MENA execs are optimistic about Egypt, EY survey finds

Good morning, friends. Just two more days and we slide into the weekend. Have you made plans yet? Judging from the record number of email auto-replies we’ve gotten the past two Sundays, it looks like plenty of you have slipped into three-day weekend mode for summer.

SIGN OF THE TIMES- EFG Hermes has kicked off its first-ever virtual investment conference: The investment bank is holding a six-day Virtual Investor Conference, which kicked off yesterday and wraps on 30 June, allowing executives from 72 companies to connect with more than 480 investors with USD 15 tn in assets under management. You can check out the firm’s press release here (pdf) or visit the conference website here.

The CBE will meet to review interest rates on Thursday, 25 June. Our poll earlier this week showed consensus among analysts that the central bank’s Monetary Policy Committee will leave rates where they are for the third consecutive meeting. A Reuters poll published yesterday found similar results.

The IMF’s executive board will meet on Friday to discuss Egypt’s request for a USD 5.2 bn standby facility, according to the fund’s calendar.

Three things to watch for today:

The still-unfolding saga of GERD, where we have appealed to the UN Security Council to get involved. More likely to make headlines today are any new developments in Libya. France accused Turkey late yesterday of playing a “dangerous game” on our western border and a mouthpiece for the Nutter in Ankara declared that its proxy in Libya saw “Egypt’s military threat [as] a declaration of war.” The US has expressed support for Cairo-brokered peace talks and urged an immediate ceasefire, as have Germany and Italy, who fear a new influx in migrants if tensions escalate any further, according to the Associated Press.

On the markets front: Stock futures have recovered after swooning earlier in the night when White House trade advisor Peter Navarro said the US trade pact with China was “over.” Futures recovered after Navarro walked back his remarks. Asian markets are mixed in early trading and stock futures now paint a similar picture for Europe and the US when shares start changing hands later today.

COVID-19 IN EGYPT-

The Health Ministry confirmed 85 new deaths from covid-19 yesterday, bringing the country’s total death toll to 2,278. Egypt has now disclosed a total of 56,809 confirmed cases of covid-19, after the ministry reported 1,576 new infections yesterday. We now have a total of 16,613 confirmed cases that have since tested negative for the virus after being hospitalized or isolated, of whom 15,133 have fully recovered.

Infections could slow in September, but we’re looking at another wave in winter: Egypt’s covid-19 case tally will likely begin to taper off by September, but a second wave of infections around wintertime is all but certain, member of the Health Ministry’s covid-19 task force Ahmed Shawky told ‘Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 14:45).

Egypt could have more than 600k covid-19 cases -Baseera: More than 600k Egyptian adults may have contracted the novel coronavirus, according to a survey conducted by the Egyptian Center for Public Opinion Research (better known as Baseera). In a poll of more than 3k Egyptians, an average of 10.1 per thousand reported contracting the virus that causes covid-19. Extrapolating the data to the broader population would mean that around 616k people have been infected, Baseera said. Of the respondents who said they had contracted the virus, 12% said they had been hospitalized (which is equivalent to around 74k individuals — a figure Baseera says is within the same [rough] ballpark as the Health Ministry’s confirmed case tally), while 66% isolated at home, 39% followed up with a doctor, and 61% underwent treatment.

The most common symptom among Egyptians is a high fever: Only 39% of cases reported experiencing three or more covid-19 symptoms with the most common symptom being a high fever at 67%, followed by vomiting and diarrhea (39%), a severe cough (37%), congestion (31%), loss of smell or taste (13%), and abdominal pain (13%). Most respondents (38%) were diagnosed using a chest scan; only 15% said they had had a PCR test.

The survey was big news on last night’s talk shows (details below), and a quick note here: The 600k cases, if accurate, includes folks who had a sniffle and stayed home weeks ago — it is not a measure of the current active case load in Egypt.

Rameda to manufacture Avigan substitute, Aviziram, to treat covid-19: Our friends at Rameda will start locally manufacturing the antiviral Anviziram (which contains the same active ingredient as in Avigan) as a possible treatment for covid-19, according to a statement (pdf). Rameda will also manufacture the antiviral med Remdesivir for intravenous administration. All production is initially earmarked for the domestic market, the company said.

Eva Pharma is working to begin manufacturing Avifavir, a Russian-produced generic version of Avigan, CEO Riad Armanious said, according to the local press.

Vezeeta launches recruitment drive as healthcare demand surges: Vezeeta is recruiting new employees across MENA — including in Egypt — on a work-from-home basis amid rising demand for digital healthcare solutions, the company said in a statement.

DONATIONS-

UNICEF will provide the Egyptian government with USD 17 mn to support the fight against covid, the International Cooperation Ministry said in a statement (pdf).

Chinese smartphone company Oppo has donated 15k food boxes to families impacted by covid-19, according to a company statement.

“Work, engage and communicate in an environment inspired by tranquility promoting productivity, clarity, and peace of mind.”

ON THE GLOBAL FRONT-

Global coronavirus cases broke the 9 mn barrier overnight, according to the Johns Hopkins University covid-19 tracker. Cases are soaring in big countries, the WHO warns.

No international pilgrims will go on Hajj this year: Saudi Arabia has decided to move ahead with a “very limited” Hajj this year for individuals of “various nationalities” currently residing in the kingdom, but will not allow pilgrims from outside the kingdom, according to the Saudi Press Agency. Hajj is set to begin at the end of next month. Saudi’s caution is well-placed: The decision comes as the WHO has warned that religious events are contributing to a resurgence of new cases in countries that managed to contain the virus early on, Reuters reports.

It’s day two of reopening for office towers in New York, on which the NYT has some color.

South Korea has been hit with a second wave of covid-19 infections in capital city Seoul after many ventured outside to celebrate during a holiday weekend in May, according to Reuters.

GLOBAL MACRO-

Investors are questioning whether the USD should be trading at a safe-haven risk premium as second waves of the covid-19 pandemic emerge worldwide, Deutsche Bank’s chief Asia macro strategist Sameer Goel told CNBC following a sharp spike in new cases across the US over the weekend. While investors have been favoring the greenback over other developed nations’ currencies since the outbreak escalated in March, the “emergency USD demand seems to be waning,” he said.

Bond traders are being dragged into the digital age: Bond trading, one of the few remaining areas of the financial world that hasn’t gone digital, is now embracing the new digital status-quo amid the pandemic, Reuters says. The case of a Seattle-based bond trader who managed to break up a large bond order into smaller bits and execute them electronically “illustrates how the volatility caused by the crisis, along with a new remote mindset of working from home, has pushed more traders to go digital in a market that has historically lagged stocks and forex in electronification,” Dhara Ranasinghe and Saikat Chatterjee write for the newswire.

AND THE REST OF THE WORLD-

The Donald has suspended the issuance of new H-1B and a raft of other work visas until at least the end of the year. Business in the US is freaking out, particularly given H-1B visas are earmarked for highly-skilled workers and are sought after in Silicon Valley. Also suspended are L-1 visas, which let corporations movie staff to the US as part of inter-company transfers. Visas for some seasonal workers and short-term gigs like camp counselors and au pairs have also been put on ice. The Wall street Journal and Reuters have more.

Last night’s WWDC keynote was a blockbuster and is all over the front pages of the global business press. Expectations were high enough that it brought veteran Apple watcher Walt Mossberg out of retirement. The WSJ stalwart and co-founder with Kara Swisher of the Recode franchise said (a tiny bit inelegantly) in a livestream last night that the event was “one of the most important and historic events in Apple history.” Done fully remotely instead of in front of the customary audience in Steve Jobs Theater, the event saw the computer maker:

• Announce a switch to its own chips for the Mac starting at the end of this year, dumping Intel in a process that could take up to two years. Macs will run on the same silicon that powers iPads, iPhones and Apple Watches. Microsoft Office and Adobe professional software including Photoshop and Lightroom are already running on the new chips.
• Unveil the ability to put widgets anywhere you want on your iPhone screen, among other tweaks coming in iOS 14;
• Show off a rebuild of macOS for the new silicon that packages improvements in design and functionality;
• Significantly tweak iPadOS to make it more friendly to power users, including through a iPad-version of dropdown menus for the first time;
• Promise to continue supporting Intel-based Macs for the foreseeable future.

Oh, and Apple will finally stop taking over your entire screen when you have an incoming call when iOS 14 rolls out to the masses this fall. If you want everything on a single page, head over to CNBC or the Verge for the top line. If you want to dive deeper, your best bet may be this 13-minute rundown and page chock full of links from MacRumors, with 9to5Mac’s version being a close second. The story is front-page news everywhere from the Financial Times to the Wall Street Journal (no less than four stories) and Bloomberg.

Also of interest to the nerds among us: Apple took the venom out of a spat with email startup Hey (run by the outspoken founders of Basecamp) as it allowed Hey to update its iOS app in the App Store and as Apple said it will allow developers to “challenge” its app review guidelines.

Airbnb may still IPO this year: “We’re not ruling it out this year, but we’re definitely not committing to a timeline right now,” said CEO Brian Chesky according to Bloomberg. Despite seeing nearly USD 1 bn in cancellations early on in the pandemic, a rebound in demand by urban professionals looking for vacation rentals in nearby rural areas has heightened optimism over the company’s performance in the back half of the year.

On another foreign policy-dominated evening, Qalaa Holdings boss Ahmed Heikal’s discussion of the outlook for the Egyptian and global economy post-covid was the business / econ highlight on the airwaves last night. You can watch the full interview here (runtime: 33:50).

While the global economy is unlikely to stage a real recovery before 2025 or 2026, Egypt’s economy could bounce back sooner, largely because we entered the pandemic on solid ground thanks to the government’s economic reform program, Heikal told El Hekaya’s Amr Adib. It’s still far too early in the pandemic to predict with any real certainty where economies are headed, which Heikal says will only really be possible once scientists successfully produce a vaccine or meaningful treatment for the virus.

In the meantime, it’s key for the government to retain the investors we already have, because it’s unlikely that fresh investments are coming soon — simply because nobody is venturing into new markets right now, he said.

Don’t expect an uptick in inflation — and don’t look at the USD rate as the only indicator of Egypt’s economic strength, either, Heikal told Adib. Heikal stressed that the real economy will benefit more from a focus on propping up local manufacturing, which will reduce our reliance on imports and demand for foreign currency.

Heikal praised the Madbouly government’s handling of the outbreak, telling Adib that while the partial lockdown was necessary when it was implemented, the government is also doing the right thing now by beginning to lift these restrictions to jumpstart the economy.

Heikal’s advice for investing in the middle of a pandemic: Diversify and invest in gold and a handful of equities you have confidence in.

On the foreign policy front: Al Kahera Alaan’s Lamees El Hadidi phoned Rep. Emad Gad to discuss Egypt’s position on Libya, which Gad noted has garnered international support, including from France. The MP also told Lamees he hopes to see the Arab League take on a more active and significant role in the issue (watch, runtime: 10:28). Lamees also had a chat with Cairo University’s international law faculty head, Mohamed Amr, who suggested that the UN Security Council will either mediate renewed tripartite negotiations between Egypt, Sudan, and Ethiopia on the Grand Ethiopian Renaissance Dam, or tap a small number of countries to act as observers (watch, runtime: 8:39).

Baseera Deputy Director Hanan Gerges explained the research center’s methodology in its covid-19 study and broke down the survey’s findings in a phone-in to Al Kahera Alaan (watch, runtime: 9:09). We have the story in What We’re Tracking Today, above.

Senior execs in MENA are optimistic about Egypt even as they brace for a sharp global slowdown: Senior executives from the Middle East and North Africa are both uncertain and cautious about the effect of the covid-19 pandemic, with nearly three-quarters of respondents in a survey conducted by Ernst & Young (EY) expecting the covid-19 pandemic to have a severe impact on the global economy. Despite this, executives expect this impact to vary by region and as little as one quarter believe the pandemic will have a large impact on MENA. The survey was part of EY’s Global Capital Confidence Barometer (pdf).

There is relative optimism among Egypt-based execs, a third of whom don’t expect the pandemic to have a significant impact on the country. Only one-fifth anticipate economic activity to be heavily impacted.

Contrast this with Saudi Arabia and the UAE, where the outlook is darker: More than 80% of respondents expect the global economy to be severely impacted and more than one-third predict a deep local recession.

But we’re (so far) doing alright as a region: “One reason MENA countries initially may have felt financially insulated from the pandemic is that many companies in the region are well-capitalized and therefore believe they can operate longer before feeling the financial pinch,” says EY.

Outlook for M&A remains healthy: When the survey was conducted, many executives anticipated an immediate term slowdown in traditional M&A activity, However, the executives’ intention to pursue M&A until March 2021 is still high at 51%.

In Egypt, M&A intentions are at 49%, higher than the long-term regional average of 39%. Intentions for the UAE are also solid at 56%, with Saudi executives reporting reasonable appetite, but still down from last year’s survey.

A word of warning: Surveys have a shelf life — they’re a snapshot in time — and this one was conducted between 4 February and 26 March, when the outbreak in the MENA region was in relative infancy.

DEBT WATCH- Proparco has extended a USD 20 mn finance facility to T&C Garments, an Egyptian-Turkish JV specialized in manufacturing denim clothes for export, according to a press release (pdf). The loan from the private-sector financing arm of the French development finance institution AFD will help T&C Garments double its production capability over the coming years as well as finance the installation of solar PV panels and a water-recycling unit to increase sustainable electricity usage in the company. “Egypt has high potential to play a growing role in the textile sector worldwide,” said Yazid Safir, North Africa director at Proparco, adding that the company, “is pioneering high environmental and social standards in the Egyptian textile sector.”

EBRD confirms it’s lending the National Bank of Egypt USD 100 mn for SMEs: The European Bank for Reconstruction and Development (EBRD) confirmed yesterday it is providing the National Bank of Egypt (NBE) a USD 100 mn loan for on-lending to SMEs impacted by covid-19, which NBE Deputy Chairman Yehia Aboul Fotouh had announced last week. The EBRD also agreed to a separate USD 100 mn increase to its uncommitted trade finance limit for NBE under its Trade Facilitation Program to support import and export transactions. The limit is now at USD 300 mn.

INVESTMENT WATCH- Arabia Investment Holding (AIH) is planning to invest EGP 60 mn this year in its non-banking financial services subsidiaries, leasing company UE Finance, auto financing firm Rawaj, and its soon-to-be established factoring company, the local press reports, citing unnamed sources. The company is also considering more stock buybacks, which it has recently done to maintain its share prices, as well as purchasing shares in promising EGX-listed companies, without providing additional details.

DISPUTE WATCH- Gov’t looks to reach financial settlement with Saudi investor over Omar Effendi sale dispute: The Holding Company for Construction and Development (HCCD) has proposed a financial settlement to Saudi’s Anwal United Trading Company in its dispute over the sale of HCCD subsidiary Omar Effendi, HCCD Chairman Hisham Aboul Atta tells Masrawy. HCCD is currently waiting on Anwal’s decision on the proposed settlement, Aboul Atta said, without disclosing details on the sum or terms offered.

Background: The state had agreed to sell a 90% stake in Omar Effendi to Anwal in 2006, only to have the Administrative Court issue a ruling in 2011 rolling back the stake sale. The ruling also scrapped other agreements the state had reached with investors, including one to partially privatize Nile Cotton Ginning. The decision drew Egypt into international arbitration entanglements, including a dispute with the World Bank’s International Finance Corporation (IFC) over a USD 40 mn loan Omar Effendi signed under the Saudi company’s management in 2007. Anwal stopped repaying the loan after the Administrative Court ruling. Omar Effendi eventually signed an agreement with the IFC in 2018 to settle the dispute.

LEGISLATION WATCH- The Cabinet economic group signed off yesterday on proposed amendments to the VAT Tax Act, which now go to cabinet as a whole for approval, according to a statement. The proposed legislative changes, which the Finance Ministry finalized last week, would subject most commercial advertising to the value-added tax but scrap the 20% stamp tax on ads. Under the amendments, departing tourists would be able to claim VAT rebates on select items worth more than EGP 1.5k or more (as opposed to the current EGP 5k threshold for VAT drawbacks), special economic zones would enjoy the same VAT treatment as freezones, and the Health Ministry would be given the authority to issue decrees exempting pharma components from the tax.

The Finance Ministry has issued a “unified guide” for comptrollers at state agencies to promote best practices, according to a ministry statement (pdf). The guide will give those officers a standardized handbook to ensure purchases and collections by state bodies are in line with budget forecasts, to raise financial efficiency and accountability, “ration public spending,” and improve Egypt’s ranking internationally on budget transparency indices, the statement notes.

Nearly a dozen emerging-market central banks are starting to become fond of quantitative easing, a practice traditionally limited to the developed world, says the Financial Times. This is a shift from previous crisis handling policies in EMs, which have usually stayed away from QE. The experiment — which involves central banks buying government bonds to inject liquidity into the financial system and hold down yields — could have potentially destructive implications if it starts to get out of control.

Who’s on board with QE? South Korea and Israel, which both have experience with QE from the 2008 financial crisis, relaunched bond buying programs in response to the pandemic. Now, they’re being joined by a host of first-timers, including Poland, Hungary, Malaysia, the Philippines, Indonesia, Turkey and South Africa.

Countries with risky debt profiles, including large fiscal deficits, less independent central banks and high inflation can’t risk getting involved too heavily in QE, some experts warn. Others are raising doubts about whether EM central banks have the political will to stop the programs when conditions improve. “Judgment day will be when things have normalized,” said Drausio Giacomella, head of EM research at Deutsche Bank. “Are central banks going to be willing to tighten monetary policy or stop their asset purchases?” Others say emerging market QE programs are strikingly similar to those seen in the US, EU and Japan — just on a really limited scale. “At this stage we don’t see any cause for concern given the limited nature” of EM-led QE policies, head of EM debt strategies at AllianceBernstein Shamaila Khan says.

The wall of money unleashed by central banks around the world is raising fears of irrational exuberance: Foreign investor portfolios continue to be susceptible to large swings away from EMs, as we saw with March’s large drop in inflows. And with the latest pile into EM assets being driven by the Federal Reserve’s flood of stimulus, some investors are hesitant to get on board. “This rally is close to the end and it would be very dangerous to chase it,” said Arthur Budaghyan, chief EM strategist at BCA Research. ”Manias are not driven by fundamentals and rational forecasters cannot forecast them.”

New x-ray images map the universe in unprecedented detail: German-Russian space telescope eRosita has scanned the skies to produce an intricate recording of the universe, made up of over 1 mn sources of x-rays, the BBC reports. The orbiting telescope has been scanning the skies since December, picking up black holes, stars, hot gas, and an assortment of cosmic activity. The map is in color to show what’s going on, with blues representing the highest levels of energy and reds the lowest. The band across the middle of the image represents the plane of our own Milky Way galaxy.

It’s crickets for Egypt in the international press, with the only story of note being the Guardian’s piece on concerns about covid-19 among those in the nation’s prisons.

Private equity bosses are raking in bns running funds that fail to beat cheap tracker funds, according to a new Oxford Business School study. Authored by Ludovic Phalippou, professor of finance at Oxford University’s Said Business School, the report finds that top executives at private equity firms including Blackstone, Apollo, KKR and Carlyle have netted around USD 230 bn in management fees from investors in exchange for meagre returns equal to those generated by passive funds tracking US stocks. Comparing the performance of the big four PE firms with large US public pension plans, Phalippou found that the pension plans earned about USD 1.50 (after fees) for every USD 1 invested in private equity funds between 2006 and 2015 — meaning they both churn out an average annual return of 11% over the same period.

A staggering transfer of wealth: Over the past 15 years, the number of private equity chiefs with personal fortunes exceeding USD 2 bn has risen to 22 from three. Blackstone co-founder Stephen Schwarzmann has risen to become the world’s 29th richest person with a net wealth of USD 17.7 bn. Apollo founder Leon Black is ranked #63 with a USD 7.7 bn fortune while KKR’s George Roberts and Henry Kravis have both accumulated fortunes in excess of USD 6 bn. “This wealth transfer from several hundred mn pension scheme members to a few thousand people working in private equity might be one of the largest in the history of modern finance,” Phalippou wrote.

How a water pump changed the way we understand the spread of diseases: When cholera outbreaks became rampant in the UK in the 1800s, doctors and scientists believed the disease traveled in a miasma or a cloud. In 1854, Dr. John Snow (no relation to the King of the North) hypothesized that contaminated water was a leading cause of the disease’s transmission, which he traced to a water pump on Broad Street. He created a map of the area complete with all the fatalities and infections to back his findings, which eventually led to the containment of the outbreak. The Broad Street Pump Map is now a case study for modern day epidemiologists and has changed the way we fight outbreaks. This episode of Vox Almanac deciphers the map (watch, runtime: 6:36).

Petrogulf Misr — a JV between the Egyptian General Petroleum Company, the Kuwait Foreign Petroleum Exploration Company, and Cheiron — has made a shallow-water oil discovery in the Gulf of Suez that has an initial production level of 2k barrels of crude per day, the Oil Ministry said in a statement. The GNN-4 well contains roughly 260 mn barrels of oil (MMbbls) and is located in the concession covering the Geisum and Tawila West fields, Cheiron said in a statement.

Global non-profit the Better Cotton Initiative (BCI) has launched a program in Egypt to train 2k local farmers to cultivate crops eligible for its quality certification starting the 2020-2021 cotton season, according to a statement. The training program will be funded by Italian Agency for Development Cooperation. Local partners the Cotton Research Institute, Modern Nile Cotton and Alkan will also be on board, the Agriculture Ministry said. This comes after Egypt last May officially became a member country of BCI following a successful pilot launch last year in collaboration with the UNIDO.

Noon Academy has raised USD 13 mn in its latest funding round as more students resort to distance learning through the Saudi-based company’s educational technology platform, according to Bloomberg. Noon Academy also operates in Egypt, India and Pakistan.

State-owned Banque Misr and the Federation of Egyptian Industries’ real estate division have signed a cooperation agreement to expand mortgage lending to middle-income families through a CBE-backed EGP 50 bn package and BM’s own real estate financing products, Youm7 reports. Under the agreement, both parties will work to streamline the lending process, a statement cited by the newspaper says, without giving details.

The New Urban Communities Authority will ease payment terms and deadlines for property developers and investors in new cities, Housing Minister Assem El-Gazzar said. Projects that are due to be delivered on or after 15 March 2020 will see their original completion deadlines stretched by 3 months. A grace period of at least six months will also be granted for land installment payments. The Trade Ministry’s Industrial Development Authority also issued a similar decision (pdf) for industrial investors.

The Egyptian General Company for Tourism and Hotels (EGOTH) will launch an international tender for the development of the Giza Plateau and its sound and light shows within three months, Chairperson Mervat Hatabah told Youm7. The new tender will include terms that will ensure the winning bidder sticks to the implementation schedule. The Sound and Light Company in 2018 scrapped a USD 10 mn agreement with Orascom Investment Holding to develop the plateau, after repeated delays in commencing work on the project.

Conglomerate Samcrete is in talks with two local banks to arrange a EGP 1.7 bn loan to finance its work in new cities, Al Mal reports, quoting sources with knowledge of the matter. The company is in talks with one state-owned and one private bank for a three- to five-year revolving credit facility to finance projects awarded to it by NUCA in the second phase of New Alamein, the sources said.

Today’s Google Doodle commemorates what would have been Egyptian feminist icon Hoda Shaarawy’s 141st birthday. At a time when Egyptian women were denied their basic rights in Egyptian society, Huda Shaarawi emerged as a feminist revolutionary figure who called for equal access to education and deconstructing various taboos that held back Egyptian women.