Sunday, 22 December 2019

CBE to keep interest rates on hold this week -Enterprise poll of economists

TL;DR

What We’re Tracking Today

What to expect this week from your legislators: the Local Administration Act. The House of Representatives’ agenda this week will include discussing a committee report on the long-awaited Local Administration Act, which aims to decentralize local councils and organize district elections, reports Al Shorouk. President Abdel Fattah El SIsi had teased the possibility of local elections at the end of the year back in September, saying that he expected the House to vote on the act in October.

Also expected to get our elected representatives chattering this week: Amendments to a law regulating who should be on the nations’ terrorist watch list and a law to protect architectural heritage by preventing the unlicensed razing of dilapidated, but historic buildings.

GERD talks resume in Khartoum: Irrigation ministers from Egypt, Ethiopia, and Sudan enter their second day of meetings in Khartoum today for the latest round of technical talks on the Grand Ethiopian Renaissance Dam. The three parties will meet again on 13 January in Washington, DC for the fourth round of talks, at the end of which the countries have committed to reaching an agreement on the guidelines for filling and operating the dam and drought mitigation measures.

Air France has resumed its direct flights to Sharm El Sheikh, with the first flight arriving yesterday morning after a five-year hiatus, according to Al Mal. The UK had also resumed its charter flights to Sharm El Sheikh last week with Enter Air bringing 110 tourists on board.


As 2019 draws to a close, financial markets appear thankful for a very positive end of the year. 2019 has seen global stocks gain USD 10 tn, a bull bond market, and oil prices rising 25%, according to Reuters. The MSCI index gained 24% this year, while the S&P 500 surged 30%. Meanwhile, and for the first time since records began, the US has spent an entire decade without entering a recession, making it the longest economic expansion in US recorded history, according to CNBC (watch, runtime: 11:01).

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This comes despite the continued presence of some of the global headwinds that contributed to the EM Apocalypse of 2018, which saw the year ending on a low. These include the lack of a conclusive resolution to the US-China trade war and continued chaos from Brexit. So what is it that we have to be thankful for?

Falling global interest rates: The US Federal Reserve cut interest rates for the first time since the global financial crisis in 2019. The move, which was largely expected by global central banks, has spurred other central banks, including the European Central Bank and other EM banks, to cut rates. Egypt’s central bank cut interest rates four times this year.

Most analysts don’t expect Egypt to see a fifth rate cut this Thursday, when the CBE’s Monetary Policy Committee is set to meet for the final time this year. The majority of economists surveyed in our interest rate poll (which you’ll find in this morning’s Speed Round, below) agree that the central bank will hold off on another round of cuts for the time being to get a better feel of the impact of its past rate cuts.

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Rising asset prices: Encouraged by the rate cuts, investors have been gobbling up treasuries all year and firing up bond markets. Egypt is among the winners, with returns on Egyptian treasuries up 23.2% YTD according to Reuters data, second only to the Ukraine. The EGP also appears to have gained 11.7% in keeping with other rising emerging market currencies, including Russia and the Ukraine. Even the EGX has performed relatively well, with the benchmark EGX30 index up 6.15% YTD as of Thursday. Compared to other MSCI emerging market indices, the performance of Egypt’s stocks was second only to Russia, with Egypt shares rising 36.4%. Egyptian shares outperformed the MSCI EM Index, which grew 14.6%. This comes despite struggling over low volumes and a lack of new listings. Reuters’ figures last week show trading volumes have fallen a little over 40% since 2017.

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*** THE REAL ENTERPRISE SURVEY- It has come to our attention that some of you have been receiving the wrong link to our 4Q2019 survey, and for that we apologize.

What is the Enterprise Reader Survey? Every year we ask you, our readers, to weigh in on what you expect for the year ahead: Are you investing? Do you plan to hire new staff in 2020? How do you think the EGP will perform? What’s your take on interest rates? Tell us, and we’ll share the results with the entire community in early January to help you shape your view of the year. The survey is quick and with the correct link, we promise.

You can take the Enterprise Reader Poll here.


2020 New Year party pooper award goes to the World Bank: The World Bank is worried about the impact of low interest rates in light of the USD 55 tn in debt accrued by developing nations, the global lender warned in a report on Thursday. Emerging market total debt has risen to around 168% of their combined GDP, a 55% increase from debt levels in 2010. “The size, speed, and breadth of the latest debt wave should concern us all,” said World Bank Group President David Malpass. “It underscores why debt management and transparency need to be top priorities for policymakers — so they can increase growth and investment and ensure that the debt they take on contributes to better development outcomes for the people.”

We don’t have to worry about anything for now, while the global trend of low interest rates continues. But the record of the past 50 years show that about half of the 521 national episodes of rapid debt growth in developing countries have been accompanied by financial crises that significantly weakened per-capita income and investment. “History shows that large debt surges often coincide with financial crises in developing countries, at great cost to the population,” said Ceyla Pazarbasioglu, the World Bank Group’s Vice President for Equitable Growth, Finance, and Institutions. “Policymakers should act promptly to enhance debt sustainability and reduce exposure to economic shocks.”

It was a good week for Egypt debt watchers last week, with EFG Hermes subsidiary Hermes Securities Brokerage ending a decade-long dry spell for corporate bond issuances with a EGP 400 mn issuance of one-year bonds before the end of the year, with another EGP 1.6 bn planned in the coming months. The transaction was advised by EFG Hermes Investment Banking. Meanwhile, Madinet Nasr Housing (MNHD) closed on a EGP 370 mn securitized bond issuance on Wednesday. In a statement on Thursday (pdf), MNHD said that EFG Hermes Promotion & Underwriting and CIB acted as structuring advisor, lead managers, and arranger of the transaction. The issuance was fully underwritten by EFG Hermes, CIB, and the National Bank of Egypt (NBE). Zaki Hashem & Partners acted as legal advisors for the transaction, and KPMG acted as the auditors.


MOVES- Andrew Bailey is new head of the Bank of England: Former Bank of England deputy governor Andrew Bailey is reportedly set to be named as the new governor of the Bank of England, a person familiar with the process told Reuters on Thursday. Bailey, worked for 30 years at the UK’s central bank before heading finance industry watchdog, the Financial Conduct Authority. Bailey beat out Minouche Shafik, the former Bank of England Deputy Governor and current head of the London School of Economics, as well as Gerard Lyons, who was economic adviser to UK Prime Minister Boris Johnson. The National’s Jack Dutton speculates in an oped that Shafik was sidelined for her Brexit views.

Glovo may be a unicorn with USD 166 mn Series E funding from Mubadala: Spain’s on demand delivery app Glovo received USD 166 mn in Series E funding from the UAE’s Mubadala, TechCrunch reports. The size of the stake acquired by Mubadala was not mentioned. The latest round will put its valuation at over USD 1 bn, giving it unicorn status, the company said, according to TechCrunch.

PSA- biblical plague alert: New immature swarms of desert locusts that could threaten crops are expected to start forming by the end of the month in the horn of Africa, The United Nations’ Food and Agriculture Organization warned in a statement. Hatching is expected to occur in the coming weeks along the western side of the Red Sea from Eritrea to southeast Egypt, the statement added. The organization urged national authorities to “undertake timely reporting and efficient control” in the upcoming period.

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Hazem Moussa, the co-founder and CEO of Sarwa Capital, on growing a consumer finance startup and life post-IPO: Since starting out with car financing with Contact Cars back in 2001, Sarwa Capital has grown its operations to encompass all aspects of consumer finance, including financing consumer durables, home finishing, mortgages and small businesses, and most recently, life and general insurance. The firm even invented the notion of securitized bond offerings in Egypt. He talked with us about raising money for the business before venture capital was a thing in Egypt. About life after going public on the EGX in a controversial IPO in 2018. And about how he resists micromanaging while still keeping his finger on the pulse of his business.

** Listen to this week’s episode (runtime 32:21) on our website | Apple Podcast | Google Podcast.

Want to catch up on season one? Previous guests on our show about how to build a great business right here in Egypt have included:

Enterprise+: Last Night’s Talk Shows

We’re taking a watered-down winter break: Our daily roundup of last night’s talk shows is on hiatus until the end of the year. We’ll be back with everything the talking heads have to say in the new year.

Speed Round

Speed Round is presented in association with

SURVEY- Economists expect CBE to keep rates on hold in final meeting of 2019: The Central Bank of Egypt (CBE) will leave interest rates on hold when its Monetary Policy Committee (MPC) meets this Thursday, according to seven of 10 economists polled by Enterprise. This is the lowest rate of consensus we’ve seen among economists we’ve surveyed since March of this year. Pharos Holding, Shuaa Securities, Prime Holding, Beltone Financial, Renaissance Capital, EFG Hermes, and veteran economist Hany Tawfik all see the MPC keeping rates steady, while Signet, Sigma Capital, and HC Securities think we could see a rate cut.

The CBE cut interest rates by 100 bps last month, bringing the overnight deposit rate to 12.25% and its lending rate to 13.25%. The main operation and discount rates were both cut to 12.75%.

December inflation could accelerate, encouraging CBE to play it safe: The economists cited the slight increase in November’s inflation rate — the first increase in six months — and largely expect inflation inflation to edge up again in December due to the dissipation of the favorable base effect. Inflation figures for December won’t be out until after the MPC meets.

Where is inflation expected to stand? Pharos Holdings’ head of research Radwa Elswaify expects December’s annual inflation reading to come in at 6%. Shuaa Senior Economist Esraa Ahmed also sees a 6-6.5% inflation reading next month, and expects inflation to remain in that range in 1Q2020. Prime Holding Senior Economist Mona Bedeir sees inflation closing 2019 at c.7%, which she notes is below the central bank’s initial targets of 9% (±3%). Beltone’s Alia Mamdouh also says inflation will remain within the CBE’s targets, particularly in light of the EGP’s recent strengthening against the USD.

Keeping rates on hold would be a strategic move for the CBE at this point in the easing cycle, before resuming the cuts as of 1Q2020, EFG Hermes’ Mohamed Abu Basha says. By maintaining rates, the CBE will be able to better assess the impact of the three consecutive rate cuts it enacted earlier this year before exhausting its toolkit. Abu Basha also believes the CBE will be unwilling to act on interest rates without December and January’s inflation data. Bedeir and Elswaify are of the same mind, saying that as the favorable base effect wears off, the CBE will be less able to accurately predict where December’s inflation levels will come in. Bedair expects the central bank to deliver a total of 200-300 bps in rate cuts over the course of 2020, with a 100 bps cut in 1Q2020.

There’s also the Fed and rising oil prices to take into account: Elswaify also points to the US Federal Reserve keeping interest rates on hold at its last meeting as a key factor for the CBE to keep in mind this week. Meanwhile, Ahmed notes that oil prices are heading towards USD 65 / bbl, which will likely push the central bank to favor keeping rates where they are.

It’s not the hold we want, but it’s the hold we need: “I expect a hold, although I hope to see a 100 bps cut. The CBE will likely keep rates steady to maintain Egypt as an attractive destination for portfolio investors,” Tawfik tells us. He sees this, not inflation rates, as the most important driver behind the MPC’s upcoming decision. Tawfik expects around 300 bps in rate cuts throughout next year, including 75-100 bps in 1Q2020.

Dissenters see enough room for a cut without upsetting the carry traders: Even with last month’s uptick in inflation, “Egypt still enjoys a very high and favorable real interest rate for portfolio investment,” Sigma Capital’s head of research Abu Bakr Emam says. “We expect increased inflows into the Egyptian debt market over the coming few months as it continues to offer high positive real interest rates compared to other emerging markets such as Turkey,” HC Securities Chief Economist Monette Doss says. Emam and Doss both predict a 50 bps cut on Thursday.

Gov’t debt burden could also provide impetus for faster easing: Economic think tank Signet’s Angus Blair says the pickup in inflation won’t put much of a damper on the easing party, and expects the central bank to squeeze in a 100 bps cut. Blair points to the government needing lower interest rates to lower its debt burden and increase its fiscal maneuverability as a primary concern for the CBE.

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BUDGET WATCH- State records budget deficit of 2.1% in 1Q2019-20: The Finance Ministry’s latest fiscal performance report (pdf) showed a budget deficit of EGP 131.5 bn (2.1% of GDP) in the first quarter of FY2019-2020, compared to EGP 102.4 bn (1.9%) in July-September of FY2018-2019. Revenues for the quarter came in at EGP 173 bn, down slightly from EGP 174.5 bn in 1Q2018-2019. Overall expenses, meanwhile, increased to EGP 303.3 bn, from EGP 276 bn in 1Q2018-2019. This was driven by a large rise in the interest bill to EGP 138.5 bn, from EGP 109.5 bn. The ministry achieved a primary surplus of EGP 7.1 bn (0.11%) in the first three months of the fiscal year, stripped of interest spending. The ministry expects to record an overall deficit equal to 7.2% of GDP by the end of the fiscal year.

Egypt’s GDP is expected to grow at an annual clip of at least 5.5% over the next few years, according to a quarterly report prepared by Cabinet’s Information and Decision Support Center. The report attributed the growth to government spending on infrastructure, services, oil, and gas. Tourism contributed around 20% of Egypt’s GDP in 2019, according to the report.

Euromoney sees Egypt’s risk profile among most improved: Egypt’s ranking in Euromoney’s global risk table has improved to 93 out of 165 countries, up from 98 in Euromoney’s November update to its risk table. Egypt’s score out 100 (with 100 being the least risky) is 43, up from 38 in the November update. Egypt and Romania have been singled out by Euromoney as the countries whose risk profile has seen good improvement over the long term, particularly when compared to other emerging markets, whose risk profiles on the whole have been improving. Thanks largely to a stabilizing economy, and improved risk trends, both countries are being considered “solid bets for 2020” in Euromoney’s update to its global risk table.

Macro indicators all point towards stabilization: “Investment is responding to the reforms introduced under President Abdel Fattah El Sisi and guided by a completed three-year lending program from the IMF,” writes M Nicolas Firzli, chair of the Singapore Economic Forum and advisory board member of the World Bank Global Infrastructure Facility. He notes in an explainer on the report’s analysis for Euromoney that real GDP growth is seen edging close to 6% in 2020, after slipping below 3% in 2012. “Inflation and unemployment are down, and the government has utilized the dissolution of fuel subsidies – which passed without unrest – to increase wages and pensions, while the fiscal deficit is improving as tourism increases and borrowing costs decline.”

Firzli even lauded the the EGX, which has been struggling with low volumes of late. He noted that the Egyptian Exchange of Cairo and Alexandria are “now thriving again,” praising the “highly innovative short-term securitization bond program for stockbrokers, asset managers and other non-bank entities.”

Part of a trend with EMs: “No fewer than 124 countries, more than 70%, have seen their risk scores improve over time, with higher scores (indicating less risk) on a five-year trend,” says Euromoney. Countries such as Serbia (now 72nd), Honduras (78nd), Ethiopia (79th) and Cote d’Ivoire (95th) have shown consistent long-term improvement in security risk.

REGULATION WATCH- EGX completes reclassification of constituent industries, changing 42 companies’ industry classification: The EGX has completed its review of its classification system for the sectors of its constituent companies, according to a statement (pdf). The new system, which the EGX designed to be in line with international practices, will come into effect as of 2020.

What has changed? The review saw the bourse add one new industry, bringing the total number of industries to 18, and change the classification of 42 companies. Another 53 companies saw the name of their respective industries changed, either by merging two industries together, splitting one industry into more specific subsets, or altering the name. According to the statement, companies that record revenues from activities across a wide spectrum of industries are now classified by the sector that makes the largest contribution to its top line, among other factors. For example, Orascom Development is currently classified under tourism and entertainment but will be classified under real estate with the new system. Of the 244 EGX-listed companies, 35 are listed under the real estate industry, making it the sector with the largest number of members.

Education became the 18th industry in the bourse’s classification system, answering the prayers of many industry leaders, including CIRA CEO Mohamed El Kalla. Adding education as a standalone industry could help ensure that “qualified” and “serious” foreign investors enter the sector, which is a state priority and is the reason the government moved to restrict foreign investment in Egyptian private schools to 20%, El Kalla told us earlier this month.

Why does this matter? The changes are meant to create a system that more accurately reflects the activities of listed companies, therefore allowing passive investors to better track indexes and industry-specific performance. Foreign investors looking to build a basket of shares in a certain industry will also have an easier time with the new system, the statement says. The move also paves the way for the EGX to roll out new financial instruments related to specific industries.

INVESTMENT WATCH- Toyota Tsusho-led consortium to build a USD 150 mn vehicle terminal in SCZone: The Suez Canal Economic Zone (SCZone) signed on Thursday a USD 150 mn contract with a consortium led by Japan’s Toyota Tsusho to build, operate, and transfer a roll-on roll-off vehicle terminal at East Port Said, according to a cabinet statement. The consortium, which also includes France’s Bolloré Transport & Logistics and Nippon Yusen Kaisha (NYK), will develop and run a 270k sqm terminal and 600 meter platform for the import, export, and transshipment of around 800k vehicles, SCZone CHairman Yehia Zaki said in the statement. The SCZone will receive an annual payment of USD 233 mn from the consortium, the statement noted. Reuters also has the story.

Background: The SCZone had signed an initial USD 220 mn agreement last year with the consortium to build the terminal under a build-operate-transfer framework. The final contracts were expected to be signed back in October 2018.

M&A WATCH- Pressure from top Endeavour, Centamin shareholder to make merger work: A major shareholder in both Endeavour and Centamin is urging the latter to make concessions that would facilitate a takeover by Endeavour. VanEck International Investors portfolio manager Joe Foster told Reuters on Friday that Centamin should accept a request to extend the deadline for Endeavour to submit a second merger bid. “You have to be realistic. These are big, complicated projects. It takes a while to understand them, so I would hope that they would extend the deadline,” Foster told the newswire. Foster’s VanEck is said to be the third-largest shareholder of Endeavour and the second-largest of Centamin.

The latest: Endeavour said on Thursday that it has little time to study Centamin’s assets, which only include the Sukari gold mine and Cleopatra project in Egypt, before a 31 December “put up or shut up,” deadline imposed on it under UK merger law comes to pass. “Endeavour continues to believe in the strategic merits of the combination.. and therefore urges Centamin to request that the Takeover Panel consents to an extension of the current [deadline] period to January 31, 2020,” reads a press release by the Toronto-listed miner.

Previously on the saga: Thursday’s statement was in response to claims last week by Centamin that Endeavour is refusing to share information for a reciprocal due diligence exercise that leaders of both companies agreed to conduct in a meeting last Monday. Unless its wish to extend the deadline is granted, Endeavour will refuse to go ahead with the due diligence proposal, Centamin said at the time. All of this came some two weeks after Centamin rejected an all-share merger bid from Endeavour, triggering the deadline.

VanEck isn’t the only one who wants this to work: When Centamin’s board unanimously rejected the bid earlier this month, Naguib Sawiris’ La Mancha — the largest shareholder in Endeavour — was out with a statement (pdf) “strongly” urging it to reconsider. The Egyptian government also “welcomed” the prospect of the merger and said it would be happy to see it materialize, especially that the government is paving the way for a more accommodative mining sector through in-the-works amendments to the Mineral Resources Act that received praise from industry watchers.

Background: Centamin’s board rejected Endeavour’s initial on the grounds that it would disproportionately benefit Endeavour’s shareholders. The Candian miner offered to exchange 0.0846 of its shares for every Centamin share, valuing the latter’s share capital at around USD 1.9 bn. Centamin would have received a 47.1% stake in the new company while Endeavour would have been the majority shareholder.

M&A WATCH- Norway’s Equinor has acquired an additional 5.2% stake in Norwegian solar power company Scatec Solar for USD 83.9 mn, according to a statement from Equinor. The move brings the total ownership stake of Equinor in Scatec Solar to 15.2%. “Through this acquisition of additional shares in Scatec, Equinor further strengthens its exposure to the fast-growing solar energy sector. Since acquiring a 10% interest a year ago, we have continued to work effectively with Scatec’s management and now we are capitalising on an opportunity to acquire an additional stake in this high performing company,” Pål Eitrheim, executive vice president for New Energy Solutions in Equinor, said.

Expect Egypt to be a beneficiary of some of that investment, as Egypt is a key market for Scatec Solar, which has investments in the Benban solar park. The company announced last August that it had begun commercial operations at its fifth 65 MW solar plant in Egypt, raising the company’s total output in the country to 325 MW.

M&A WATCH- Egypt’s AMN Industrial Investment acquires 7.7% of Pachin for EGP 38.9 mn: AMN Industrial Investment has acquired 7.7% of the Paint and Chemical Industries Company (Pachin) in a EGP 38.9 mn transaction, Pachin said in a disclosure to the EGX (pdf). AMN bought out Pachin shareholder Helmy Abou Eita’s entire 1.85 mn shares at EGP 21 per share, reports Hapi Journal. Pachin is 44.63% owned by the state’s Chemical Industries Holding Company and 12.81% by state-owned Banque Misr.

M&A WATCH- Al Taisier Group acquires 75% stake in Hassab Laboratories for EGP 50 mn: Al Taisier Medical Holding Group, owner of Al Taisier International Hospitals, acquired a controlling stake of more than 75% in Hassab Laboratories in a EGP 50 mn transaction, according to Al Mal. The remaining stake is held by the founder of Hassab Laboratories, Amina Hassab, who will stay in her position as the laboratories chairman, unnamed sources told the newspaper.

The move comes as part of Al Taisier group’s plan to expand to expand in North Cairo, from its current locations in Mansoura, Sharqiya and the Suez Canal area, the sources added. Hassab Laboratories had also announced earlier that it aims to acquire two medium-size laboratories as well as launch several branches in Upper Egypt and Delta.

M&A WATCH- Eipico acquires a 10% stake in Medical Union: Pharma player Eipico has acquired a 10% stake in Medical Union Pharma for EGP 210 mn, sources close to the matter tell Al Mal. The company bought 4.8 mn shares that were previously owned by Egylease as part of its exit from the pharma sector, according to the sources. Okaz Brokerage and HC Securities served as the transaction’s brokers.

Arkan Developers joins HHD stake sale race: Arkan Developers has joined the list of companies competing to acquire management rights for Heliopolis Housing & Development (HHD) along with a 10% stake in the company, sources told the local press. Arkan joins Palm Hills, SODIC, and BPE Partners in the competition, with the door still open until 14 January for interested companies to make their bids. State-owned investment bank NI Capital will announce the winning bid by the end of January, Public Enterprises Minister Hisham Tawfik told us earlier.

Bids to advise on secondary offering: EFG Hermes, CI Capital, and Arqaam Capital are competing for a lead manager role for the 15% stake sale on the EGX. The winning firm will be announced within the coming two weeks. Zaki Hashem & Partners, Shalakany Law Office, and Baker & McKenzie are competing for the legal advisor role.

EARNINGS WATCH- Qalaa Holdings revenues rose 21% y-o-y in 3Q2019 to EGP 3.9 bn on the back of a broad-based expansion in volumes at TAQA Arabia, the company’s energy platform, Qalaa said in its earnings release (pdf). TAQA booked a y-o-y growth of 30% in 3Q219. Qalaa Holdings booked a net loss after minority interest of EGP 395.3 mn in 3Q19 against a net profit of EGP 158.1 mn in 3Q2018. It should be noted that 3Q18 results included non-cash gains related to a provision reversal as well as gains due to the deconsolidation of Africa Railway’s operational liabilities, the firm said.

ERC operating at 100% capacity: “I am particularly pleased to report that our flagship greenfield Egyptian Refining Company is now fully operational, having ramped up capacity utilization from 85 percent as of 30 September 2019 to its current 100% utilization rates,” said Qalaa Holdings Chairman and Founder Ahmed Heikal. “Since inauguration of its facility, the Company has sold approximately 1.1 MT of refined products to EGPC, in addition to 129 thousand tons of pet coke and 15 thousand tons of sulphur sold to key cement and fertilizer players as of November 2019. Currently ERC is making a Gross Refining Margin (GRM) of around USD 3 million per day when operating at full capacity. The plant also offers opportunities to expand production capacity with minimal incremental investments.”

This story has been corrected, after speaking with a company representative, to reflect that ERC’s utilization rate is 100%, not 85% as stated in an earlier version of the story. The link the Qalaa’s earnings release has also been updated.

Israel's Leviathan field to come online tomorrow, securing shipments to Egypt next month: Environmental concerns that have threatened natural gas shipments from Israel’s Leviathan field to Egypt have been cleared after an Israeli court lifted an injunction it had issued last week, reports Reuters. The Israeli Energy Ministry gave its final approval to begin production from the field tomorrow following a statement by the Jerusalem District Court noting that disgruntled environmental activists and municipalities have failed to prove to an appellate body that the field’s emissions will be significant enough during the start-up phase.

Background: The Israeli government greenlit gas exports to Egypt last week, putting the first gas shipments on course to arrive in 2020 under the USD 19.5 bn gas purchase agreement signed by Alaa Arafa’s Delphinus with Texas-based Noble Energy and Israel’s Delek Drilling. Leviathan is located 120 km off Israel’s coast, but it’s production platform is built only 10 km ashore, prompting environmental concerns.

CLIMATE WATCH- Egyptian historical landmarks might get damaged by climate change: Egyptian historical monuments and archaeological sites in Upper Egypt are under threat of deterotiation because of high temperatures, rising sea levels and floods as a result of climate change, according to a report by Reuters. “I believe that in 100 years all these antiquities will be gone because of climate change,” former Antiquities Minister Zahi Hawass told Reuters.

Rising sea levels could also cause serious damage to archaeological sites in Mediterranean cities in 30 years, Monica Hanna, an archaeologist with the Arab Academy for Science, Technology and Maritime Transport told Reuters. Air pollution and poor sewage systems in areas close to the historical sites in Egypt are other potential threats, Hanna adds. Although some government initiatives have been put in place to help protect the sites, including a USD 14 mn initiative to protect the Citadel of Qaitbay from coastal erosion, they seem to not be enough to combat the imminent threat, the report adds.

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Egypt in the News

Leading coverage of Egypt in the foreign press this morning is the rising tension with Libya and Turkey, which the two countries have unleashed on their Mediterranean neighbors by beginning the implementation of their contentious military and maritime cooperation agreement. We have the full story in Diplomacy + Foreign Trade, below.

Diplomacy + Foreign Trade

Libyan government implements its military pact with Turkey: Prime Minister Fayez Al Serraj’s Libyan Government of National Accord (GNA) has agreed to begin implementing its military and maritime cooperation pact with Turkey, . The agreement, which was ratified last week by Turkey’s parliament, brings Ankara closer to the possibility of deploying troops to curb an advance on Tripoli by forces allied to General Khalifa Haftar. But it’s still unlikely Ankara would get involved soon since the size of the force has to pass through parliament, says the Guardian. Ankara did, in fact, play it down, getting its envoy to Libya to say he doesn’t foresee this happening despite the agreement’s activation being tantamount to a call for help by Tripoli. The current pact in place addressed training, consultancy, experience transfer, planning and material support by Turkey to the Libyan government only and does not tackle sending troops. If Turkey decides to step foot in Libya the government will, firstly, need to seek parliament's approval for the move upon the request of Libya itself, Emrullah Isler, the Turkish president’s envoy to Tripoli, said, while ruling out any deployment of combat troops. The two governments signed last month two MoUs on military cooperation and border demarcation that were met with backlash by Egyptian, Greek, and Cypriot authorities for their potential to disrupt maritime borders in the natural gas-rich region.

Egypt disapproves again: Egypt’s UN ambassador Mohammed Edrees renewed the denunciation of the agreements in a statement seen by the Associated Press over the weekend. Edrees’ statement also noted that the activation of the military accord will allow the transfer of Turkish weaponry to the GNA, running counter to UN Security Council-imposed arms embargo on our neighbours. Al Monitor also took note.

El Sisi signals we’re well connected: Ittihadiya was out with three statements on Friday recounting calls President Abdel Fattah El Sisi had with each of German Chancellor Angela Merkel, Cypriot President Nicos Anastasiades, and European Council President Charles Michel — in which they discussed “regional developments.” There were no specifics of what the discussions entailed, but El Sisi reiterated Egypt’s support of stability in Libya in his phone call with Merkel. The president, meanwhile, spoke of across-the-board cooperation with Michel and pushing ahead with “consultations on political issues of mutual interest” with Anastasiades.

Energy

New oil well discovered in Egypt’s Western Desert

A new oil well was discovered in the Western Desert in Abu Sennan, after Borg El-Arab Petroleum and Mineral Company drilled exploratory oil wells in the area, according to a cabinet statement. The production capacity of the ASH-2 well is estimated to be 7k bbl/d of crude oil and 10 mn cf/d of gas, the statement added.

Tourism

Sovereign Fund of Egypt charged with renovating, managing Bab El Azab renovations

The Sovereign Fund of Egypt received cabinet approval to hold the rights to renovate and develop the Bab El Azab area in the Salah El Din Citadel under a 49-year contract, according to a statement from the cabinet. The technical proposal for the project includes building a museum with interactive technologies, crafts schools, theater and others, Antiquities Minister Khaled El Anany said. CEO of the fund Ayman Soliman had earlier told Reuters that the fund was looking to Egyptian businessman and chairman of Orascom Development Holding, Samih Sawiris to help develop the area with total investments of EGP 2 bn.

Banking + Finance

AAIB looks for partners in EGP 2.1 bn syndicated loan for MNHD

The Arab African International Bank (AAIB) has approached several local banks to contribute to a EGP 2.1 bn loan it is arranging for Madinet Nasr for Housing and Development, according to Al Shorouk. The company will use to loan to pay the development cost of its Sarai 1 and 2 projects.

Sports

Egypt’s Mo Salah named FIFA Club World Cup Player

Liverpool forward Mohamed Salah was named FIFA Club World Cup Player of the tournament after his team won the tournament’s title in Qatar, according to FIFA. Salah had recently won the Adidas Golden Ball and Alibaba Cloud Player of the Tournament.

The Market Yesterday

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EGP / USD CBE market average: Buy 15.98 | Sell 16.08
EGP / USD at CIB: Buy 15.98 | Sell 16.08
EGP / USD at NBE: Buy 15.99 | Sell 16.09

EGX30 (Thursday): 13,387 (+0.3%)
Turnover: EGP 871 mn (18% BELOW / ABOVE the 90-day average)
EGX 30 year-to-date: +6.2%

THE MARKET ON THURSDAY: The EGX30 ended Thursday’s session up 0.3%. CIB, the index’s heaviest constituent, ended up 1.5%. EGX30’s top performing constituents were CIRA up 3.8%, Cleopatra Hospitals up 3.5%, and Credit Agricole up 2.2%. Thursday’s worst performing stocks were Qalaa Holdings down 2.1%, TMG Holdings down 1.9% and Palm Hills down 1.8%. The market turnover was EGP 871 mn, and foreign investors were the sole net buyers.

Foreigners: Net Long | EGP +186.7 mn
Regional: Net Short | EGP -7.1 mn
Domestic: Net Short | EGP -179.6 mn

Retail: 41.2% of total trades | 35.3% of buyers | 47.0% of sellers
Institutions: 58.8% of total trades | 64.7% of buyers | 53.0% of sellers

WTI: USD 60.44 (-1.21%)
Brent: USD 66.14 (-0.60%)

Natural Gas (Nymex, futures prices) USD 2.33 MMBtu (+2.42%, January 2020 contract)
Gold: USD 1,480.90 / troy ounce (-0.24%)

TASI: 8,291.39 (+0.46%) (YTD: +5.94%)
ADX: 5,092.41 (-0.05%) (YTD: +3.61%)
DFM: 2,768.56 (-0.68%) (YTD: +9.44%)
KSE Premier Market: 6,870.30 (+0.61%)
QE: 10,340.37 (+1.16%) (YTD: +0.40%)
MSM: 3,916.70 (-0.68%) (YTD: -9.41%)
BB: 1,584.06 (+0.02%) (YTD: +18.46%)

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Calendar

December: Belarus Industry Minister Pavel Utiupin will visit Egypt to discuss means of cooperation in the SCZone and plan for the seventh Egypt-Belarus Trade Meeting.

December: Indian automotive delegation to visit Egypt.

21-22 December (Saturday-Sunday): The irrigation ministers of Egypt, Sudan, and Ethiopia will hold the third round of Grand Ethiopian Renaissance Dam negotiations in Khartoum, Sudan.

23 December (Monday): The Cairo Economic Court decided to adjourn the lawsuit filed by Americana Egypt minority against the independent financial advisor to Monday 23 December.

26 December (Thursday): Central Bank of Egypt’s monetary policy committee will meet to review interest rates.

January 2020: 2019 Confederation of African Football (CAF) Awards, Albatros Citadel Resort, Hurghada, Egypt.

January 2020: UK-Africa Investment summit, London, United Kingdom.

5 January (Sunday): Postponed lawsuit hearing against Peugeot Automobile filed by Cairo for Development and Cars Manufacturing.

9-12 January 2020 (Tuesday-Sunday): PLASTEX, Egypt International Exhibition Center, Nasr City, Cairo.

13 January 2020 (Monday): The irrigation ministers of Egypt, Sudan, and Ethiopia will hold the fourth and final round of Grand Ethiopian Renaissance Dam negotiations in Washington, DC.

25 January 2020 (Saturday): 25 January revolution anniversary / Police Day, national holiday.

25 January 2020 (Saturday): Midterm break for public schools and universities. Also known as: Two weeks of good commute.

February 2020: An Italian business delegation will visit Egypt to discuss investments in the Port Said industrial zone.

February 2020: A delegation of Swiss businesses will visit Egypt to discuss investment.

February 2020: Higher Education Minister Khaled Abdel-Ghaffar will visit Minsk, Belarus.

1 February 2020 (Saturday): The administrative court will look into an appeal by Adeptio AD Investments against a Financial Regulatory Authority to submit a mandatory tender offer (MTO) for Americana Egypt.

4 February (Tuesday): Court hearing for PTT Energy Resources’ USD 1 bn lawsuit against Egyptian government

8 February 2020 (Saturday): Midterm break ends. Traffic in Cairo stinks once more.

11-13 February 2020 (Tuesday-Thursday): Egypt Petroleum Show, Egypt International Exhibition Center, Nasr City, Cairo.

March 2020: The Middle East and North Africa Financial Action Task Force (MENAFATF) will visit Egypt to assess the progress of actions taken to combat money laundering and terrorist sponsoring activities.

1 March 2020: A conference on “logistics and its impact on the movement of goods and industry,” venue TBD, Alexandria.

4-5 March 2020 (Wednesday-Thursday): Women Economic Forum, Cairo.

25-26 March 2020 (Wednesday-Thursday): Mega Projects Conference, Egypt International Exhibition Center, Nasr City, Cairo.

23 April 2020 (Thursday): First day of Ramadan (TBC).

23-26 May 2020 (Saturday-Tuesday): Eid El Fitr (TBC).

5-7 May 2020 (Tuesday-Thursday): AFSIC – Investing in Africa, London, United Kingdom.

17-20 June 2020 (Wednesday-Saturday): 2019 Automech Formula car expo, Egypt International Exhibition Center, Cairo.

30 June 2020 (Sunday): June 2013 protests anniversary, national holiday.

November 2020: Egypt will host simultaneously the International Capital Market Association’s emerging market, and Africa and Middle East meetings.

30 July 2020-3 August 2020 (Thursday-Monday): Eid El Adha (TBC), national holiday.

19-20 August 2020 (Wednesday-Thursday): Islamic New Year (TBC), national holiday.

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. © 2021 Enterprise Ventures LLC.

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