Wednesday, 17 June 2020

It’s all about debt as EGP proves flexible, CIB readies green bond.
(We’re off Thursday — see you back here next week)

TL;DR

What We’re Tracking Today

** We are taking a publication holiday tomorrow to give everyone here a chance to recharge their batteries. Enterprise will be back in your inboxes at the appointed hour on Sunday — just in time for interest rate week as the central bank meets on Thursday, 25 June.

The big story at home this morning: Investor appetite for Egyptian debt looks to be returning as the EGP eases a bit against the greenback, returning to where it stood in December 2019. That puts the central bank in a familiar (and frankly welcome) quandary as it prepares to meet next Thursday, 25 June, to set interest rates: Does it cut rates to spur domestic borrowing (particularly from corporates), or leave them where they are and stay attractive to the carry trade? We have more in this morning's Speed Round, below, and will have our customary interest rate poll for you next week.

The big story abroad: Equity investors are cheering positive economic data, but Jay Powell and Gita Gopinath are readying buckets of ice water, suggesting we all need to calm the [redacted] down because this ride isn’t over yet. Wall Street joined European and Asian shares in a rally yesterday (and Egyptian equities climbed 2.5%, thank you very much) amid data showing a strong spike in consumer spending in May as businesses reopened. Also helping: The expectation that both the US Fed and the government will step in and provide more aid to the American economy (a rather debatable proposition given (a) the state of politics over there and (b) Republicans having telegraphed that they’re not so inclined).

Fed boss Jay Powell, meanwhile, warned lawmakers yesterday that there is “significant uncertainty” about the “timing and strength” of a US economic recovery, underscoring that interest rates will probably stay around zero through the end of 2022.

And IMF chief economist Gita Gopinath says things are worse than we know right now. In a blog post yesterday to lay the groundwork for the IMF’s June World Economic Outlook, Gopinath writes, “For the first time since the Great Depression, both advanced and emerging market economies will be in recession in 2020. The forthcoming June World Economic Outlook Update is likely to show negative growth rates even worse than previously estimated. This crisis will have devastating consequences for the world’s poor.” The Great Lockdown, as she calls what we’re going through right now, is “unlike anything the world has seen before.”

Her post is worth reading in full here.

Perhaps more welcome: A “rigorous study” has found that the inexpensive steroid dexamethasone is the first covid breakthrough. A trial found that “it cut deaths by about one-third in patients who were on ventilators because of coronavirus infection.” Patients on oxygen therapy saw their risk of dying cut by 20% when they went on the steroid.

Don’t rush to the pharmacy to stock up on dexamethasone: It has absolutely no effect on people with mild cases of covid-19 — ie: folks not on oxygen or a ventilator, the study found.

FURTHER READING: The respected scientific journal Nature’s a plain-English story is a must-read. The researchers’ press release is here. Nerds can dig deeper in the study’s homepage.

COVID-19 IN EGYPT-

The Health Ministry confirmed 94 new deaths from covid-19 yesterday, bringing the country’s total death toll to 1,776. Egypt has now disclosed a total of 47,856 confirmed cases of covid-19, after the ministry reported 1,567 new infections yesterday. We now have a total of 14,144 confirmed cases that have since tested negative for the virus after being hospitalized or isolated, of whom 12,730 have fully recovered.

Egypt to receive possible covid-19 treatment without charge: Japan has agreed to provide Egypt with Avigan — also known as favipiravir, a med with the potential to fight the virus that causes covid-19 — without charge, the Foreign Ministry said in a statement. Avigan is one of a number of treatments clinicians hope could play a role in fighting covid-19, but manufacturer Fujifilm said late last month that its efficacy was still unproven. Clinical trials are continuing. Japan is cooperating with the UN to distribute Avigan without charge to countries in need.

An additional 100 Egyptian factories have started producing masks this month, according to Omar Hassan, head of the ready-made garment division at the Cairo Chamber of Commerce, reports the local press. There are now 400 factories producing anywhere from 6-30k masks every day, he said.

Egypt will be offering face masks on ration cards starting 1 July, offering 40 mn reusable cloth masks at EGP 6 apiece, Assistant Supply Minister Ayman Hossam El Din said on Sada El Balad (watch, runtime: 9:21).

E-commerce sales in Egypt have gone up 80% since the beginning of the outbreak, says Jumia CEO Hisham Safwat, according to Masrawy. What are people buying the most? Groceries, home workout gear, video games, and personal protective equipment. Sounds about right.

EgyptAir won’t be raising ticket prices wen it returns to the skies on the first of July, said CEO Roshdy Zakaria (watch, runtime: 4:33). The national flag carrier would have resorted to higher pricing if it was required to implement “socially distant seating,” which the International Air Transport Association has said is not a necessary measure.

Professional footballers will be back on the field on 25 July for tournaments, with training at football clubs to resume on 20 June, Sports Minister Ashraf Sobhy said. This comes as part of the ministry’s plan to allow clubs to gradually resume activities and training as of 1 July, starting with non-contact sports.

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ON THE GLOBAL FRONT-

Quarantines, checkpoints and emergency testing were rolled out across Beijing yesterday as Chinese authorities fight to contain what they described as an “extremely severe” coronavirus outbreak, the Guardian reports.

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GLOBAL MACRO-

EM bond rally to gather steam as central banks buy up local debt: Bond-buying programs launched by the Federal Reserve and local central banks in the wake of the covid-19 pandemic will pour more fuel on a rally that has seen emerging market bonds rise by almost 20% since the end of March, the Financial Times reports. More than 12 central banks in emerging markets have resorted to using the Fed’s playbook, buying local sovereign bonds to protect their economies from the damaging effects of the virus. These programmes could “safeguard the functioning of domestic bond markets” and support post-covid recoveries if used responsibly, said Alejo Czerwonko, a strategist at UBS Global Wealth Management.

Global economy to see worst oil demand slump in history this year -IEA: Oil demand will fall by a record-breaking 8.1 mn bbl/d in 2020 despite lockdowns easing during the second half of the year, the International Energy Agency said yesterday. The IEA is penciling in a recovery next year, but with a jump of 5.7 mn bbl/d, demand will remain below 2019 levels.

EGYPT BEYOND COVID-

The Social Solidarity Minister will issue “soon” the executive regulations to the Social Security and Pensions Act, Minister Nivine Kabbag said at a presser yesterday, according to Masrawy. The new law, which President Abdel Fattah El Sisi ratified last August, will see 21% of public and private sector workers’ salaries going towards a newly-established fund. The percentage taken out of employee salaries will increase 1% every seven years until it hits 26%.

AND THE REST OF THE WORLD-

Just what the world needs now: 20 Indian troops have been killed in a clash with Chinese forces in a disputed Himalayan border area, the BBC reports.

The European Commission has launched two antitrust investigations into Apple’s App Store and Apple Pay, the Financial Times reports. Both Spotify and Japanese ereader company Kobo have complained about commission charged by Apple on app subscriptions, while regulators are looking into whether Apple Pay has breached competition rules by limiting access to contactless payment in their stores.

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With the season finale of Making It just around the corner, it’s the perfect time to get caught up on season two. Our guests are founders and C-suite execs across industries with one story to tell: How to build a great business in Egypt.

Catch all of seasons one and two on our website | Apple Podcast | Google Podcast | Omny. We’re also available on Spotify, but only for non-MENA accounts. Subscribe to Making It on your podcatcher of choice here.

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*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development and even social infrastructure such as health and education.

In today’s issue: We take a look at the Arab Petroleum Investments Corporation’s (Apicorp) outlook for the MENA region’s energy landscape, which the multilateral development bank expects will see a USD 173 bn reduction in net investment over the next five years because of the pandemic.

Enterprise+: Last Night’s Talk Shows

It was a relatively quiet night on the airwaves, with no single story leading the conversation.

A charter flight from Ukraine is set to land in the Red Sea governorate on 2 July, governor Amr Hanafy told Mehwar TV’s 90 Minutes. Hanafy also confirmed that a flight carrying Belgian tourists will arrive in the governorate later this month (watch, runtime: 5:40).

The government will begin next month disbursing the five overdue pension bumps to recipients whose pensions fell short of reflecting their salaries between 2006 and 2010, with each portion of the pension increase set to be disbursed every three months until April 2021, Social Solidarity Minister Nivine Kabbag told Yahduth fi Misr’s Sherif Amer (watch, runtime: 4:38) and Masaa DMC’s Ramy Radwan (watch, runtime: 4:11).

WHO regional advisor rebukes the notion of herd immunity against covid: The threshold for achieving herd immunity against covid-19 is not within reach right now and would be very costly to reach because it requires at least 60% of the population to contract the virus that causes the disease, World Health Organization regional advisor Amgad El Khouly told Amer (watch, runtime: 3:33).

Speed Round

Speed Round is presented in association with

Portfolio investors warming to Egypt as EGP proves more flexible: There are signs that foreign investors may be warming to Egypt after the EGP eased a bit against the USD, Bloomberg reports, writing that “a stable currency and elevated interest rates have kept Egypt’s bond market humming for months” and suggesting that a more flexible EGP could “keep investors coming back for more.” Over the past month, the currency has returned to where it was seven months ago, easing a little over 2.8% since 17 May after holding steady at around EGP 15.68 / USD through the worst of the covid-inspired market chaos in March.

Signs of recovery: The subscription rate at recent Treasury auctions has seen a “sizeable jump,” indicating renewed investor appetite for local-currency debt, according to Naeem Holdings. Foreign holdings of local-currency bonds had plunged by around 60% to USD 9-10 bn by the end of May as investors pulled an unprecedented amount of capital from emerging markets during the covid-inspired market tumult.

Foreign investors had been looking at “substitutes” to Egypt, which has long held on to its emerging markets darling status, the business information service writes, as the EGP maintained its strength through the covid-19 crisis. Egypt’s local-currency bonds rank among this month’s weakest performers, bettering only Argentina, Colombia and Chile. “Markets that investors view as substitutes to Egypt have more flexible currencies,” Bloomberg quotes Richard Segal, a senior analyst at Manulife Investment Management, as saying.

Where is the EGP heading? Analysts see the currency at anywhere between EGP 16.50 and 17.50 to the greenback by the end of the year, as do 25% of readers who responded to our covid-19 poll. EFG Hermes is calling EGP 16.50–17.00 by year-end after “a clear signal from the central bank that its support to the EGP amidst the unprecedented capital outflows in the past two months is being withdrawn.” Emirates NBD is guiding for 17.00 and HSBC is suggesting we’re looking at 17.50 by year’s end. JP Morgan, meanwhile, says that “external support should prevent disorderly FX movement, but it would not be surprising to see the EGP give up the gains made in 2019.”

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DEBT WATCH- Egypt hires UAE banks to arrange USD 1 bn loan: Egypt has tapped Emirates NBD and First Abu Dhabi Bank (FAB) to arrange a loan worth more than USD 1 bn as it tries to plug its financing gap caused by the covid-19 pandemic, Reuters reports, citing two sources familiar with the matter. The two banks are in talks with other lenders to assist with the loan, the sources said.

This would be the third major loan in the pipeline for Egypt after the IMF last month disbursed a USD 2.8 bn rapid financing instrument, while the fund’s executive board is expected to green-light a USD 5.2 bn standby loan in the coming weeks. There are no board meetings scheduled as of dispatch time this morning.

Separately, the World Bank’s board of executive directors signed off yesterday on a USD 400 mn loan to support Egypt’s new universal healthcare program, according to a bank statement. The facility, which the bank recently agreed to increase from USD 250 mn, will be used to “help Egypt increase its coverage of the Universal Health Insurance System (UHIS) in six governorates, strengthen UHIS-related governance and institutions, and also provide temporary financial protection against high out of pocket health expenditures for vulnerable populations across the country,” says Marina Wes, World Bank Country Director for Egypt, Yemen, and Djibouti. The healthcare system is currently up and running in Port Said, where it was piloted in September.

Meanwhile, the French Development Agency AFD will allocate EUR 151 mn to support Egypt’s electricity and clean energy sectors, according to a statement from the international cooperation ministry.

DEBT WATCH- CIB sees international appetite as it prepares Egypt’s first green bond offering: The International Finance Corporation (IFC) is looking to take a position in CIB’s upcoming USD 100 mn green bond program, according to a project proposal disclosed by the international institution. The financial institution would invest USD 65 mn in the first tranche of the five-year bonds, which will take place through a private placement, and will work with stakeholders on future bond issuances. The IFC said it plans to share its expertise in climate finance to further build CIB’s capacity on climate finance’s eligibility criteria, greenhouse gas emission savings calculation, green bond reporting, and green building financing. It could also invest up to USD 1.5 mn from blended concessional finance that could spur the construction of green buildings in Egypt.

CIB’s bond offering would be the first of its kind in Egypt and would serve as the bank’s first foray into a product that it thinks could prove a regular feature of the debt market going forward, Heba Abdellatif, head of debt capital markets at CIB, said in an emailed statement.

CBE approves soft loans to small farms under SME initiative: The Central Bank of Egypt (CBE) has greenlit a request from the agriculture minister to allow small-scale growers and livestock breeders access to the SMEs lending initiative, cabinet said in a statement. The approval allows commercial banks to receive loan applications from small farms, who are now eligible to receive loans at a subsidized 5% interest rate. Banks are required under a CBE initiative first launched in 2015 to dedicate a portion of their loan portfolios to extend soft loans to SMEs.

This is different from a larger-scale industry stimulus initiative the CBE launched last year. The separate EGP 100 bn package first targeted factories with annual sales of less than EGP 1 bn. The package was later extended to cover companies of all sizes — including agriculture and agricultural production, fish, poultry, and livestock companies — who can access soft loans carrying interest rates between 5-8%.

In related SME news: The Trade Ministry’s Industrial Development Authority (IDA) and state-owned Export Development Bank (EDB) signed an MoU to help small and youth investors acquire pre-licensed workshops being built under an initiative to support SMEs, the IDA said in a statement. Interested entrepreneurs will be eligible for 10-year loans from the EDB at a declining 5% interest rate.

Background: When it first launched the initiative in 2018, the government said it aims to tender workshops and small factories in 22 industrial clusters across 14 governorates by the end of 2020. Those factories are offered to entrepreneurs at their actual construction and fitting cost, with no added margin from the government, the IDA says on its website.

INVESTMENT WATCH- MIH says it’s partnering with Malaysia’s Proton for El Nasr car assembly plan: Malaysian auto outfit Proton will partner with the Metallurgical Industries Holding Company (MIH) to assemble cars at El Nasr Automotive and Eamco, MIH board chairman Medhat Nafea was quoted as saying by Al Mal. Proton and MIH will assemble 20k cars a year, with production set to begin within three years, under the terms of an MoU recently signed between the two companies, he said, adding that both companies will soon begin a six-month feasibility study into the project. Nafea had announced the agreement earlier this week, without identifying the foreign partner at the time. Nafea confirmed to Enterprise that these are the same agreements and clarified that 20k is the correct figure.

Background: The MoU has been in the making since last year, and comes as part of plans to develop the automotive industry and increase exports to African countries. The government last March approved a strategy for the industry that aims to encourage car assemblers and feeder industries. A cornerstone of this new plan would be to provide customs discounts to manufacturers on a sliding scale linked to the percentage of locally-produced content they use. It will comprise legislative provisions, incentives, infrastructure improvements, and trade agreements with countries in the region and elsewhere, cabinet said at the time.

Correction (20/06/2020): A previous version of this article incorrectly stated that MIH had signed an agreement with Malaysian auto firm Perodua. 

INVESTMENT WATCH- CIRA eyes expansion in Assiut: Cairo for Investment and Real Estate Development (CIRA) confirmed reports that it is negotiating to buy an 11k sqm land plot in Assiut to build an international school, according to a regulatory disclosure (pdf). Reports this week indicated that CIRA is seeking to purchase land in West Assiut (Nasser City) after Porto Group and Madinet Nasr for Housing recently obtained land in the area. It is now waiting for the New Urban Communities Authority to approve the project.

BUDGET WATCH- House committee recommends bumping up education funding by EGP 22 bn in FY2020-2021: The House Education and Scientific Research Committee has recommended providing an additional EGP 22 bn in funding for the Education Ministry under the state FY2020-2021 budget, a portion of which will be earmarked for e-learning initiatives, according to Al Shorouk. EGP 950 mn of the funds would be earmarked for disinfecting secondary and technical examination facilities while the remainder would go towards supporting the ministry’s e-learning infrastructure, university hospitals and setting aside emergency funds. The government’s proposed FY2020-2021 budget had increased education spending by 70% from the previous year to EGP 132 bn.

LEGISLATION WATCH- House committee approves waiving late fees on handful of taxes: The House Planning Committee has greenlit a draft law that would waive interest and late fee payments on state dues including income, value-added and real estate taxes, according to Al Mal. The bill, which should now make its way for a final vote, would waive 90% of the fees if the taxes are paid within two months after it becomes law, 70% if paid within four months, and 50% within six months. Late taxpayers that clear their dues before the temporary law passes will be exempt from 100% of the fees, cabinet said last month.

STARTUP WATCH- Dawi Clinics opens its first clinic outside the Greater Cairo area: Primary healthcare clinic chain Dawi Clinics has opened a new branch in Tanta, which is its first foray outside of the Greater Cairo area, according to an emailed statement (pdf). The new branch is the tenth Dawi has set up since it was founded in 2016. Dawi’s nine other branches are spread across Giza, Cairo, and 6 October City. The healthcare startup had secured a USD 3 mn investment from the Egyptian American Enterprise Fund in November 2018.

EARNINGS WATCH- Fawry reports 82% growth in profits in 1Q2020: Profits at e-payment service provider Fawry surged by 82% in 1Q2020 to EGP 38 mn from EGP 21 mn in the same period last year, according to its quarterly financial statement (pdf). Revenues rose to EGP 258 mn during the three-month period from EGP 174 mn in 1Q2019.

Fawry CEO Ashraf Sabry projected (pdf) that the strong performance should continue through the second quarter, as segments hit by covid-19 (travel, entertainment) are outweighed by increasing use of essential services as well as e-commerce and wallets.

Porto Group turns losses of EGP 16.3 mn in 1Q2020: Porto Group registered losses of EGP 16.3 mn in 1Q2020 against net profits of EGP 59.6 mn in 1Q2019, according to its regulatory disclosure (pdf). Revenues took a hit during the first months of the year, falling more than 50% to EGP 206 mn from EGP 417.8 mn in 1Q2019.

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The Macro Picture

Shrugging off debt relief initiatives, developing countries continue tapping global debt markets to plug covid-19 financing needs: Developing countries are piling on more debt to finance the deficits they face as a result of the covid-19 pandemic, rather than opting for potential restructuring of their existing debts, according to the Financial Times. Emerging markets’ renewed appetite for sovereign debt issuances comes despite the G20 and the Paris Club, among others, looking at introducing a debt moratorium for poor countries. However, with markets normalizing and investors’ risk appetite rising, EMs are resuming business as usual with their sovereign debt issuances. Since the beginning of April, emerging markets have raised some USD 83 bn from the international bond market — a stark departure from March, when investors dumped the same amount in debt and equity, according to the International Institute of Finance.

Egypt is among the EMs that has recently returned to global financial markets: Last month, Egypt sold USD 5 bn in eurobonds in its largest-ever international issuance, which was 4.4x oversubscribed, the Finance Ministry said at the time. The record issuance saw solid appetite among investors, attracting bids around 4.4x the amount on offer, despite Egypt being classified as “non-investment-grade,” according to the salmon-colored paper. Other similar countries that have raised bonds recently include Guatemala, Paraguay, Serbia, Albania, and Brazil.

That’s not to say debt is always bad: “People have railed too much against debt and the result has been stagnation … The legacy of not taking on debt is excess savings, which has been terrible for the world,” says Oxford Economics head of macro research Gabriel Sterne. Debt service costs are currently lower than during previous debt crises, creating a “reasonable” environment for a ramp-up in borrowing among developing countries that have a strong enough foundation to raise their debt-to-GDP ratios, Sterne says.

Egypt in the News

It’s a relatively quiet news day for Egypt in the international press. The nation’s reopening to tourists is getting digital ink in the UK’s Express, while the AP has picked up news that a second journalist has been detained after appearing on Qatari mouthpiece Al Jazeera and the Washington Post took note of the death of exiled LGBT activist Sarah Hegazi. Over in the UAE, the National is covering a campaign by women handball players seeking equal treatment with their male peers.

Diplomacy + Foreign Trade

The Trade Ministry has renewed for three months a suspension on all exports of beans and legumes to ensure sufficient supply for local consumption, according to a statement. The decision was taken last March due to the covid-19 economic fallout.

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MENA region to see USD 173 bn reduction in net energy investment in 2020-2024 thanks to covid-19, Apicorp says: It looks like covid-19 and the oil crisis might do a number on the region’s energy sector for some time to come, with multilateral development bank Arab Petroleum Investments Corporation (Apicorp) estimating that MENA’s investment in energy will fall to USD 792 bn in the coming five years, down from USD 965 bn Apicorp projected last year in its MENA Energy Investment Outlook report. This drop will be caused by three factors stemming from covid-19: The health crisis and the impact of the lockdown; an oil crisis; and a looming financial crisis. “The downturn from 2020 is expected to be more challenging than previous downturns, and its impact already deeper and longer lasting,” says the report. As such, the report sees a W-shape recovery in the works for the region. In the meantime, natural gas projects will be what’s sustaining MENA.

So, what does the regional abyss look like? The MENA region’s total committed and planned energy investment will fall by USD 173 bn to USD 792 bn in the coming five years. This is down 18% from USD 965 bn the bank projected would be invested in 2019-2023. The private sector’s share in energy project investments is also expected to decline to 19% over the next five years, after having climbed to 22% in Apicorp’s 2019 five-year outlook. This decline will mostly be seen in planned investments, which are projected to fall 24% y-o-y to USD 466 bn, from USD 613 bn last year. Committed investments, which reflect more on the ability to execute projects, are expected to see a decline of 6% y-o-y to across the MENA region to USD 343 bn. That was buoyed by a 2.3% increase in committed investments by the GCC (no surprises there).

For Umm El Dunia, the picture is (only slightly) less bleak. While the total value of planned and committed energy investments do show a 15% decline from last year to around USD 100 bn, we’re actually seeing an increase in the number of planned projects. This is crucial, as Apicorp sees projected investments as a measure of the health of the investment climate. Planned investments are expected to reach USD 65 bn, up from USD 50 bn. That said, the rise is mostly from the state, as the private sector’s share appears to be shrinking to around 15%, down from around 27% in last year’s report. We plan to spend our way out of the global energy crisis by investing in petrochemicals and gas, in keeping with our goal to reduce imports of refined goods and becoming a regional gas hub.

Saudi, UAE, Egypt, and Iraq driving regional energy investments: Regional energy investments are primarily driven by four countries: Saudi Arabia in the gas and power sectors (USD 39 bn and USD 41 bn, respectively); Iraq’s reconstruction efforts and gas-to-power (USD 33 bn); the UAE’s oil capacity maximization (USD 45 bn); and Egypt’s petrochemicals drive (USD 38 bn).

The perfect storm x3: The pandemic hit just as oil prices were moving downwards, driven by a surplus build-up. Throw in a global pandemic, lockdowns, and supply chain disruptions and what you get is the lowest oil demand in history, with Brent prices falling to USD 18/bbl on 20 April. That’s not all folks, as the crisis is raising fears of an impending liquidity crunch that might drive down asset values. “Although central banks and multilateral financial institutions are stepping up, concerns linger that such massive stimulus plans might create enormous unproductive debt overhangs that will slow economic growth,” says the report.

Expect an immense shakeup in oil, marked by M&A and shutdowns: “The first consequence is a possible restructuring of the oil and associated gas industry, accelerating closure of the lowest efficiency parts of the capital stock (producing assets and companies), and M&As,” the report predicts. Apicorp expects that facilities with high operating costs and limited storage access will be the first to go. This has already begun to happen, as global upstream spending was already slashed 30% y-o-y in 2020, and the sector has lost 1 mn jobs so far. Planned upstream spending has been cut by 20-30% across the board by oil majors, national oil companies and large independents. As the oil market writhes and contracts to keep up with demand, Apicorp predicts average Brent prices to stay in the USD 30-40 range in 2020 and 2021 before reflecting a more balanced market.

As an oil-dependent region looks to gas, an oversupply there threatens postponement of new project decisions: Due to a number of country-specific policies — namely, Qatar’s push to better use its gas resources, Saudi Arabia diversifying from oil, Iraqi investments, and Egypt’s push to be a gas hub — 2019 was a record year for new LNG project announcements. However, thanks to both covid-19 and an oversupply problem similar to oil, final decisions on these projects are expected to be postponed. “An oversupplied LNG market with global gas prices at the hubs expected to remain below USD 4/mmbtu for 2020 and below USD 6/mmbtu during 2021 discourages players to pursue additional gas developments.”

Egypt in particular appears to have been hard hit by the oversupply. “Egypt’s LNG exports were already challenged with high feed gas prices at around USD 4.5/mmbtu, as compared to their export netback parity. Egypt’s gas output collapsed to a 19-month low of just 6 bcfd for February on enforced shut-ins. LNG exports fell to just 253 mcfd for February—a quarter of late-2019 levels — and to zero since the last cargo loaded in mid-March.” The report does not address how this could impact Egypt’s goal of becoming the region’s premier energy hub.

That said, gas offers the best hope for MENA: "In terms of planned investments, the biggest gain was in the gas value chain, which jumped by USD 28 bn, a 13% increase compared to last year’s outlook.” Gas continues to be of strategic importance to the region and “the majority will stick to gas development plans for domestic reasons.”

It looks like our electricity oversupply problem is a regional thing: Electricity projects in the region are expected to decline by USD 114 bn, “due to the commissioning of several projects during 2019 in Egypt, UAE and Saudi Arabia.” Earlier this month, renewable energy investors told Enterprise that the electricity oversupply may lead renewables investments slowing down substantially for the next 18-24 months. Apicorp’s report held an equally dismal outlook for renewable energy investments in a number of countries in MENA.

Expect a bumpy and long-term recovery, says Apicorp. “The impact of COVID-19 is already deeper and longer lasting than past downturns. Indeed, the nature of this triple crisis and the profound restructuring in oil and gas will hit energy investments for a potentially long period of time, sowing the seeds of supply crunches and price volatility. Therefore, we expect a W-shaped recovery for the MENA region,” Apicorp CEO Ahmed Ali Attiga said. “International collaboration between the private and public sector will therefore be critical to counter the expected shortfalls in investment,” he noted.

You can read the full 2020 report here (pdf). For perspective, we also recommend you read the full 2019 report here (pdf).

Your top infrastructure stories of the week:

  • The government signed on Sunday a EUR 50 mn agreement with the French Development Agency (AFD) to develop Cairo Metro’s line one.
  • Suez Canal Container Terminal (SCCT) will invest USD 60 mn to add capacity to the East Port Said Port container terminal.
  • Hassan Allam has been awarded a contract by the government to build a utilities and road network in a 32.4 sq km area in Sheikh Zayed.
  • The EETC has signed two agreements worth a combined EGP 598 mn to build electricity substations in El Ayyat’s Gerzah village and Madinaty, one with Energya Power and another with a consortium led by China’s SieyanElectric.
  • General Electric delivered 20 locomotives to Egypt this week, the third batch of rail engines that Egypt had purchased in 2017.
  • The ICT Ministry is spending USD 1.6 bn to boost internet speed from an average 15.5 Mbps to 20 Mbps by the end of 2020 and 40 mbps by 2021, Minister Amr Talaat said.

The Market Yesterday

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EGP / USD CBE market average: Buy 16.13 | Sell 16.23
EGP / USD at CIB: Buy 16.13 | Sell 16.23
EGP / USD at NBE: Buy 16.11 | Sell 16.21

EGX30 (Tuesday): 10,935 (+2.5%)
Turnover: EGP 996 mn (30% above the 90-day average)
EGX 30 year-to-date: -21.7%

THE MARKET ON TUESDAY: The EGX30 ended Tuesday’s session up 2.5%. CIB, the index’s heaviest constituent, ended up 3.4%. EGX30’s top performing constituents were GB Auto up 6.7%, EFG Hermes up 4.1%, and Heliopolis Housing up 4.0%. Yesterday’s worst performing stocks were CIRA down 0.3%, Ibnsina Pharma down 0.2% and SODIC down 0.2%. The market turnover was EGP 996 mn, and foreign investors were the sole net sellers.

Foreigners: Net Short | EGP -75.2 mn
Regional: Net Long | EGP +29.1 mn
Domestic: Net Long | EGP +46.1 mn

Retail: 71.3% of total trades | 73.8% of buyers | 68.9% of sellers
Institutions: 28.7% of total trades | 26.2% of buyers | 31.1% of sellers

WTI: USD 37.63 (-1.95%)
Brent: USD 40.34 (-1.51%)

Natural Gas (Nymex, futures prices) USD 1.62 MMBtu (+0.56%, July 2020 contract)
Gold: USD 1,732.40 / troy ounce (-0.24%)

TASI: 7,308.21 (+0.61%) (YTD: -12.89%)
ADX: 4,328.61 (+1.43%) (YTD: -14.72%)
DFM: 2,070.02 (+0.89%) (YTD: -25.13%)
KSE Premier Market: 5,494.14 (+1.57%)
QE: 9,160.50 (+0.29%) (YTD: -12.13%)
MSM: 3,527.84 (+0.20%) (YTD: -11.39%)
BB: 1,279.24 (+0.32%) (YTD: -20.55%)

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Calendar

25 June (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

30 June (Tuesday): Anniversary of the June 2013 protests, national holiday.

1 July (Wednesday): Official reopening of Egypt’s airspace to inbound and outbound international flights.

12 July (Sunday): North Cairo Court will hold a court session for the international arbitration case filed by Syrian Antrados against Porto Group for USD 176 mn after being pushed back from an initial 17 May court date.

28-29 July (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

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

13 August (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

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

15-16 September (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

24 September (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

24 September- 2 October (Thursday-Friday): El Gouna Film Festival, El Gouna, Egypt.

6 October (Tuesday): Armed Forces Day, national holiday.

29 October (Thursday): Prophet Mohamed’s birthday (TBC), national holiday.

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

4-5 November (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

12 November (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

15-16 December (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

24 December (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

25 December (Friday): Western Christmas.

1 January 2021 (Friday): New Year’s Day, national holiday.

7 January 2021 (Thursday): Coptic Christmas, 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. © 2018 Enterprise Ventures LLC.