Monday, 26 October 2020

Institutional investors, research houses hold the line on CIB


What We’re Tracking Today

After a very tense early morning yesterday, the business community let out a sigh of relief in the afternoon as first the EGX and then banking hours came to an end without incident.

The community was primed for drama after WhatsApp and social media were set on fire Thursday and over the weekend amid news that Hisham Ezz Al Arab was stepping down under pressure from the Central Bank of Egypt after a 21-year run as chairman and managing director of private-sector heavyweight CIB.

What we got instead was a show that underscored how satisfyingly boring a well-run, well-governed institution really is. Major research houses reaffirmed their ratings on CIB. Institutional shareholders, who for more than 15 years have had extensive access to the bank’s CEO and award-winning investor relations team, held the line as retail investors sold. It was business as usual in CIB’s branches as clients (us included, to be honest) submitted payroll transfers ahead of the long weekend and otherwise went about our business. CIB CEO Hussein Abaza started the morning with an email to staff and ended it with an afternoon all-staff call after the bank closed its doors. In both, his message was simple: It’s business as usual, because Ezz Al Arab had helped build an institution that was bigger than any one individual. Non-Executive Chairman Sherif Samy fielded a handful of interviews.

We have chapter and verse on the rather anticlimactic denouement at CIB in this morning’s Speed Round, below.

But don’t worry, drama-lovers: We have a fraught week ahead of us between covid-19 and the US presidential election. In our neck of the woods, Saudi Arabia’s Tadawul closed down 4.1% amid what analysts say are concerns the world may be bracing for a second spell of lockdowns. Shares in chemicals group Sabic and its parent company, oil giant Aramco, contributed most to the decline. Also down yesterday: Qatar (-1.5%), Kuwait (-1.2%), and Dubai’s indices (-0.4%). Bloomberg has a market recap.

Expect an uptick in volatility in the European markets today after Spain yesterday declared a state of emergency to impose a nationwide nighttime curfew and Italy reimposed the harshest pandemic restrictions since May. Asian shares were mixed at dispatch time this morning, while futures point to a lower open on Wall Street.

The US has seen the biggest weekly rise in new cases since the spike in the summer, with 441,541 new infections reported over the past week, the Financial Times reports, citing the Atlantic’s Covid Tracking Project.

The European Central Bank could increase its monetary stimulus program by another EUR 500 bn by December as countries revert to lockdowns in response to surging covid-19 cases, according to predictions by economists surveyed by Bloomberg. Less than half of the EUR 1.35 tn currently allocated to bond purchases has been spent but pressure will likely grow on the bank to up this as the risk of a double dip recession in the eurozone grows, they said.

US ELECTION WATCH- Across the pond, Facebook is preparing measures to help stem potential unrest after next week’s US presidential election, the Wall Street Journal reports in an exclusive. The tools, which “include slowing the spread of certain posts and tweaking users’ news feeds,” were previously used amid unrest in Sri Lanka and Myanmar, the newspaper reports.

Election day in the US is next Tuesday, 3 November, but a high proportion of mail-in ballots has observers expecting it could be days or even weeks before the outcome of the poll is known.

PSA- You can now order your electronic vehicle sticker online through the traffic authority’s website, the Interior Ministry said in a statement on Saturday. The ministry has set 21 November as the deadline to obtain the RFID-chip sticker now required for all vehicles.

PSA- We are heading into a three-day weekend as the nation observes the Prophet’s Birthday on Thursday.

KUDOS- Orascom Construction announced three recipients of educational scholarships to pursue undergraduate and postgraduate degrees at Harvard University and the University of Chicago under its Onsi Sawiris Scholarship Program, according to a statement (pdf). The scholarship program, which has now been going strong for two decades, awards full scholarships to students pursuing degrees in engineering, construction, economics, political science, finance, and management, at top-tier US universities including Harvard, Stanford, MIT and the University of Pennsylvania. Some 88 Egyptian students have now been awarded the scholarship.

The Health Ministry reported 143 new covid-19 infections yesterday, down from 167 the day before. Egypt has now disclosed a total of 106,540 confirmed cases of covid-19. The ministry also reported 12 new deaths, bringing the country’s total death toll to 6,199. We now have a total of 98,903 confirmed cases that have fully recovered.

Egypt and other developing countries that will order doses of China’s covid-19 vaccine are in line for grants and other forms of support, Liao Liqiang, China’s ambassador to Cairo, said at a presser yesterday, according to Al Mal. Vaccines developed by Chinese companies will be offered at “acceptable and fair” prices worldwide, he said. Egypt is first in line among African countries to receive a Chinese vaccine against covid-19, with a vaccine currently in phase three clinical trials here.

New Stars Aviation Services will operate three weekly tours from Ukraine to Marsa Alam beginning in November, Al Shorouk reports. Ukraine International Airlines currently operates 50 weekly flights to Sharm El Sheikh and Hurghada, which are expected to increase to 90 during the winter season, officials at the agency said.

Saudi chemicals giant Sabic has turned a corner after suffering heavy losses in the second quarter, reporting a SAR 1.09 bn net profit in 3Q, according to an earnings release (pdf). The company, which is majority owned by Saudi Aramco, said it had experienced a pick up in demand as economies recovered from lockdowns in the second quarter, but warned that supply will continue to outstrip demand “for the foreseeable future.”


The world’s richest aren’t letting a good crisis go to waste. The message from Swiss banks and wealth advisors to their bn’aire clients during the market panic earlier this year: don’t sell. The result: A huge increase in the fortunes of the world’s super-rich and possibly the largest transfer of wealth of our lifetimes. Bankers tell the Financial Times that they advised their clients to hedge their positions rather than panic-sell, enabling them to capitalize on the flood of stimulus and surge in asset prices as the global economy saw its worst recession since the Great Depression. “It’s been hard emotionally, but the key to performance this year was to remain invested,” one advisor said.

China’s richest man is taking shots at the Western-led financial system ahead of Ant Group IPO: Alibaba founder Jack Ma has described the Basel Accords — which require banks keep collateral sufficient to absorb potential losses — as “an old people’s club” and called for the revamping of global financial regulations, days before the expected USD 30 bn record-breaking IPO of Alibaba’s financial services arm Ant Group, the Financial Times reports.

Other international headlines worth knowing:

  • France-Turkey spat escalates after Erdogan playground insult: France has recalled its ambassador to Turkey after Recep Tayyip Erdogan said Emmanuel Macron needed “mental treatment” for launching a crackdown on radical Islamists, Bloomberg reports.
  • Libya is set to resume producing over 1 mn barrels of crude a day in the next four weeks, after the country’s National Oil Corporation announced the lifting of force majeure and the resumption of production following the ceasefire agreement signed during UN-led talks on Friday.

Diverse investment teams tend to do better than so-called “male and pale” ones, analysts London-based advisory firm Willis Towers Watson found after looking at more than 2.4k groups, according to the Financial Times. Groups with more women and ethnic minorities outperformed by 20 basis points a year on average, the analysts said. Despite the better metrics, data indicate that progress on diversity at asset management funds still lags, with only 4% of UK funds being run entirely by women, compared to 85% run by men — and fewer than 1% of asset managers in the UK are Black.


*** 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: Will current SAT cancellations permanently change the outlook on the SATs in Egypt?

Enterprise+: Last Night’s Talk Shows

The House of Representatives elections were still leading the conversation on the airwaves last night as the first round of voting wrapped in 14 governorates yesterday and the process of counting ballots began. Ala Mas’ouleety’s Ahmed Moussa, for one, dedicated a full three hours to the second day of voting and the ballot counting process (watch, runtime: 3:00:29), while Masaa DMC’s Eman El Hosary also took note (watch, runtime: 8:11).

Back on the political side of the conversation, some 140 complaints over alleged bribing of voters with money and food were filed throughout the two-day vote, Egyptian Human Rights Organization head Hafez Abu Saada told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 10:22). Lamees also dove deeper into details of the election’s first phase in a lengthier segment (watch, runtime: 40:18). Meanwhile, Egyptian Center for Strategic Studies analyst Sobhi Essila explained to Al Hayah Al Youm’s Mohamed Sherdy how the redrawing of some electoral districts has led to more closely contested votes and a more active voter base (watch, runtime: 4:35).

The corporate drama at CIB also made headlines last night; we have details in this morning’s Speed Round, below.

Speed Round

Institutional investors, research houses hold the line on CIB amid selling pressure from retail investors following Ezz Al Arab’s resignation. Four research houses have affirmed their ratings on CIB after Hisham Ezz Al Arab stepped down on Friday as chairman and managing director following a probe by the Central Bank of Egypt. Selling yesterday appeared largely confined to retail investors, a veteran market watcher suggests.

CIB shares fell as much as 10% at the start of the session before recovering ground, closing the day down 6.9%. The bank’s EGX-listed shares had been suspended from trading by the Financial Regulatory Authority on Thursday. Trading of global depositary receipts on the London Stock Exchange had continued on both Thursday and Friday. From Wednesday’s close of USD 4.23, the GDRs fell to USD 3.50 at the closing bell on Thursday and hit an intraday low of USD 1.77 on Friday before surging to end the week at USD 4.00 on unprecedentedly high volumes, according to LSE market data.

Four research houses have reaffirmed their ratings on CIB since a call on Friday night between CEO and Managing Director Hussein Abaza and more than 600 members of the investment community including fund and portfolio managers as well as research analysts. HSBC, Arqaam Capital and Arab African have all maintained “buy” ratings while our friends at Pharos are equal weight on CIB.

HSBC believes that “the market has overreacted to the sudden news of the chairman’s departure” and “continues to view CIB as a financially sound bank.” The central bank audit will likely lead to higher compliance and internal control costs in the medium term, analyst Aybek Islamov wrote, leaving his target price for CIB unchanged at EGP 86 per share, implying more than 40% upside to yesterday’s close.

Pharos’ Dalia Bonna advised clients yesterday that there was “no need to panic” and that Ezz Al Arab’s departure was “not a disaster,” while Prime Holdings Head of Research Amr Elalfy said in a note that investors “should not push the panic button indiscriminately.” Prime’s Shihab Helmy suggested that the impact on EGX-listed bank shares would likely be transient.

Shuaa Capital “doesn’t expect this event to actually blow out of proportion,” said analyst Aarthi Chandrasekaran in an interview with Bloomberg TV, adding that “investors, from now, will look forward to the complete audit report, which is still pending from the Central Bank of Egypt. But the way the news came out — the way it was handled the first two days — was a disappointment to the investor community.”

Other research heavyweights have yet to weigh in, including EFG Hermes, Goldman Sachs and JPMorgan, which a veteran market watcher suggested yesterday suggests that they don’t believe they need to update their models or change their recommendations on the share in the wake of Ezz Al Arab’s departure.

Selling pressure yesterday appeared to come largely from retail investors, the market veteran told us, calling the trades “small blocks” and suggesting that “institutional investors are sanguine about what’s happening — look for bargain hunters to enter the market on Monday. Sentiment on CIB is that it’s a strong bank and investors know and trust [CEO Hussein] Abaza.” Prime’s Elalfy agrees, telling Bloomberg he sees CIB shares “finding support around EGP 60 driven by institutional buyers ‘opting to get in at a 10% discount to [last] Wednesday’s price.’”

The drama at CIB was on nighttime talk show host Amr Adib’s mind yesterday. The host of El Hekaya expressed dismay at how the story unfolded, particularly as domestic shareholders and foreign investors alike were left in the dark on the details of the regulatory probe that led to Chairman Hisham Ezz Al Arab’s resignation (watch, runtime: 6:39). Nonetheless, Adib stressed that he isn’t losing a wink of sleep over the bank’s future, pointing to the institution’s strong fundamentals and investor confidence in the bank’s track record (watch, runtime: 1:47). Blom Bank Managing Director Mohamed Fathallah said much of the same, telling Adib that the bank’s shares would have fared worse on the EGX yesterday if it weren’t for its fundamentals (watch, runtime: 2:49).

Background: Hisham Ezz Al Arab stepped down last week after the central bank said it found “gross violations” of banking regulations during an audit of the bank. Ezz Al Arab has been succeeded by former regulator, consultant and entrepreneur Sherif Samy as the bank’s non-executive chairman, while Abaza becomes both CEO and managing director. The CBE has long sought to convince banks to separate the officers of chairman and managing director, saying best practice is to have non-executive chairs responsible for governance and oversight while managing directors run and build banks.

Foreign investors are piling into Egyptian debt: Foreign inflows into Egyptian bonds have surged to more than USD 20 bn just a few months after investors pulled USD bns during the global market panic in the spring caused by the coronavirus pandemic, Bloomberg reports. Investment in short-term Treasury bills and long-term bonds more than doubled to USD 21.1 bn as of mid-October from USD 10.4 bn in May, said Mohamed Hegazy, head of the Finance Ministry’s debt management unit.

The rush of hot money signals increased investor confidence in the Egyptian economy, Finance Minister Mohamed Maait told the Financial Times. “We see this in the reaction of investors when we go to international financial markets and in the way they receive issuances of Egyptian treasury bills,” he told the salmon-colored newspaper. The central bank has seen huge demand for EGP-denominated debt while investors lapped up the government’s eurobond and green bond issuance earlier this year. Hegazy said that the two FX-denominated sales, in addition to stable outlooks from the three major rating agencies, has only strengthened foreign inflows, which now account for 9.4% of total EGP holdings, up from 5.2% at the end of June.

Egypt was hit badly by the sell-off in emerging markets in the spring: Bondholders sold more than 60% of their holdings of Egyptian debt between February and May as investors panic-sold risk assets in response to the escalating pandemic. In March alone, foreign holdings plummeted from USD 27.8 bn to USD 14.4 bn.

The carry trade to the rescue: Investors have been drawn to EGP-denominated assets by the high yields, the stable currency and signs from the government that it was committed to further economic reform, Mohamed Abu Basha, head of macroeconomic research at EFG Hermes, told the FT. Returns offered by Egypt’s local-currency bonds remain some of the highest among emerging markets, despite the central bank’s surprise 50-bps rate cut last month, while the EGP has remained steady at 15.654, gaining more than 3% since its nadir of 16.168 in June.

Debt diversification is gaining pace: The government is following through on its plan to issue more longer-term debt. By the end of September, Treasury bonds accounted for 71% of its net issuance, compared to just 20% three months earlier. As of the end of June, average maturities were 3.2 years, up from 1.3 years in the same month of 2013, Hegazy said. It is hoped that by issuing greater quantities of long-term bonds, which typically carry lower rates of interest, the government will lower its borrowing costs.


Egypt’s recent loan agreements with international lenders has also been a stabilizing factor. The two loans secured from the IMF — the USD 2.8 bn rapid-financing instrument and the USD 5.2 bn standby loan — helped to prevent the pandemic from inflicting serious scars on state finances, providing emergency support for health and social programs, and keeping the budget and balance of payments deficits in check.

…as has economic growth, which is likely to come in at 2.8-3.5% during the current fiscal year, Maait told the FT. Egypt has remained the only country in the region to avoid an economic contraction this year, despite suffering through a three-month lockdown and seeing its tourism industry brought to a standstill by the collapse in international travel. The World Bank now sees the economy growing at a 2.3% clip this fiscal year before expanding to 5.8% the following year. Earlier this month the IMF revised upwards its 2020 growth forecasts to 3.5% from the 2% it forecast in June.

And the budget deficit is narrowing slowly but surely, though the minister acknowledged covid-19 was slowing growth targets. “It is true corona is slowing us down in reaching our aim, but we continue to reduce the deficit … If I compare with others … their deficit has increased,” he said. The deficit has widened to 7.9% of GDP from 7.2% in FY2019-2020, and the IMF sees the trend continuing this year, reaching 8.1% by the end of FY2020-2021 before rapidly falling to 5.2% the year after.

Meanwhile, Egypt’s total stock of foreign debt rose 11% q-o-q in 4Q2019-2020 (April-June 2020) to USD 123.5 bn from USD 111.3 bn by the end of the previous quarter, and 13.6% y-o-y, from USD 108.7 mn in 4Q2018-2019, central bank data cited by Masrawy showed. The rebound came after external debt fell for the first time in nearly 5 years in 3Q19-20.

How Egypt dodged a recession: The shift in outlook is due to the government’s increased spending on infrastructure as well as central bank measures which include interest rate cuts. Abou Basha told the FT that the resumption of public spending after a pause in April was key, while Maait said the government would continue to boost the economy by extending its EGP 500 monthly stipend for informal workers till the end of the year, as well as disbursing export subsidies.

Going forward: In IMF and World Bank meetings last week, Maait outlined Egypt’s strategy of prioritizing investment in transport, renewable energy and oil and gas, and told the FT of plans to increase exports and fund new tourism initiatives. In the interview though, the minister acknowledged fears that a return to normality may be much further away than initially thought, echoing the refrain that “people will have to learn to coexist with the virus.”

LEGISLATION WATCH- Office space and snack tax? Amendments to the VAT Act that would impose VAT on non-residential property and some snack foods are now with the House of Representatives after going through Cabinet, the local press reports. The changes would apply a 14% VAT to the rent and purchase of commercial and administrative properties, while the 5% schedule tax on crackers and sweet pastries would be replaced by the standard VAT rate. The amendments, which were signed off by the cabinet’s economic committee in June, would also subject most commercial advertising to the tax but scrap the 20% stamp tax on ads, and allow tourists to claim VAT rebates.

Real estate developers have pushed back against plans to end the VAT exemption for non-residential properties, suggesting that businesses already struggling through the coronavirus pandemic will not be able to cope with the additional costs. The government argues that the changes are necessary to close loopholes in the legislation, which impose VAT on some commercial properties — such as stores located in malls — but not others.

In other VAT news, FinMin renews agreement with Lawyers Syndicate on VAT: Attorneys will keep paying a flat VAT rate on their services under a renewed agreement (pdf) between the Finance Ministry, the Lawyers Syndicate, and the Justice Ministry. The agreement sets VAT on legal services and court proceedings undertaken by law firms. VAT for proceedings in the Court of First Instance was unchanged at EGP 40 and those in the Court of Appeals at EGP 60. Lawsuits filed in the courts of cassation, administrative, constitutional, and international arbitration will also incur the same VAT of EGP 200. The agreement was last renewed in September 2018 after it was initially inked in April 2017. Lawyers had been opposed to the initial agreement and further increases.

BP has started gas production from its Qattameya gas field in the North Damietta offshore concession through its Pharaonic Petroleum Company JV, the company said in a statement (pdf) yesterday. The field, discovered in 2017, is expected to produce up to 50 mn cubic feet of gas per day, and is tied to the Ha’py and Tuart fields via a 50 km pipeline. BP holds 100% equity in the concession in the East Nile Delta, and directs gas production to Egypt’s national grid.

Staying the course paid off, regional boss says: Karim Alaa, BP’s North Africa regional president, called the operation “a great example of resilient hydrocarbons development. We are proud to have brought this project safely onstream through an extremely challenging period. Our team continues to work to support Egypt realise the potential of its energy resources, adding to our track-record of delivery and enabled by our established partnerships with the Egyptian petroleum sector.”

M&A WATCH- Struggling producer Dana Gas offloads Egypt assets to IPR Energy: Dana Gas has agreed to sell most of its Egypt assets to IPR Wastani Petroleum for as much as USD 236 mn, allowing the company to double down on its operations in Iraqi Kurdistan, the company said in a statement yesterday. The Emirati firm, which began talks with several prospective buyers in 2Q2019, is selling its entire concessions in El Manzala, West El Manzala, West El Qantara and North El Salhiya but will hold onto its interests in exploration concessions El Matariya (Block 3) and North El Arish (Block 6), the statement said. Watani has agreed to pay a base price of USD 153 mn as well as USD 83 mn contingent on Brent prices and production between 2020-2023.

Wastani who? IPR Wastani Petroleum is part of the Texas-based energy group IPR Energy, which conducts exploration and production operations in nine concessions in Egypt.

The acquisition isn’t done yet: The agreement will be completed by early 2021, pending the approval of the Oil Ministry, the company said.

A sale fit for a pandemic: The sale price represents a serious climbdown from the USD 500 mn valuation Dana had originally attached to its portfolio. While the company hasn’t offloaded all of its assets, the USD 153 mn base price represents a marked discount given the blocks it is keeping hold of (El Matariya and North El Arish) are yet to make commercial discoveries after years of exploration.

Background: Dana Gas has been looking to offload its Egypt assets since September of last year. Talks with IPR Energy were reported last month, ahead of a USD 379.6 mn debt repayment in outstanding Islamic bonds, or sukuk, due at the end of this month.


M&A WATCH- Raya Contact Center has submitted a non-binding offer to purchase an unnamed call center company based in the Gulf, the company said in an EGX filing (pdf) yesterday. The company is currently conducting due diligence but didn’t provide any additional information.

Separately, Raya’s board of directors will start discussions on how to unwind the EGP 10.4 mn of share buybacks the company authorized following the onset of the coronavirus pandemic, the disclosure said. Raya was among more than 20 EGX-listed companies that lined up for share buybacks after the pandemic fueled a sell-off in capital markets earlier this year. The Financial Regulatory Authority eased regulations on buybacks in early March, opening the floodgates as companies rushed to prop up their share prices. We took a closer look at the buyback boom in July.

The private sector is getting involved in the government’s move to locally produce railcars: Orascom Construction, Samcrete and Hassan Allam will hold stakes in the National Company for Railways Industries, a newly-established company that will produce, repair and renovate railway cars at the Suez Canal Economic Zone (SCZone), Al Mal reports, citing an unnamed government official familiar with the matter. The firms will invest in the company alongside the Sovereign Fund of Egypt and the SCZone. Share allocation is currently being discussed and will be announced soon, the official added. The company will invest USD 240 mn in two factories in the East Port Said Industrial Zone: one for producing railcars and another for manufacturing components.

State-owned Telecom Egypt (TE) plans to bring Egypt’s largest international data center online in 2021, local press reported. The data center will be connected to TE’s 10 Mediterranean and Red Sea subsea landing stations, connecting with more than 60 countries worldwide and allowing Egypt to make use of its unique position as a subsea internet cable hub. TE announced last year that it would be building four to five data centers in the coming two years in the new administrative capital, Alexandria, Smart Village and Suez. The company currently runs six data centers in Cairo and Alexandria.

KUDOS: GAFI has been acknowledged as the investment promotion agency that attracted the best investment project in the Middle East and North Africa in 2019 at the UAE’s Annual Investment Meeting, according to a statement. The authority received the award for Lekela Power’s 250-MW West Bakr wind farm in the Gulf of Suez.

There are common issues that impact service providers, including attracting and retaining talent, micromanagement, and creating corporate structure. We unpack the similarities and challenges of the service industry with Bahaa Alieldean, managing partner at ALC Alieldean, Weshahi & Partners, in this week’s episode of Making It.

You already have a podcast player on your iPhone, or you can listen to the episode through our website (no download required). We’re also on Google Podcasts | Anghami | Omny. Making It is on Spotify, but only for non-MENA accounts

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Egypt in the News

On an otherwise very quiet morning for Egypt in the foreign press, the only story making the rounds: Terrorists in northern Sinai have killed more than 14 civilians, including women and children, over the past two weeks, the Associated Press reports, citing security officials.

Diplomacy + Foreign Trade

Egypt has become the world’s second largest producer of sun-dried tomatoes, behind only Italy, according to the Central Administration for Plant Quarantine. The produce is farmed and dried on some 17k feddans in Esna south of Luxor, and exported mainly to Italy, France, Argentina and Brazil. China and India place third and fourth in terms of production.


Will current SAT cancellations permanently change the outlook on the SATs in Egypt? The cancellations of the SAT exams in Egypt have hurt American Diploma students’ applications to Egyptian universities, as a minimum SAT score is among the entry criteria. This has had an impact on admissions, as universities tell us there was a noticeable drop in American Diploma applicants as a result of the cancellation.

But life in Egypt goes on without it: These cancellations have driven an increasing number of students towards the ACT in Egypt, along with the homegrown Egyptian Scholastic Test (EST). While some question whether the SATs will remain canceled until June 2021 (as recently stated), some see this as the beginning of the departure away from the SATs, as some universities in the US have.

Background: SATs were canceled indefinitely in Egypt at the beginning of September due to “persistent test security incidents,” according to nonprofit organization College Board, which develops and administers them. The SATs have long been required examinations for students applying for undergraduate university admission and scholarships, particularly in the US.

Globally, SAT security breaches are nothing new: CollegeBoard has had to call off international administrations of their exams repeatedly due to security issues, including in Egypt, Morocco and Saudi Arabia last year.

Who was most directly impacted by the cancellations? Some 60k Egyptian students follow the American Diploma system, and a minimum SAT score is an entry requirement for them to attend Egyptian universities. For private universities, this ranges from 730950 for the latest version of the SATs. Public universities require a minimum of 1050.

Egyptian universities are seeing fewer American Diploma applicants as a result: BUE lost 20% of its total target American Diploma applications for the next academic year — 185 students — because of the SAT cancellations, says BUE admissions representative Mohamed Abdalla. Badr University saw a 30% reduction in admissions of American Diploma students this year, says CIRA’s Mohamed El Kalla. Fewer applications were received, and students who applied without the minimum SAT score couldn’t be accepted, he says.

Beyond cancellations, schools have been misusing the SAT: Some second and third-tier schools profit from the lucrative business model around SAT preparation, says Ciotti. “Several schools say they teach the ‘SAT curriculum.’ I’ve even heard schools say they’re accredited by CollegeBoard or the SAT, which isn’t possible. CollegeBoard isn’t an accrediting agency, and the SAT isn’t a curriculum: it’s a test.” There are schools that make a lot of money off such misconceptions, he says. The college prep industry also taps into the demand for students seeking support to enter university, with some 91 firms currently operational in Cairo — most of which are for-profit businesses, we recently reported.

All this is driving more students to take the ACT: There’s been a notable increase in Egyptian students taking the ACT, say multiple sources. “What American Diploma students are applying to university with now is the ACT,” says El Kalla. Universities in Egypt require an external standardized exam for entry, and ultimately the SAT and ACT serve the same purpose, says Allison Fleet, El Alsson American School principal.

The SAT and ACT are comparable in structure and cost: Each takes approximately three hours to complete and consists of questions in different subject areas as well as an optional essay. Sitting the SAT currently costs USD 52 or USD 68, with regional fees of USD 47 for MENA countries. The ACT costs international students USD 150 or USD 166.50. The ACT isn’t better than the SAT, says Bob Schaeffer, interim Executive Director of Fair Test: “It’s a somewhat different test structure, but is also a fast-paced, multiple choice guessing game.”

But being an online exam gives the ACT the edge in security: Because the ACT shifted to computerized testing for students outside the US a year and a half ago, test leaks are much harder, says Schaeffer.

The EST was also quickly set up as an alternative to the SAT for university entry in Egypt: The EST is an electronic test that assesses students’ reading, writing and math, and measures their readiness to enter university, according to its website. It’s delivered by the Education Ministry in collaboration with Pearson, and costs either USD 100 or USD 115. It was quickly designed and launched after the SAT cancellations, and enrollment started in late September.

As a very new test — and one that’s only valid in Egypt — much is still unknown about the EST, say multiple sources. “The EST is still quite a big question mark in our minds because we haven’t heard a lot about it and none of our students have taken it yet,” says Fleet.

But it’s seen in a positive light, offering Egyptian students more choice and control: The EST will be useful for American Diploma students looking specifically for local education at local universities, says El Kalla. Both he and Abdalla see the EST as a useful way for Egypt to avoid complete reliance on an external system it has no control over.

Gov’t temporarily replaced SAT with the ACT and EST this year: Because of the cancellation, the Education Ministry started promoting the use of the ACT as a university qualifier, Minister Tarek Shawki said last month. This is a temporary solution, with the ACT adopted because of its similarity to the SAT, says Mahmoud Hassouna, advisor to the Education Minister. It’s too soon to know if this will continue next year, but if cancellations continue it isn’t off the table, he says.

Meanwhile, Egyptian universities now accept either the ACT or the SAT to fulfill their mandatory standardized test requirement for American Diploma students, say sources. “At the end of the day, if there’s a verifiable standard test result that I can take, I'll take it,” says El Kalla. While some — like AUC — continue to accept only the SAT or ACT, others — like AASTMT — will also accept the EST, representatives tell Enterprise.

…With gov’t backing: The Higher Education Ministry has instructed private universities to continue reserving places for American Diploma students until November to give them the chance to take alternative exams, says Ashraf el Shihy, President of the Egyptian Chinese University.

While the US seems to be moving away from standardized tests as mandatory university admissions criteria. Over two dozen top US universities announced in the spring that the SAT and ACT would be optional for applicants seeking to enroll in 2021, according to the New York Times. Now over 1,250 accredited four-year colleges and universities in the US are test optional. This could push more students from AIS and other top-tier schools to study overseas this year, says AIS Director Kapono Ciotti.

Though the CollegeBoard may be working on a solution to maintain the SAT’s position: Egypt is too big a market for the SATs to be paused for two years, believes Ciotti. He doubts that the SATs will be out of the picture long enough for a viable alternative to take over. “I think the CollegeBoard will expedite a solution for next year, although this hasn’t been promised to me or anyone else,” he says. Still, the SAT and ACT are like Coca-Cola and Pepsi, according to Schaeffer. “Globally, they’re always fighting for market share.”

…which for now is still a strong one: The SAT is much more established in Egypt, having been here for 20 years while the ACT is only in its third, says Schutz’s Massimo Laterza. “I don’t know what the ACT testing capacity is, but it will have to grow quickly to meet the current demand.” Furthermore, the SAT is much more widely recognized internationally, says Ciotti.

How the SAT could continue in Egypt while maintaining its integrity is one question. Whether it will retain its market dominance is another. The College Board has every right to pause the SAT for the sake of academic integrity, say sources, but it remains to be seen if schools and universities in Egypt will want to rely so heavily on SATs in the future, when alternatives like the ACT and EST exist. It also raises the broader question of whether a move away from standardized testing — as we’re witnessing in US university admissions — might be on the cards.

Your top education stories of the week:

  • Higher teacher wages: Teachers at public schools are expecting a EGP 325-475 monthly bump in their salaries after a draft law that will cost the state coffers north of EGP 6.1 bn was approved by cabinet last week.
  • No covid-19 at schools: No new covid-19 cases have been reported among students of national schools and universities, whose academic year began earlier this month.
  • Elsewedy’s vocational schools: Elsewedy Technical Education (STA) has signed an MoU with the Education Ministry to establish 10 vocational schools in the next five years.
  • Scholarships to South Sudan: Some 400 students from South Sudan are getting scholarships to study in Egypt every year under an MoU signed this week.

The Market Yesterday

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EGP / USD CBE market average: Buy 15.66 | Sell 15.76
EGP / USD at CIB: Buy 15.65 | Sell 15.75
EGP / USD at NBE: Buy 15.65 | Sell 15.75

EGX30 (Sunday): 10,600.3 (-3.5%)
Turnover: EGP 871 mn (22% below the 90-day average)
EGX 30 year-to-date: -24.1%

THE MARKET ON SUNDAY: The EGX30 ended Sunday’s session down 3.5%. CIB, the index’s heaviest constituent, ended down 7.2%. EGX30’s top performing constituents were Ibnsina Pharma up 2.2%, Sidi Kerir Petrochemicals up 1.4%, and Eastern Company up 0.6%. Yesterday’s worst performing stocks were CIB down 7.2%, Egyptian Iron & Steel down 5.1% and Dice down 4.5%. The market turnover was EGP 871 mn, and domestic investors were the sole net buyers.

Foreigners: Net Short | EGP -92.0 mn
Regional: Net Short | EGP -17.5 mn
Domestic: Net Long | EGP +109.4 mn

Retail: 70.3% of total trades | 72.1% of buyers | 68.5% of sellers
Institutions: 29.7% of total trades | 27.9% of buyers | 31.5% of sellers

WTI: USD 39.85 (-1.94%)
Brent: USD 41.77 (-1.63%)

Natural Gas: (Nymex, futures prices) USD 2.97 MMBtu (-1.20%, November 2020 contract)
Gold: USD 1,905.20 / troy ounce (+0.03%)

TASI: 8,154.59 (-4.12%) (YTD: -2.80%)
ADX: 4,568.08 (+0.25%) (YTD: -10.00%)
DFM: 2,177.46 (-0.37%) (YTD: -21.25%)
KSE Premier Market: 6,157.79 (-1.17%)
QE: 9,808.34 (-1.51%) (YTD: -5.92%)
MSM: 3,564.11 (+0.19%) (YTD: -10.48%)
BB: 1,435.20 (-0.85%) (YTD: -10.87%)

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23-31 October (Friday-Saturday): El Gouna Film Festival, El Gouna, Egypt.

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

End of October: Last chance to settle building code violations for illegal buildings.

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

November: An Egyptian-Russian ministerial committee will meet to discuss trade and investment in Moscow.

2 November: Former Civil Aviation Minister Ahmed Shafik faces retrial at Cairo Court of Appeals in the so-called Aviation Ministry corruption case.

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

4-6 November (Wednesday-Friday): Polls open to international voters for first round of Parliamentary elections in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

4-7 November (Wednesday-Saturday): Cityscape Egypt Expo, International Exhibition Center, Cairo.

7-8 November (Saturday-Sunday): Polls open for first round of Parliamentary elections in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

7-9 November (Saturday-Monday): Techne Summit 2020, Bibliotheca Alexandrina, Alexandria.

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

13-15 November (Friday-Sunday): A conference on banking in the time of covid by the Union of Arab Banks, Sharm El Sheikh, Egypt.

15 November (Sunday): Egyptian Tax Authority’s online intro seminar on new electronic invoice system for first tranche of companies transitioning to e-filing program.

19-28 November (Thursday-Sunday): Cairo International Film Festival, Cairo Opera House, Egypt.

22-25 November (Sunday-Wednesday): Cairo ICT 2020, Egypt International Exhibition Center, Nasr City, Cairo.

23-24 November (Monday-Tuesday): Reruns for Parliamentary elections in Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira, Matrouh.

30 November (Monday): Final results will be announced for Parliamentary elections held in Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira, Matrouh.

December (date TBC): Egypt Economic Summit, Cairo, Egypt, venue TBD.

December: Fifth round of Egypt-US Trade and Investment Framework Agreement (TIFA) talks.

December: The 110th regular session of the Egyptian-Iraqi Joint Higher Committee will be held under the chairmanship of the prime ministers of the two countries.

1 December (Tuesday): The IMF will conduct a first review of targets set under the USD 5.2 bn standby loan approved in June (proposed date).

5 December (Saturday): A court will hold a postponed hearing to look into an appeal by Syria’s Anataradous against an arbitration ruling in favor of Amer Group and Amer Syria.

7-8 December (Monday-Tuesday): Reruns for Parliamentary elections in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

9-10 December (Wednesday-Thursday): BiznEx, the international business expo in Egypt, venue TBD.

14 December (Monday): Final results will be announced for Parliamentary elections held in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

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.

13-31 January (Wednesday-Sunday): Egypt will host the 2021 Men’s Handball World Championship at the Giza Pyramids.

25 January 2021 (Monday): 25 January revolution anniversary / Police Day.

25-29 January 2021 (Monday-Friday): The World Economic Forum’s “Davos Dialogues” will take place virtually.

26-28 January (Tuesday-Thursday): Future Investment Initiative, Riyadh, Saudi Arabia.

28 January 2021 (Thursday): National holiday in observance of 25 January revolution anniversary / Police Day.

4 February 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

6-18 February (Saturday-Thursday): Mid-year school break.

18 March 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

12 April 2021 (Monday): First day of Ramadan (TBC).

25 April 2021 (Sunday): Sinai Liberation Day.

29 April 2021 (Thursday): National holiday in observance of Sinai Liberation Day.

29 April 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

3 May 2021 (Monday): Sham El Nessim.

6 May 2021 (Thursday): National holiday in observance of Sham El Nessim.

12-15 May 2021 (Wednesday-Saturday): Eid El Fitr (TBC).

18-21 May 2021 (Tuesday-Friday): The World Economic Forum’s annual meeting will be held under the theme of “The Great Reset” in Lucerne-Bürgenstock, Switzerland

31 May-2 June 2021 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, Nasr City, Cairo.

1 June 2021 (Tuesday): The IMF will conduct a second review of targets set under the USD 5.2 bn standby loan approved in June 2020 (proposed date).

10 June 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

24 June 2021 (Thursday): End of the 2020-2021 academic year.

26-29 June 2021 (Saturday-Tuesday): The Big 5 Construct Egypt, Cairo International Convention Center

22 July 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

30 July-3 August 2021 (Thursday-Monday): Eid Al Adha, national holiday (TBC).

1 October 2021-31 March 2022 (Friday-Thursday): Postponed Expo 2020 Dubai.

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