt by the end of next year, and increase the domestic component percentage to 70% from 50% by next year, Vice President Ahmed Abdel Hamid said, according to Amwal Al Ghad.

The Arab Organization for Industrialization (AOI) signed an MoU on Thursday with Hungarian lighting multinational Tungsram to manufacture lighting products in Egypt, Ahram Online reports. The companies will manufacture energy efficient lighting equipment such as LED lamps, street lighting, and smart lighting technology. The products will be used domestically and exported within Africa and Europe.

The government will start implementing a national project to equip taxis and minibuses with dual fuel engines in September, Youm7 reports. Prime Minister Moustafa Madbouly last month asked ministers to prepare a report on the proposed project, which aims to reduce vehicles’ gasoline consumption by supplementing it with natural gas. The project should be fully implemented by December 2022, with the cost of converting to the new model likely to be recovered within a three- to six-month period.

A delegation from Chinese automotive manufacturer Foton Motor met with Military Production Minister Mohamed El Assar, Local Development Minister Mahmoud Shaarawy and the governors of Cairo and Alexandria to discuss preparations for manufacturing electric buses in Egypt, according to a Military Production Ministry statement. Chinese engineers visited the ministry’s factories to oversee the process of setting up the production line for the buses. The company is expected to deliver two test buses in September and another 48 buses in December. The Military Production Ministry inked an agreement with Foton Motor during the Belt and Road Forum in May to manufacture 2k electric buses in Egypt over the next four years.

Public-private special purpose vehicle (SPV) Misr for Technology Services (MTS) has signed a EGP 760 mn loan agreement with the National Bank of Egypt for its project to set up a one-stop shop for customs clearance, the domestic press reports. The proceeds will be used to finance part of the government’s in-the-works c. EGP 1 bn “window project,” which will streamline the process of settling customs payments for exporters and importers. The project will establish a centralized data center and 19 logistics centers across Egypt, removing the need for companies to interact with multiple government agencies. Local media reported in January that the project would be piloted at Cairo International Airport’s logistics center. MTS is 20% owned by private sector player Amiral Management Corporation (AMC) and 80% owned by the state-owned fintech company e-Finance.

Raya Foods received a EUR 5 mn loan from the European Bank for Reconstruction and Development (EBRD) to expand its storage facilities and purchase new equipment, the lender said in a statement. Raya Holding’s frozen fruits and vegetables production unit will use the funds to build a new storage house that will help it increase its capacity during the harvest and the off-peak seasons, which would help increase exports.

Car financing firm Elmobasher is planning to issue between EGP 400-500 mn of securitization bonds to provide liquidity for expansions, unnamed sources tell Al Mal. A subsidiary of Arabia Investment, Development, and Financial Holding Company (AIND) will manage the issuance with the participation of CIB and the National Bank of Egypt. The issuance is expected to be divided into three categories, with bonds carrying tenors of 12 months, 3 years, and 5 years.

Prime Holding is conducting a study on the consumer finance sector ahead of potentially setting up a new company, CEO Mohamed Maher told the local press without specifying a timeframe. Prime Holding recently acquired 10% of Al Tawfeek Leasing Company for EGP 29 mn.

Supply Minister Ali El Moselhy and Internal Trade Development Authority head Ibrahim Ashmawy met last week with Alhokair Group Managing Director Sheikh Abdulmohsen Alhokair to discuss potential investments in logistics complexes and retail chains in Egypt, according to the local press.

President Abdel Fattah El Sisi has approved a EUR 63.6 mn funding agreement with the European Commission to help Egypt tackle challenges caused by migration, according to Veto Gate. Egypt had signed the funding agreement with the commission in October of last year.

The Finance Ministry has set up a 13-member committee to draft a new income tax law during the current fiscal year, according to a decision seen by Al Mal. The committee will be led by Ramadan Seddik, advisor to the finance minister on tax policy, and Osama Tawakol, advisor to the minister on tax appeals. Minister Mohamed Maait announced the new law during a press conference last week, but did not provide any details about how the tax system will be changed. The ministry said in a statement that income tax rates will not be changed. An initial draft will be ready within the next two months.

Google paid tribute to Alexandria-born actress Madiha Kamel yesterday, with a Google Doodle on what would have been her 73rd birthday. Kamel was well-known for her acting and her dancing in the 60s and 70s, starring in Egyptian and Lebanese films including 30 Days in Prison, Love and Pride, and Climbing to the Bottom. Kamel’s career lasted some three decades, and she retired in the early 1990s, before passing away from cancer in 1997.