Poll: CBE to leave rates on hold.
Plus: Egypt gets ready for the Biden administration + second wave of covid

Good morning, friends. The (not so) small matter of that election across the pond is the only thing anybody is talking about this morning.

Closer to home: Plenty of folks will be thinking through what Joe Biden’s win means for Egypt and the wider region, and it’s interest rate week here in Cairo and the Health Minister will hold a news conference today as Egypt braces for a second wave of covid. We have chapter and verse on all of this — and more — below.

A decent human being will again occupy the White House in January after Democrat and former vice president Joe Biden defeated Donald Trump to become the 46th president of the United States. The Associated Press and major broadcast networks — ultimately including Fox — declared Biden the winner yesterday evening after calling Pennsylvania for Biden. It took four days of vote-counting for Biden and running mate Kamala Harris to cross the 270 electoral college vote mark.

A new day for America: “With the campaign over, it’s time to put the anger and the harsh rhetoric behind us and come together as a nation. It’s time for America to unite. And to heal,” Biden said in a statement. “Democracy beats deep in the heart of America.” You can watch Biden’s victory speech in full here (watch, runtime: 15:54).

Harris just racked up a bunch of firsts, becoming the first woman in America to be elected vice president and the first person of color to hold the office.

And keep in mind: Biden is the oldest person ever elected to the White House. He’ll be 78 when he takes the oath of office on 20 January 2021.

What’s on Biden’s to-do list as he prepares to take office? Axios’ inimitable Mike Allen has the rundown.

What does the coming Biden presidency mean for Egypt? Expect plenty of chatter about that in the months ahead, particularly as the conventional wisdom out of Washington appears to be that the president-elect will look to “restore and expand Obama-era policies.” That time was not a high-water mark in relations between Cairo and Washington as many see Hillary Clinton and others in the administration as having turned their backs on Egypt — and as having welcomed (at the very least) our Islamist interregnum. The bottom line: Likely continuity in business ties and economic policy, but more pressure on the human rights file.

President Abdel Fattah El Sisi congratulated Biden on his victory, saying he looks forward to working on stronger bilateral relations between the two countries, Ittihadiya said in a statement.

Egypt’s talk show hosts were all about the election last night — we have the rundown below.

There’s also a risk of a wider US pullback from the Middle East, some media outlets warn this morning. Start with this package from the BBC, then head over to the FT’s “What does a Biden presidency mean for the world?” Veteran business editor Geoff Colvin takes a look at What a Biden administration means for business in Fortune, suggesting it’s likely to mean more regulation, more taxes and more infrastructure spending.

Investors are welcoming the Biden presidency, Reuters reports, noting that markets saw their best week in seven months last week as Joe Biden closed in on the White House and employment figures beat expectations. Bloomberg agrees.

But Agent Orange still sits in the White House until 20 January, and there’s plenty of damage he can do, from offering clemency to pals (and maybe himself?) to leaving a legacy of nasty appointments for his successor to deal with and plenty of “midnight rulemaking.” Axios has the rundown.

How’s this going down in MAGA Land? Trump has not conceded defeat: In an all-caps Twitter meltdown last night, the soon-to-be former president once again claimed that the Democrats had fraudulently added mns of mail-in ballots to the vote tally and insisted that he had won the election. Earlier in the day Trump issued a statement claiming that Biden is “rushing to falsely pose as the winner,” accused the media of covering up electoral fraud, and vowed to challenge the result in court beginning Monday.

The chances of Trump being successful in any of his lawsuits are slim to nil, the New York Times reports. Nothing says credibility like holding a major press conference to announce your federal lawsuit outside a landscaping store next to an adult book shop.

Want more color? This is the mood inside the White House — and here’s how Politico thinks the Trump campaign imploded.

Control of the Senate hangs on two runoff races in Georgia in January. It’s shaping up to be ground zero for whether Congress will be divided again next year, as two Senate seats in Georgia head to runoff elections in January, the Associated Press reports. The race is finely balanced with each party winning 48 seats in the upper chamber in last week’s elections, leaving both parties three short of a majority. With seats in Alaska and North Carolina still too close to call, the Georgia contests will determine whether the incoming Biden administration will have a cooperative Senate or whether the country faces more years of gridlock.

Meanwhile, here at home: It’s interest rate week, and the consensus among analysts in our traditional poll is that the Central Bank of Egypt will leave rates on hold. We have more in this morning’s Speed Round, below.

Inflation data for October will be released on Tuesday ahead of the meeting.

With everything going on across the Atlantic, it’s easy to forget that we’ve got an election of our own underway. Today is the final day that voters in Cairo, Dakahlia, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai can cast their ballots in the parliamentary election. Polls opened for the second stage of the contest yesterday.

French foreign minister Jean-Yves Le Drian is in town today to meet with Sameh Shoukry, and the two will hold a press conference following the talks, Al Shorouk reports. We’re none the wiser on the specific reason for the diplomatic visit.

Are we getting closer to having an altogether confusing system for shop and restaurant operating hours? The government is putting the finishing touches on proposals to regulate the closing times for restaurants, shops, and cafes across the country, cabinet spokesperson Nader Saad told Al Mal. We’re hoping the plan is a little less convoluted than the outline suggested last week, which would see businesses close at different times depending on the time of year, where in the country they’re based, and what services they provide.

PSA #1- Expect more rain in the capital this morning: The torrential downpours seen on the North Coast yesterday will move south early today, reaching Cairo and parts of Upper Egypt, according to the Egyptian Meteorological Authority. Look for a daytime high of 24°C today and an overnight low of 16°C.

PSA #2- Are you a manufacturer? Have you done anything innovative? There’s an award for you. The Trade Ministry and the Egyptian-German Promotion for Small and Medium Enterprises promotion project have opened an awards program that recognizes manufacturers who’ve excelled at supply chain, process, production and marketing. It’s called the Ebtaker Industrial Innovation Award 2020. You can learn more about it here (pdf) or here.

PSA #3- There’s an Apple event this coming Tuesday streaming at 8pm CLT. Look for the announcement of Macs running on Apple silicon.

The Health Ministry reported 208 new covid-19 infections yesterday, down from 224 the day before. Egypt has now disclosed a total of 108,962 confirmed cases of covid-19. The ministry also reported 12 new deaths, bringing the country’s total death toll to 6,355. We now have a total of 100,239 confirmed cases that have fully recovered.

Health Minister Hala Zayed will hold a press conference today on the state’s efforts to combat a second wave of covid-19, providing updates on case numbers and outlining treatment protocols, the local press reports. The ministry on Friday reported 224 fresh cases of the virus, the highest figure since 30 August.

The US has set a new covid-19 record for the third day in a row, reporting 125k cases yesterday, the Financial Times reports. Several states are reinstating stricter safety measures since a resurgence of the virus in October, and New York (which reported over 3k new cases on Friday for the first time in six months) has deployed more National Guard troops to airports ahead of the holidays.

Some non-election international news that should be on your radar this morning:

It’s no longer illegal to own booze or shack up in the UAE in major legal reforms to the country’s personal status law and criminal code, the National reports. Other changes will clamp down on “honor killings” and make divorce and inheritance laws more flexible.

Ikhwan vs. El Face: Facebook has shut down a network of “inauthentic” Ikhwan-linked accounts, some of which are in Egypt, as part of its crackdown on disinformation and “coordinated inauthentic behavior,” it said in a report. The platform also shut down nearly 8k pages and six other networks spanning Iran, Afghanistan, Turkey, Morocco, Georgia and Ukraine.

Turkey has sacked the head of the country’s central bank in response to high inflation and a plunging currency which hit a record low of 8.58 against the USD on Friday, the Associated Press reports. The currency has lost almost a third of its value this year, and annual inflation is now at 11.89%.

Short-dated bonds from Egypt and Brazil were among last week’s best performing thanks to their minimal connection to the volatility of the elections. Investors poured into higher-risk assets following election uncertainty that pushed the USD to its weakest in over two years, while giving a boost to emerging markets and spelling out benefits for US exporters, Bloomberg reports.

The US unemployment rate fell by one percentage point to 6.9% in October as employers added 684k jobs, according to a US labor department report (pdf). The figures handsomely beat estimates that saw the economy adding 530k jobs, and mark the sixth straight monthly gain that has seen the US claw back more than half of the 22 mn jobs lost in March and April.

Ant Group’s IPO could be delayed by at least six months and its valuation markedly reduced after the Chinese government suspended the listing — which was meant to debut as soon as this Thursday — to protect the stability of capital markets, according to the Financial Times. The IPO, which was on track to raise a record-breaking USD 37 bn IPO, was scrapped by regulators last week after Beijing announced new regulations on Monday that would introduce loan caps and require online platforms to fund at least 30% of their loans.

It was wall-to-wall election coverage on the airwaves last night, with the nation’s talking heads clearly more interested in what was going on across the Atlantic than the voting taking place at home.

Biden beats Trump: Kelma Akhira’s Lamees El Hadidi spoke with Omar Mehanna, the head of the Egyptian-American Business Council, who said that Biden would focus on reunifying American society — and suggested that Biden would likely break with the Obama administration on Middle East policy (watch, runtime: 5:12). El Hadidi also interviewed Al Masry Al Youm Chairman Abd El Moneim Saeed, who said that Biden's priority would be containing the covid-19 crisis and healing divisions, adding that the former vice-president would rebuild bridges with the country’s NATO and European Union allies (watch, runtime: 11:23).

More, for your viewing pleasure: Masaa DMC’s Eman El Hosary (watch, runtime: 24:27), Al Hayah Al Youm’s Lobna Assal (watch, runtime: 1:24), and El Hekaya’s Amr Adib (watch, runtime: 2:56) also covered the results.

Ahmed Moussa went full MAGA: Ala Mas’ouleety’s Ahmed Moussa phoned Michael Morgan, a researcher at the fringe “think tank” London Center for Policy Research, who unsurprisingly took his cue directly from Trump’s Twitter feed, claiming that the Democratic Party committed electoral fraud by faking mail-in ballots. Insisting that the election is not yet over, he claimed that Biden’s victory still remains a projection while the Trump Campaign’s lawsuits remain unadjudicated (watch, runtime: 17:54).

How will the markets react? El Hadidi phoned Nabil Zaki, professor of international economics and finance at New York University, who predicted that the markets will continue last week’s rally next week but will experience volatility as investors turn their attention to Biden’s economic and tax program (watch, runtime: 8:10).

Second round of House elections kicks off: Assal covered the first day of the second round of the parliamentary elections, focusing on the participation of youth and women (watch, runtime: 21:05). El Hosary also covered the second phase of the elections (watch, runtime: 6:49).

Warning: We’re about to have a bit of weather… Assal phoned the director of the Egyptian Meteorological Authority’s forecast center, Mahmoud Shahin, who said that there are expectations of torrential rains along coastal areas and that a decision has been taken to suspend schools and universities (watch, runtime: 4:17). Alexandria Governor Mohammad El Sharif told Amr Adib that authorities are working to drain the water (watch, runtime: 3:39). Adib also phoned Iman Shaker, sensor center deputy at the Meteorological Authority, who said that rain would continue in Cairo and Alexandria today before beginning to ease on Monday (watch, runtime: 1:39).

ENTERPRISE POLL- Rates seen left on hold amid covid, US election uncertainty: The Central Bank of Egypt (CBE) will likely keep interest rates on hold when its Monetary Policy Committee (MPC) meets this Thursday, according to an Enterprise poll. Six of eight economists and analysts surveyed expect the MPC to leave rates unchanged after enacting a small but unexpected 50 bps cut at its last meeting in September.

Where rates stand currently: The CBE’s overnight deposit rate is now at 8.75% and the lending rate is 9.75%. The main operation and discount rates are now at 9.25%.

There’s room for a cut, just not now: The MPC has “ample room” to cut rates on Thursday, but likely won’t pull the trigger until its final meeting this year on 24 December, says senior economist at Prime Holding Mona Bedeir.

But Pharos’ Radwa El Swaify forecasts another 50 bps rate cut, telling Enterprise that the recent rebound in portfolio investment is supportive of a more accommodative monetary policy. Inflows to EGP-denominated bonds more than doubled between May and October as foreign investors adopted risk-on positions and piled into high-yielding securities across emerging markets. Arqaam Capital’s Noaman Khalid also forecasts a 50-bps cut, telling us that there is little risk of outflows from EGP securities and that the central bank will want to give the economy another shot of monetary stimulus to protect against the effects of a potential second wave.

Policymakers looking to maintain stability as a potential second wave of covid looms: Monetary policy decisions through the end of the year will be geared towards supporting economic growth, particularly in the industries most affected by the economic fallout from the pandemic, Suez Canal Bank board member Mohamed Abdel Aal tells us.

The US being in a transition period between administrations supports a “wait and see” approach, Bedeir says. EFG Hermes’ Mohamed Abu Basha is of the same mind, pointing to the political risk from the elections and the uncertainty of the impact of a second wave as the key factors supporting a hold.

Real interest rates are still high enough for a rate cut but the central bank is not going to want to give portfolio investors a reason to dump EGP assets, especially now when hot money is one of Egypt’s most important sources of USD inflows, head of research at Sigma Capital Abu Bakr Imam says. The only way the central bank will cut rates is if it was pressured into it by the IMF, he says.

With inflation now below the CBE’s targeted range, the next rate cut is unlikely to come before 2021, says banking expert Hany Aboul Fotouh. The central bank is likely to begin gradually reducing rates from the beginning of the year starting with a 50-100 bps cut to support the economy due to fears that a second wave of the virus could extend economic uncertainty beyond 1Q2021, Aboul Fotouh says.

El Swaify thinks it could come sooner though should a second wave of covid-19 hit, telling Enterprise that the central bank would likely push ahead with another rate cut in December’s meeting.

Reminder: Economists had suggested last month that persistently low inflation figures could trigger consultations with the IMF this year. Under the USD 5.2 bn stand-by facility Egypt had agreed to with the fund, authorities are to consult with IMF technical experts should the rate fall below 6% by the end of September. Annual urban inflation accelerated to 3.7% in September, while annual core inflation rose to 3.3%.

S&P Global Ratings has affirmed Egypt’s B sovereign credit rating with a stable outlook, despite elevated external risks from covid-19, according to a research note over the weekend, leaving its ratings largely unchanged since April. S&P’s outlook rests on the expectation that “the weakening of external and government debt metrics will be temporary, and gradually improve from 2022, supported by higher GDP and current account receipts (CARs).”

Stable foreign exchange reserves + access to debt markets are enough to keep us relaxed for another year: Egypt’s store of foreign currency and access to debt markets are expected to cover financing needs and upcoming maturities for the coming 12 months, the agency said. Egypt’s foreign reserves have climbed steadily since June after plunging by almost USD 10 bn between March and May thanks to a global covid risk-off that saw investors exit emerging markets, rising to USD 39.22 bn in October from USD 36 bn at the end of May. Sovereign debt issuances, including the USD 5 bn eurobond sale and USD 750 mn green bond offering, as well as external loans such as the USD 8 bn in IMF support, have helped to buoy reserves.

But lower tourism, remittances will bite in 2021 before recovering “significantly” by 2022, S&P says: Government debt metrics are expected to weaken through 2021 as external debt rises and key sources of foreign exchange such as tourism and remittances shrink as a result of covid-19, leading to an expected account deficit of 3.5% in FY2020-2021. With improved global economic conditions anticipated starting 2021, these sources of income are expected to recover significantly by 2022 as receipts rebound. The agency projects external debt to rise to 125% of CARs in 2021, followed by a gradual decline reaching 100% in 2023, supported by higher oil prices and the promotion of non-oil exports.

Egypt enjoys strong medium-term growth prospects: Despite elevated external risks, central bank buffers remain strong even after reserves dipped by USD 7-8 bn earlier this year as the banking sector moved to absorb the impact of capital outflows. Monetary easing following lower inflation will also reduce government financing costs and support private-sector credit growth.

Are government growth projections ambitious? S&P said it expects a government primary surplus of 1% in FY2022-2023 — lower than the government’s projected 2% — which should nonetheless be enough to begin reducing the debt-to-GDP ratio.

The downside: The agency could downgrade Egypt’s rating if the economic fallout from covid-19 is more prolonged than expected and we start to run low on foreign reserves, hampering the issuing of debt and interest payments. A continued high debt-to-GDP ratio caused by the weakening of the EGP or higher borrowing costs could also lead to a lower rating.

The upside: The agency could upgrade Egypt’s rating if the economy’s medium-term growth outperforms its expectations or if economic reforms successfully reduce Egypt’s dependence on external financing.

EXCLUSIVE- Cairo Angels launches USD 3 mn regional fund: Cairo Angels has launched a USD 3 mn fund, named the Cairo Syndicate Fund, to invest in tech and tech-enabled startups in Egypt and the wider MENA region, Chairman Aly El Shalakany told Enterprise. The nature of the region’s startup activity, which is centered in specific hubs, means the fund will be focused on Egypt, Saudi Arabia, and the UAE. The fund plans to make its first investment in January 2021 and fully deploy within 24 months of its first investment — meaning it should reach this milestone by the end of 2022, according to El Shalakany.

How the fund is looking to set itself apart: The fund will have larger ticket sizes than the market average, but is also looking to target more pre-series A businesses, where there is a gap in funding, El Shalakany says. The investments will also go further down the value chain as the fund doesn’t want to just look at a minimum viable product. “The governance structure is designed to leverage the experience of Cairo Angels’ board and executive team members, while bringing on board new faces from the region and globally,” El Shalakany tells us. Cairo Angels is hosting a Q&A session on 16 November on the fund. Tap / click here to register.

DEBT WATCH- Sarwa Capital will take a EGP 2.5 bn sukuk issuance to market over the coming two weeks on behalf of its subsidiary Contact, the local press reports. The single-tranche issuance is awaiting final approval by the Financial Regulatory Authority and is part of Sarwa Capital’s strategy to diversify its sources of funding. The sukuk will carry a seven-year tenor. MERIS ratings is providing the credit rating for the issuance, while ALC Alieldean Weshahi & Partners will act as legal counsel and KPMG Hazem Hassan will be the financial auditor. Contact was the first company to be granted a consumer financing license earlier this year along with Raya Holding’s Aman.

DEBT WATCH- The fourth tranche of Al Taamir’s EGP 10 bn securitized bond issuance has been listed on the EGX, according to an EGX disclosure (pdf). Al Taamir is a special purpose vehicle set up by the New Urban Communities Authority (NUCA), and proceeds from the issuance will be put towards financing the development of new urban areas including the new administrative capital and New El Alamein.

Background: The issuance reportedly includes five tranches backed by a EGP 6 bn receivables portfolio held by NUCA, making the issuance the largest ever securitized offering in Egypt. The first tranche was issued in 2019 and valued at EGP 2.6bn, followed by the second tranche valued at EGP 6.2bn, and the third valued at EGP 1.2bn. The bonds carry terms of three, five, and seven years respectively.

DISPUTE WATCH- Egypt found in breach of investment treaty in cement arbitration case but dodges damages: The International Center for the Settlement of Investment Disputes (ICSID) has dismissed claims brought against the Egyptian government by Spanish cement group Cementos La Union despite finding Egypt in breach of a bilateral investment treaty, according to the Global Arbitration Review (GAR). Cementos, a majority shareholder in Arabian Cement Company, was seeking damages from the government for what they said was a failure to provide enough gas and electricity supplies for a cement plant it was due to open in Egypt. Cementos also claimed that the government required Arabian Cement to pay “excessive licensing and electricity fees.” The dispute over the 2008 licensing fees imposed on the plant also include court cases that remain pending before Egyptian courts.

Background: Arabian Cement was one of a number of companies to warn recently that the stresses facing the sector are intensifying as falling demand caused by the covid-19 pandemic compounds an acute oversupply crisis. The supply glut, which began in 2016 and was exacerbated in 2018 with the opening of a large state-owned factory, has caused widespread losses in the sector, resulting in several companies temporarily or permanently their operations. We took a deep dive into the problems facing the sector earlier this year.

M&A WATCH- Al Ahly Capital has completed its acquisition of 94.5% of El Nada Hospital, according to Youm7. We had picked up reports last week that suggested Al Ahly had taken over 100% of the hospital. Al Ahly — the investment arm of the National Bank of Egypt — purchased the company from a group of doctors and individual investors in an OTC transaction on the EGX. Founding partner and chairman of the hospital, Omar Abdel Aziz, will retain his position at chairman of the board.

Advisors: Our friends at investment bank Pharos’ brokerage arm executed the share transfer on the EGX, while ALC Alieldean, Weshahi & Partners acted as legal counsel to Al Ahly Capital.

It’s another slow morning in the foreign press: The Financial Times suggests that Ethiopia’s recent bout of ethno-nationalist conflict could have a regional impact, particularly as Addis Ababa is embroiled in dispute with Cairo over the Grand Ethiopian Renaissance Dam, while Reuters reports that Egypt’s Bedouins are getting reacquainted with working in agriculture as they seek alternative sources of income to the covid-devestated tourism.

Topping diplomatic coverage this morning: Egypt has condemned the razing of the West Bank village of Homsa Al Baqia by Israeli forces. More than 70 homes were demolished in the Jordan Valley on Tuesday, displacing dozens of families, prompting the Foreign Ministry to denounce the move as a clear violation of international humanitarian law.

The National Bank of Egypt (NBE) will provide the Cairo Airport Company almost half of the EGP 2.2 bn loan needed to develop Cairo International Airport’s Terminal 1, according to Al Mal, citing sources close to the negotiations. The bank will loan the company EGP 1 bn for 7-10 years with a two-year grace period.

In other NBE news, the bank was awarded ISO 27001:2013 certification for information security management systems by the British Standards Institute, covering all of the bank’s digital branches in the country, according to an emailed statement (pdf).

Six international companies have submitted bids in the tender to consult on the construction of a EGP 1.4 bn, 50 MW solar power station in Kom Ombo, according to Al Mal, citing unnamed Electricity Ministry sources. Among the six are Belgium’s Tractebel, Malaysia’s Global Oriental, and Germany’s ILF Consulting Engineers, the sources added without specifying the remaining three. The project is financed by the Kuwait Fund for Arab Economic Development and implementation of the station is expected to be completed by 2023.

Air Serbia is planning to operate charter flights to Hurghada and Sharm El Sheikh at the end of December and beginning of January, including two special flights to Hurghada for the New Year holidays, according to a statement from the flag carrier. Air Serbia resumed flights to Egypt in August and has operated 108 flights to the country’s tourist cities during the summer season.

The Transport Ministry will establish a bus rapid transit (BRT) system on the Cairo ring road to ease congestion, Minister Kamel El Wazir said on Saturday, without providing additional details.

A court sentenced some 59 people to 15 years in prison on Thursday on charges of organizing and participating in the 2013 Rabaa sit-in, while seven defendants were sentenced to five years in prison and 29 others were acquitted, according to Reuters.

Could Siwa become Egypt’s premier ecotourism destination? The European Union’s almost-complete restoration of the Shali Fortress brought ambassadors from over 20 countries to the Siwa Oasis last week to explore the possibility of transforming the outpost into a hub for sustainable living and travel, according to an EU statement. The EU-funded project also saw the establishment of the Earth Architecture Museum, which showcases the architectural and cultural heritage of the Siwa Oasis.