CBE announces new daily limits on bank withdrawals and deposits

We’re going to start this morning with a global headline that sends a big signal to the global economy — and to policymakers around the world: Someone in the White House managed to convince The Donald to listen to the scientists and extend social-distancing measures until the end of April. The US president had previously said he wanted the US open an “raring to go” by mid-month.

Worth a listen this morning: Central Bank Governor Tarek Amer’s appearance on TV to talk about the impact of covid-19 on the economy. We have highlights and the link in this morning’s Speed Round, below.

Market update: The EGX30 closed down 1.5% yesterday in a session marked by anemic volumes, with turnover some 30% below the trailing 90-day average. Asian markets are squarely in the red in the first trading day of the week, with major indices in South Korea, China, Hong Kong, Japan and India all down at least 1% in early trading as we headed toward dispatch this morning. Futures suggest a lower open for US and European markets.

PSA- Heavy, dusty winds will roil most of the country today and sandstorms could strike the northwest coast, the Egyptian Meteorological Authority said. Areas most likely to be affected include Cairo, the Nile Delta, the Mediterranean coast and the northern regions of Upper Egypt. Look for highs of 29°C today, with the evening cooling to around 24°C. The warm weather is set to continue through the weekend and spike above 30°C in the capital on Saturday and Sunday.

And one quick reminder: Thursday is interest rate day, with the Central Bank of Egypt’s Monetary Policy Committee set to meet.

COVID-19 IN EGYPT-

The Health Ministry has reported 33 new cases of covid-19 yesterday evening, all Egyptians, taking the total to 609. Another four fatalities — all Cairenes aged 58-84 — brought the death toll to 40. A total of 132 people have fully recovered so far and been discharged from hospital and 182 people have tested negative after treatment in hospital.

Mosques will remain shut down indefinitely, Religious Endowments Minister Mohamed Gomaa said. The ministry ordered mosques to close their doors for two weeks as of 21 March in a bid to curb the covid-19 outbreak. The Coptic Church had also suspended masses and other activities in churches at the same time; it has yet to say whether it, too, will extend the shutdown.

Market data provider EGID has launched a new online platform ‘E-Maglis’ that enables shareholders to take part in meetings and vote remotely, according to a statement (pdf). The system will allow companies to continue operating as usual through the pandemic while at the same time supporting the government’s “digital transformation” strategy, EGX boss Mohamed Farid told Enterprise. EGID is an EGX-owned company.

The Financial Regulatory Authority has instructed microlenders to consider delays on a case-by-case basis of up to 50% of the value of monthly installments for struggling clients.

The Federation of Egyptian Industries has handed the government a long shopping list of measures it wants to see enacted to help businesses through the pandemic, the local press reports. It calls a six-month postponement of the deadline to file and pay taxes for FY2019, exempting companies from paying income tax and social insurance for three months, raising the domestic market allocation for those who have export restrictions to 50% from 20%, and expediting the payment of overdue export subsidies. The FEI also wants the government to cover two weeks of wages for any factory that closes down to promote social distancing.

We think some measure of tax relief is a good idea, but we’re not certain we would start filling the FEI’s shopping list in full or in part right now. Egypt’s economy isn’t feeling the same pinch as, say, Italy, Spain or New York — and we need something in reserve in case (a) we do or (b) the status quo lingers for months rather than weeks.

State-paid healthcare workers will receive a 75% allowance on top of their wages, an Ittihadiya statement said. President Abdel Fattah El Sisi allocated EGP 2.25 bn for the initiative and set up an emergency fund for as support for medical professionals, including doctors working in university hospitals, during the covid-19 outbreak. Doctors will receive an additional EGP 700, physiotherapists EGP 500 and nurses EGP 400, using a payment system related to their basic wages.

Foreign Minister Sameh Shoukry said he is working with the Civil Aviation Ministry to repatriate Egyptians stuck abroad. Speaking in an interview on Al Mehwar TV, Shoukry said the Madbouly government is focused on Egyptian tourists stranded abroad and students studying overseas.

An EgyptAir flight brought back 340 Egyptians from Kuwait yesterday, the local press reports. Arrangements are also being made to bring back Egyptians in Tunisia, according to a cabinet statement. Other evacuations are in the works to bring home citizens from the UK, Saudi Arabia, UAE, Oman, Lebanon, and Jordan this week.

An Egyptian star in a rare “good news” covid story: Egyptian-American doctor Nermeen Botros has been named “Hero of the Day” by the New York Post for working punishing 80-hour weeks since the start of the crisis and for her courage during these unnerving times.

Investors lap up nine-month t-bills, balk at yield on three-month notes: A government bond auction held yesterday was a tale of two halves, as investors oversubscribed to the EGP 10.5 bn nine-month offering but largely rejected the offered yield on three-month bills. The central bank sold more than EGP 15.6 bn of nine-month bills at a yield of 13.611%, but only sold EGP 24 mn of its EGP 4 bn three-month issuance as investors demanded a 13.585% yield — more than 100 bps higher than the rate accepted by the CBE.

ON THE GLOBAL FRONT-

Corporate America anxious about first quarter earnings as uncertainty grows: US corporate earnings forecasts are now much less hopeful as companies revise their 2020 financial targets in light of the gradual shuttering of the US economy, says Reuters. Analysts project a 2.9% y-o-y fall as we approach the earnings season for the first quarter, which begins in mid-April. A stark 7.1% drop may follow in quarter two, and 0.5% for full-year 2020, with only a slight recovery priced in for the third and fourth quarters, according to IBES data from Refinitiv, which is said to be one of the more optimistic forecasts.

This gloomy view comes as the recorded number of cases in the US have now surpassed those of Italy and China, and as measures to contain the virus have temporarily shut down businesses and led to a wave of layoffs. We’re keeping an eye out for US industry surveys and employment data due this week, which CNBC says “will likely paint a bleak picture of how much the first weeks of the coronavirus shutdown have already hit the economy.”

And as revenue streams are threatened, bond issuance by investment grade corporates has soared to USD 244 bn this month, making it the second largest monthly record after the USD 252 bn sold in September, says the Financial Times. US companies led the pack, selling USD 150 bn worth of new corporate paper to “outlast any drag on revenues.”

In other international covid-19 news:

• Saudi Arabia quarantines Jeddah: Saudi Arabia has banned people from entering and exiting Jeddah governorate, tightening lockdown measures as the death toll in the kingdom yesterday doubled to eight. (Reuters)
• Spain strengthens measures, extends lockdown: Spain has ordered all non-essential workers to remain in their houses for two weeks, the latest government measure to contain the outbreak which has now infected almost 79k people. (Reuters)
• Drive-thru testing in the UAE: Abu Dhabi has opened a drive-thru testing facility that will test people for covid-19 in just five minutes. (Twitter)

There is an overwhelming global surfeit of oil and logistical services are “struggling to cope,” as transport, businesses and factories have ground to a virtual standstill amid continued covid-19 lockdowns, Bloomberg reports. Demand is at an unprecedented low, with the 100 mn barrels of oil usually consumed per day slashed by a quarter in recent weeks, traders and analysts estimate.

It doesn’t come as much of a surprise, then, that oil fell below USD 20/bbl in early trading today: WTI fell as much as 7.6% to lows not seen since November 2002 this morning. The US crude benchmark traded as low as USD 19.92 in early trading while Brent — which is on course for its worst quarter ever — fell 5.1% to USD 23.66/bbl.

A three-month caffeine fast? Why on earth would you do that? Author Michael Pollan, who went on such a fast for research purposes to explore the effect of caffeine on the human body, offers the Wall Street Journal some compelling reasons: namely, it vastly improves the quality of your sleep. The man speaks sense, and the idea of sleeping like a teenager again is appealing, but we won’t lie: There is zero chance of us putting this into practice anytime soon.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: We look at what schools and universities learned from the past few weeks of online education, and whether online learning tools can be adopted en masse and become the norm in a post-covid world.

Naguib Sawiris dropped in to Al Kahera Alaan to offer his two cents on the state of the economy as the talking heads continued to chronicle the story of covid-19.

Al Kahera Alaan’s Lamees El Hadidi spoke to Egyptian bn’naire Naguib Sawiris last night, who voiced his thoughts on the current state of the Egyptian economy and the financial markets.

The inveterate goldbug channeled his Inner Donald on social distancing and the economy and threw in some stock tips for good measure:

• Sawiris urged the government to allow employees to return to work within a week and warned in colourful terms that the economy would suffer sharply if social distancing measures aren’t scrapped soon. Shutting down entire sectors for an extended period would result in lay-offs and increasing rates of depression.
• Go long on gold? Sawiris said that he has invested half of his capital in the precious metal and reiterated his confidence that the price of gold will rise due to the covid-19 crisis, despite it having recently eased.
• The EGX hasn’t bottomed out: Sawiris cautioned investors against buying into the EGX. “We have not reached the bottom and we will see companies whose shares will be at least 10% in the coming days,” he warned.

You can watch the full interview here: (watch, runtime: 10:49).

Pay boost for healthcare workers: El Hadidi spoke with Health Minister Hala Zayed who discussed the latest covid-19 updates and President Abdel Fatah El Sisi’s initiative to provide additional pay allowances to healthcare workers and exceptional bonuses to quarantine and chest hospital workers (watch, runtime: 9:52). El Hekaya’s Amr Adib (watch, runtime: 2:59), Al Hayah Al Youm’s Lobna Assal (watch, runtime: 2:36), Masaa DMC’s Eman El Hosary (watch, runtime: 0:59), and Min Masr’s Amr Khalil (watch, runtime: 2:32) also covered the news.

CBE limits withdrawals: Hany Genena, the head of research Prime Holding investments, told El Hadidi that the central bank had chosen to place new limits on withdrawals after EGP 30 bn was withdrawn from Egyptian banks in the past three weeks. He said that the decision should not distress depositors, who should only have cause for concern if they see banks prohibit or limit transactions between entities (watch, runtime: 14:49). El Hekaya’s Amr Adib (watch, runtime: 12:04), Masaa DMC’s Eman El Hosary (watch, runtime: 1:13) had the same story, while. Min Masr's Amr Khalil spoke with the head of Banque Misr, Mohamed El Etribi (watch, runtime: 7:04). We have more on the central bank’s announcement in this morning’s Speed Round, below.

Day labourers workers being tallied: El Hadidi also spoke with the Manpower Minister Mohamed Saafan who said that the ministry is currently vetting its lists of day labourers who applied for emergency relief, and that EGP 500 would be disbursed to 120k workers soon (watch, runtime: 4:38). Khalil had the same report (watch, runtime: 1:11).

CBE temporarily sets daily limit on bank, ATM cash withdrawals and deposits: The Central Bank of Egypt (CBE) decided yesterday to impose a temporary cap on daily cash withdrawals and deposits from banks and ATMs, according to an official statement (pdf). The CBE said the measure is designed to force citizens to move away from cash and so reduce footfall at banks. The move comes as pensioners nationwide prepare to line up at bank branches to collect their monthly stipend starting 1 April. Reuters also has the story.

The measures include:

• Companies can withdraw EGP 50k per day, but face no cap on deposits, according to a CBE circular (pdf) issued later in the day yesterday. Companies can also make whatever cash withdrawals they need to “satisfy obligations to employees.”
• In-branch cash withdrawals and deposits are now limited to EGP 10k per day for individuals;
• ATM withdrawals and deposits are now capped at EGP 5k per day for individuals and companies alike;
• Transactions related to letters of credit and of guarantee are exempt as are transactions by individuals “whose line of work includes depositing large sums of money regularly” are also reportedly exempt.
• Deposits to satisfy credit card payments are also exempt.

There are no new limits on electronic transfers between accounts, whether they’re held by individuals or companies. The central bank earlier ordered banks to slash to zero all fees for e-payments and transfers. Military-affiliated companies are entirely exempt from the new cash deposit and withdrawal caps.

Checks will also be subject to the cap. Take in an EGP 40k cheque, for example, and you can get EGP 10k in cash on the spot and the balance of EGP 30k in either (a) your bank account or (b) in three daily EGP 10k chunks.

The Egyptian Businessmen’s Association wants exemptions from the decision, arguing in a letter to the CBE that limiting withdrawals will have a negative impact on businesses with high volumes of daily cash transactions.

The key word here is “temporary,” we’re told by a source familiar with the central bank’s thinking. The source added that the measures are specifically designed to help stem the transmission of the virus that causes covid-19.

Separately, the CBE will cover the cost of interbank ATM cash withdrawal fees for six mn pensioners for six months, according to Egypt Today.

Amer talks covid-19 and the Egyptian economy: Central Bank of Egypt Governor Tarek Amer yesterday phoned into Sada El Balad for a wide-ranging conversation with talk show host Ahmed Moussa on the current state of the Egyptian economy and how the central bank is responding to the covid-19 pandemic. You can watch the full interview here (watch, runtime: 1:37:51).

Here are the key takeaways:

Foreign investors have pulled around EGP 7 bn from the EGX since covid-19 pandemic hit global markets, Amer said. President Abdel Fattah El Sisi last week announced that the CBE would allocate EGP 20 bn to support share prices on the EGX, a measure that has helped to stabilize trading on the exchange, Amer said. It remains unclear how exactly the central bank is entering the market.

The central bank isn’t pencilling in a recession just yet: “There are expectations that foreign economies will contract in the second and third quarters, while in Egypt there will be lower growth, but we will achieve growth,” Amer said, suggesting Egypt will escape the deep recession now forecast in many countries around the world.

Greenback to fall against the EGP: Amer expects the USD to reverse some of its recent gains against the EGP in the coming weeks. The greenback has been on a tear this month as investors have dumped risk assets in search of safety, but retreated last week after the Federal Reserve pledged to pump as much money as was needed into the economy.

Another rate cut on the way? Unlike many other countries that are operating at or close to zero interest rates, the CBE has more room to cut rates if additional stimulus is needed to support business activity, Amer said. The central bank made an emergency 300 bps rate cut earlier this month taking the overnight deposit rate to 9.25%, the lending rate to 10.25% and the main operation and discount rates to 9.75%. The majority of countries in comparison have cut rates below 5%. The central bank will next meet to review interest rates this coming Thursday, 2 April 2020.

Debt relief package delivered: Amer said that debt relief will be offered to struggling companies, from the public sector to private businesses and SMEs, by suspending loan instalments for six months worth EGP 1.8 bn investment, noting that interest will still accumulate and be due once the period ends. Collections on another EGP 40 mn in personal loans will also be postponed for the same period. He said some 20 mn citizens will benefit from the initiative.

Microenterprises shouldn’t expect their debts to be postponed. Amer said that it was difficult to reschedule debt payments for microenterprises because many access finance through NGOs, which use companies to collect repayments. Granting a six-month holiday to microbusinesses, as the CBE did last week with corporate and individual borrowers, will likely cause complications for everyone involved, he said. Instead, micro firms may be able to negotiate more relaxed payment schedules with their NGO or Banque du Caire — the primary bank lender for micro businesses — on a case-by-case basis, he said.

Egypt’s foreign reserves can cover as much as 10 months’ of imports, compared to the global average of just three months, Amer said. Reserves currently stand at USD 45.5 bn as of the end of February.

Petrol prices will likely fall: He said that we will probably see petrol prices drop, given that they are tied to declining oil prices in the global market and the recent strength of the EGP against the USD. The next announcement is expected at the beginning of April.

The EGX30 slipped back into the red yesterday, closing down 1.5% to resume a spell of volatility that has gripped the market over the past few weeks. The benchmark index had inched up 0.5% by the closing bell last Thursday and 1.0% on Wednesday. Index heavyweight CIB drove yesterday’s dip, ending the trading day down 2.4%. Orascom Development Egypt was down 3.6% and CIRA dipped 3.5%. The session’s best performers were Pioneers Holding up 1.7%, Orascom Investment Holding up 1.5%, and SODIC up 1.5%.

Egypt’s bourse was in lockstep with other regional markets which also performed poorly yesterday. Boursa Kuwait ended the trading day 4.7% in the red after S&P downgraded its credit to AA-, spurred by the country’s reliance on exports amid low oil prices globally, according to Bloomberg. Bahrain closed down 1.9%, Oman closed down 1.66%, and Qatar saw losses of 0.57%. Saudi’s Tadawul bucked the trend, inching up 0.8%.

Has the market bottomed out? Renaissance Capital analysts seem to think so, writing in a research note yesterday that “the market [in Egypt] might have found a floor until either we see further strict measures imposed by the government or an exponential growth in new covid-19 cases discovered.” The investment bank notes that the EGX30 index has shed around 25% in USD terms since the beginning of the month, which is around the same level as the MSCI EM index (-22%). RenCap expects healthcare, banks, and other “defensive stocks” to outperform on the EGX in the short term.

Meanwhile, stock buybacks continue: The Egyptian International Pharmaceuticals Industries Company’s (EIPICO) board approved yesterday the purchase of 1.6 mn in treasury stock, worth 1.61% of the company’s shares, according to an EGX filing (pdf). Madinet Nasr for Housing and Development (MNHD) also announced the purchase of some 507k treasury shares, bringing the company’s total stock buybacks to 2.4 mn shares since the beginning of the month, according to an EGX disclosure (pdf).

Emerging markets have done better than European countries to contain covid-19, but will struggle to finance lockdowns -RenCap: Emerging markets have, by and large, outperformed most European countries when it comes to containing the spread of covid-19, Renaissance Capital said on a webinar last week.

EM governments — including Egypt, Turkey, Russia, and South Africa — enacted effective policies including lockdowns faster than their European counterparts, as can be seen in the number of cases per 100k people once the policies went into effect (5 per 100k in Italy and the UK vs. less than 0.01 per 100k in Hubei). Europe is expected to see more deaths per capita by the end of the outbreak, but EMs are likely to keep their death rates from the virus at around the same level as Hubei, says Global Chief Economist Charles Robertson.

The flattening of the curve in Italy on the back of strict measures enacted by the government is “encouraging” and indicates that social distancing and lockdowns do work in curbing the spread of covid-19. Based on the “fairly straightforward” progression of the virus’ spread, the US is expected to see its new cases peak next month.

Bond yields in EMs, which have been rising after already being high, beg the question of how these countries will be able to afford the lockdowns they’re imposing. RenCap flags Pakistan, Turkey, South Africa, Nigeria and Egypt, along with much of Latin America as being in the “not looking so hot corner” when it comes to yields. “Those countries that will likely struggle could and should seek cheaper funding from the IMF and World Bank or look for a G7 or G20 package if there’s one available,” says Daniel Salter, head of equity strategy. Finance Minister Mohamed Maait had told us earlier this week that the government could look at a fresh IMF facility — which Egypt had previously ruled out — to finance state spending in light of the “extenuating circumstances” created by the covid-19 outbreak.

The magnitude of outflows from EM equity funds has been relatively small, but this is the “fastest bear market” we’ve seen so far, according to Salter. The numbers might seem painful in terms of volume but the reality is that this only actually accounts for around 1.1% of EM assets under management.

Is the worst yet to come? This relatively low percentage suggests one of two things, Salter says: Either EMs have already taken so many consecutive blows over the past few years that resulted in heavy outflows so that there just isn’t much fat left to trim — or we still have the worst of the sell-off ahead of us.

The good news: EM currencies (minus China’s yuan) are at the cheapest they’ve been since 1998, meaning it’s a great chance to invest right now. Aside from Turkey, which was already facing currency pressure pre-covid-19, Latin American currencies have taken the biggest beating so far, with each of Columbia, Brazil, and Peru seeing their currencies drop 25%. Mexico’s peso has lost more than 30% of its value, and Russia’s RBL is down 10% mostly because of the oil price war. Frontier markets, on the other hand, have not seen currencies get cheaper as many are pegged. There have so far been very few redemptions in frontier markets because they have been “an unloved asset class” for the past couple of years, Robertson says.

EARNINGS WATCH- B Investment’s consolidated net profits after tax dropped 10.6% y-o-y in 2019 to EGP 173.7 mn, from EGP 194.4 mn in 2018, according to a bourse filing (pdf). The company’s revenues decreased by 6.03% y-o-y to EGP 230.6 mn in 2019 from EGP 245.4 mn.

MOVES- Mohamed Ibrahim (Linkedin) has been tapped as Sidi Kerir Petrochemicals’ (Sidpec) new chairman and managing director, according to the local press. Ibrahim, who succeeds Mosaad Attia, has been with the company for over 20 years.

Leading the conversation on Egypt in the international press is the expulsion of the Guardian’s Ruth Michaelson last week over reporting earlier in the covid-19 crisis on a then-unpublished study suggesting that Egypt could have more cases than the official tally at the time suggested. The Guardian, the Associated Press, AFP, and Deutsche Welle have the story.

Also making the pages of the foreign press: An Associated Press feature on a transgender and LGBTQ+ activist in Egypt; a wide-ranging look at how Egypt is coping with covid-19 in Haaretz; takes on the US-Egypt security relationship post-Mubarak and on the crackdown on on mahraganat; and Quartz has its two cents on the roots of the dispute over GERD.