AM — More on our re-entry to JPMorgan’s EM bond index

Welcome to February, wonderful people. It’s a straight shot from here to the end of 1Q and just 60 days until the start of Ramadan, which begins on or about 2 April (that’s a Saturday). We hope all of you FMCG and advertising folks have your plans locked in and that silly season is being good to you.

HAPPENING NOW- The bears are still salivating — and wondering what’s keeping stocks aloft.

US markets closed out a horrible month with a huge rally: The S&P 500 closed up nearly 2% on Monday while the Nasdaq surged 6.6% over the past two sessions, marking both index’s biggest two-day rallies since 2020, Bloomberg reports.

But that doesn’t change the fact that it was a terrible January for stocks, with the S&P falling 5.3% over the month, while the tech-heavy Nasdaq notched its worst monthly loss in over three years, down 8.5%. Market-watchers blamed the rocky January on the anticipated Fed tightening.

Oil was another story, posting its biggest January gain in at least three decades as supply continues to outstrip demand. Brent crude, the benchmark outside the US, settled at above USD 91 / barrel on Monday, marking a 17% gain for the month. Some analysts see oil at USD 100 / barrel this year — not great for inflation everywhere, and not wonderful for Egypt’s budget projections, either, given we’re a net importer.

OPEC+ will meet tomorrow — but isn’t likely to step in on spiraling prices. The cartel is expected to agree to another gradual oil production increase of 400k bbl/d — continuing a strategy that has so far failed to meet the recovery in demand as several member countries struggle to up their output.

THE BIG STORY ABROAD-

It’s still Ukraine: Russia and the US waged a war of words over Russian military buildup at its border with Ukraine at the UN Security Council’s meeting yesterday to discuss the issue. There was plenty of jawing and no action, but the Associated Press reports that Russia sent the US a written response to a proposal from Washington on how to de-escalate the crisis in the hours following.

Whether Russia is in fact willing to turn down the heat remains to be seen — though Foreign Minister Sergei Lavrov and US Secretary of State Antony Blinken are booked in to chat about it all over the phone today, Bloomberg reports. UK Prime Minister Boris Johnson, meanwhile, is getting on a plane to Ukraine. It can hardly be less hospitable than the environment he’s currently facing at home. And both the US and the UK are continuing to up their threats of very terrible sanctions for Russia — and newly, its elites — if it does invade its neighbor.

RELEVANT TO US- The threat of war is already driving up global wheat prices, the Wall Street Journal reports. The world’s largest wheat importer, Egypt is also the largest consumer of Ukrainian wheat, last year purchasing the equivalent of around 14% of its total wheat consumption from the eastern European country.

ALSO- The rest of the world is rushing to catch up to Egypt as they wonder when it’s okay to cancel covid. Go read the Wall Street Journal’s “Omicron pushes health authorities toward learning to live with covid-19” and marvel, once again, at how lightly Egypt has gotten off when it comes to pandemic-era lockdowns, restrictions and culture wars.

SIGN OF THE TIMES- The New York Times has bought Wordle. If you know, you know.

MEANWHILE- RIP, Dr. Johnny Fever. Howard Hesseman, who brought the radio DJ to life on WKRP in Cincinnati and was later beloved by a certain type of neurotic millennial in Head of the Class. He died at age 81. The New York Times has a nice obit.

CIRCLE YOUR CALENDAR-

The Central Bank of Egypt will hold its first policy meeting of 2022 on Thursday. All analysts surveyed in our regular interest rate poll expect the CBE to keep rates on hold, as they anticipate our rates continuing to attract portfolio inflows even amid Fed tightening and global inflationary pressures.

January PMI figures for Egypt, Saudi Arabia, and the UAE are also due out on Thursday.

From our friends at the US embassy: Women can now apply to join Fortune Global Women's Mentoring Program which will take place from 8-28 May 2022. The program aims to bring emerging women leaders from around the world to the US to meet and learn from the Fortune Most Powerful Women community, which includes executive women mentors from companies such as Accenture, Johnson & Johnson, and Aetna. The deadline to apply for the program is 8 February. You can begin your application by signing up here.

ALSO- The embassy is now accepting applications for Cultural Property Agreement Implementation projects that would help Egypt protect cultural property from looting, theft, and illicit trafficking. The guidelines state that concept notes should be sent in by this Thursday, 3 February, while shortlisted applicants will need to submit full applications by 4 May. Each project will receive USD 50-100k, with around USD 500k earmarked for the entire program.

The IMF and World Bank’s annual fall meeting this October will take place in Washington DC, with plans for Morocco to host delayed until October 2023 due to “continuing uncertainty over the covid-19 pandemic,” the World Bank announced in a statement. This marks the second year the Morocco meeting, which was initially set for 2021, has been pushed due to the pandemic. The lenders traditionally hold two consecutive annual meetings in DC, with the third meeting held in another member country.

The Cairo International Book Fair continues today at the Egypt International Exhibition Center. The event runs through to 7 February.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: The EBRD has provided Egypt EUR 1 bn in total funding in 2021 — with 44% of that going towards green economy projects. We sat down with Heike Harmgart, the EBRD’s managing director for the Southern and Eastern Mediterranean (SEMED) region, where we discussed details of their 2021 funding, their priorities for 2022, and what the bank hopes to see coming out of COP27.

Egypt rejoined JPMorgan’s emerging-market bond index following a decade of absence yesterday in a move that could bring new passive flows into the local debt market. Fourteen EGP bonds worth around USD 26 bn have been added to the JPMorgan GBI-EM Global Diversified Index, giving Egypt a weighting of 1.85%, the Finance Ministry announced. The bonds have an average yield of 14.9% and a maturity of 2.9 years, it said.

That’s not all: The bonds have also been added to the GBI-EM Broad Diversified Index with a 1.47% weighting and the GBI-AGG Diversified Index with a weighting of 0.24%. Egypt has also been added to the investment bank’s green bond index following its USD 750 mn issuance in 2020.

This isn’t the first time Egypt has been a part of the index, having been kicked off in the wake of the economic turmoil that followed the 25 January Revolution in 2011.

“This inclusion confirms the confidence of the foreign [investor] community of Egypt’s improved fundamentals … Egypt is being put on the international radar as an investment destination,” said Finance Minister Mohamed Maait.

A very welcome buffer: The inclusion of Egyptian debt in the index will help to stabilize foreign inflows, Mohamed Abu Basha, EFG Hermes’ chief economist, told us. “This type of hot money is less volatile than the investments of active fund managers, and may limit the risk of the latter’s exit from emerging markets in the event of a US interest rate hike,” he said.

“Foreign flows into Egypt currently amount to about USD 30 bn, while the current relative weight of Egypt on the index is USD 4 bn,” he added.

A key moment: “The inclusion comes at a very important time because it coincides with the exit of some investors from global emerging markets,” said Radwa El Swaify, head of research at Al Ahly Pharos, who told us that in normal circumstances it could have brought in USD 3-5 bn in inflows.

Some aren’t expecting a flood of new inflows: “We think that the news is largely priced-in and don’t see [inclusion] as a major trigger,” Naeem Brokerage’s Allen Sandeep told us.

But that might not matter: “Our real yields are way too attractive, even if the Fed raises rates by 1.5 [percentage points] this year,” Sandeep says. Egypt currently offers the highest inflation-adjusted interest rate in the world, helping it to maintain attractiveness as global rates tick up in the coming months. Investors expect at least four quarter-point rate hikes from the Fed this year.

Three years in the making: The Finance Ministry has been talking about rejoining the index for the past three years. The US investment bank placed Egypt on its watchlist last April after the country’s debt profile met the maturity requirements for inclusion.

The next piece of the puzzle: Euroclear. The government now expects to finalize an agreement with the Belgian clearinghouse to clear local debt in Europe during the second half of 2022. Making Egyptian debt clearable in Europe will make it more accessible to foreign investors, translating into greater portfolio inflows.

Egypt will sell USD 5 bn in foreign currency bonds in FY2022-2023, Vice Minister of Finance Ahmed Kouchouk told Bloomberg Asharq yesterday. Egypt last took to the international debt markets in September when it sold USD 3 bn in long-term eurobonds.

Issuance of samurai bonds + sukuk could be coming before the end of the fiscal year: Maait said last week that the ministry wants to sell around USD 500 mn in JPY-denominated bonds during the first six months of 2022. We’re also expecting the country’s maiden sovereign sukuk sale to take place before the end of the fiscal year in June.

Plus another green bond sale: The minister said this week that it is considering selling another USD 750 mn of green bonds, though the timing of the issuance has not yet been set.

Gov’t ups growth forecast: The Planning Ministry has upgraded its FY2021-2022 growth forecast for the Egyptian economy to 6% or more, from 5.6%, minister Hala El Said told Bloomberg Asharq yesterday.

This would be almost double last year’s growth: The economy grew 3.3% during FY 2020-2021, according to official figures.

The forecast is more optimistic than other estimates: The IMF last week revised upwards its 2021-2022 forecast to 5.6%, while the European Bank for Reconstruction and Development and the World Bank — as well as a Reuters poll of economists — predicted during the last quarter that the economy would grow 4.9-5.1% this year.

We still haven’t seen any official GDP data since the turn of the fiscal year in July, though El Said yesterday signaled that growth likely surpassed the 6-7% forecast for 2Q2021 in an interview with CNBC Arabia (watch, runtime: 5:15). Preliminary figures released last year suggest the economy grew by 9.8% in 1Q — its quickest pace in two decades — thanks to a favorable base effect.

Unemployment levels for 4Q2021 are not expected to rise above the 7.5% posted in 3Q2021, considering the number of jobs currently available, El Said also noted.

New growth figures to land in February: “We would like to assure everyone that the growth figures for the current quarter are better than expectations and we will announce the figures in mid-February,” El Said told the news website, without elaborating.

Ezdehar reaches USD 168 mn first close of EMF II fund: Private equity firm Ezdehar Management has reached the first close of its Mid-Cap Fund II (EMF II), overshooting its USD 100-120 mn target to book commitments totalling USD 168 mn, the firm announced in a statement (pdf) yesterday evening. The close means that Ezdehar now has more than USD 250 mn in assets under management between its two funds, making it one of the largest Egypt-focused fund managers.

About the fund: Ezdehar plans to deploy the capital by purchasing majority and minority stakes in 6-8 small to mid-cap companies with an individual ticket size of USD 5-30 mn. It will target companies in growth sectors such as consumer and retail, business services, education, healthcare, and manufacturing. Pharma and F&B firms are also on the list, Ezdehar founder and Managing Director Emad Barsoum previously told us.

The IFC is the latest LP to announce a commitment, saying that it had invested USD 20 mn in the fund.

It joins a number of other development finance institutions: The European Bank for Reconstruction and Development has contributed USD 25 mn, the UK’s CDC is in with USD 25 mn, the European Investment Bank has provided USD 15 mn, and Dutch development bank FMO has provided USD 20 mn. The Belgian Investment Company for Developing Countries (BIO) and the Egyptian-American Enterprise Fund have also made undisclosed commitments to the fund, Ezdehar said.

What they said: “With this fund, Ezdehar was able to significantly expand its investor base to include a unique set of reputable regional and global institutions,” said Emad Barsoum, Ezdehar's founder and managing director.

What’s next: Ezdehar expects to reach a final close of USD 180 mn by the end of 2022, it said in the statement.

Qalaa Holdings’ Taqa Arabia is looking to make its EGX debut next year, Al Mal quoted CEO Pakinam Kafafi as saying. She didn’t provide details about the potential offering, saying only that it will depend on market conditions.

Taqa Arabia was initially planning to IPO back in 2020, before its plans were derailed by covid. Qalaa had reportedly planned to list 30-40% of its portfolio company in the first half of 2020. The company had reached a valuation and wrapped up all procedures for the sale prior to the pandemic, but now has to conduct a new fair value study and revisit the size of the stake to list on the EGX.

Advisors: EFG Hermes and HSBC — which were originally tapped by Qalaa to manage the IPO back in 2020 — could still advise on the offering, according to Kafafi.

Taqa Arabia wasn’t the only Qalaa subsidiary with an IPO on its horizon: Qalaa had planned to list the parent company of its Egyptian Refining Company (ERC) in 4Q2020, with bulge-bracket fixtures JPMorgan, Citigroup and Goldman Sachs vying for the mandate alongside EFG Hermes, HSBC and Renaissance Capital. That was before the pandemic upended the global economy and the collapse of oil prices into negative territory. ERC’s earning ability is tightly linked to global oil prices.

Social commerce startup Brimore has raised USD 25 mn in series A funding, the company announced in a statement (pdf) yesterday. The round was led by the International Finance Corporation and Silicon Valley VC Endure Capital, and featured participation from Fawry, Flourish, and Endeavor Catalyst Fund, as well as existing investors such as Algebra Ventures, Disruptech, Khawarizmi Ventures and Vision Ventures.

About the company: Launched in 2019, Brimore is a social distribution network that allows SME manufacturers to sell fast moving consumer goods via a network of freelance distributors, who sell to customers in their local communities. The company has built a network of almost 75k resellers in 27 cities across Egypt in the three years since its founding, and lists some 8k products.

Expansion plans: Brimore says it will use the funding to quadruple its network of sellers and suppliers and double the size of its team. It is also aiming to enter two new African markets by 2023, the statement said, without providing specifics. “In the past three years, we’ve focused on building a smart and reliable infrastructure that enables the masses to do their commerce businesses,” said Mohamed Abdelaziz, CEO and co-founder of Brimore. “We’ll be using the fresh fund to scale our infrastructure, enabling many more people to continue their journey of 50x growth by 2023.”

The investment comes less than two years after the company raised USD 3.5 mn in a pre-series A round led by Algebra Ventures. Algebra has backed the startup from the beginning, co-leading its initial USD 800k seed round in 2019. “We came in on the first round of investment and invested in every subsequent round, to ensure that the growth momentum stays on track,” said Algebra managing partner Tarek Assaad. “As Brimore experienced explosive growth over the past three years, Algebra has worked closely with the company to support in strategic and operational areas, especially recruitment.”

President Abdel Fattah El Sisi yesterday ratified amendments to the VAT and the Stamp Tax laws alongside several other pieces of legislation, per an announcement in the official gazette (pdf).

How are VAT and stamp tax changing? The new legislation changes up the tax treatment for a handful of services and products. Under the amendments, fully-finished “broadcast” advertisements — advertisements on TV, radio, outdoor billboards and the interwebs — will be subject to 14% VAT, replacing the 20% stamp tax to which they were previously subject; and stamp tax on most ins. premiums would be raised by 1%. We have more on the amendments to both laws, which were approved by the House of Representatives late last year, here and here.

More legislation ratified by El Sisi yesterday:

• A bill that provides for 5-15% of the annual surplus generated by ministerial “private funds” to be transferred to the state treasury. The bill is expected to generate a combined EGP 2.5-3 bn for state revenues, equalling some 7-8% of the annual EGP 36 bn surplus. The legislation, which was first approved in 2018, sunsets each year and requires renewal.
• Amendments to some provisions of the law governing public universities, and the law governing the Academy of Arts.

Next steps: The legislation will take effect once the executive regulations are published in the official gazette.

What won’t be seeing the light: The House Education Committee rejected yesterday amendments to the Education Act that would have seen an EGP 500-1k fine imposed on parents whose children miss school without sufficient reason, according to Youm7.

Dominating the conversation on the airwaves last night: Our re-inclusion in JPMorgan’s emerging markets bond index, the benefits of which Finance Minister Mohamed Maait discussed at length in a phone-in with Al Hayah Al Youm (watch, runtime: 16:46). Kelma Akhira’s Lamees El Hadidi (watch, runtime: 1:31; 3:13) and Ala Ma’ouleety’s Ahmed Moussa (watch, runtime: 7:10; 4:35) also weighed in on the event.

Natural gas exports to Lebanon to begin by March: Oil Minister Tarek El Molla phoned in to Kelma Akhira (watch, runtime: 2:48) to discuss plans to export natural gas to Lebanon via the Arab Gas pipeline running through Jordan and Syria. The pipeline is expected to be up and running by the end of February or the beginning of March, El Molla said, adding that only paperwork remains to be completed and no further delays are expected. El Molla had previously said that the pipeline would be operational by the end of last year, before shifting the kick-off date to early this year.

Leading the conversation on Egypt in the foreign press: Egypt’s Afcon victory against Morocco on Sunday got substantial ink, with France 24, The Athletic and the National all delivering takes.

Also getting attention: Egyptian online therapy startup Shezlong is the subject of a Financial Times profile that looks at the company’s role in reducing the stigma on mental health and improving access to care across the MENA region.

Fawry saw transaction values surge last year: The e-payments giant processed EGP 6 bn worth of cashless POS transactions through its Fawry Accept service in 2021, up 232% y-o-y, and EGP 5 bn worth of online payments, up 400% y-o-y, the company said in a statement (pdf) this week. The country’s biggest e-payments provider is eyeing further expansion, recently announcing a planned EGP 800 mn capital increase to help launch its pre-paid cards as it seeks to turn MyFawry into a super-app, as well as a potential US listing. It also launched the region’s first fintech-distributed money market fund in partnership with Misr Capital a few weeks back.

Other things we’re keeping an eye on this morning:

• Investment firm Catalyst Partners is looking to establish subsidiaries in the UAE, Saudi Arabia and Morocco this year, following recent moves to expand into logistics and ins. services.
• El Sewedy Electric for Trading and Distribution has signed an EGP 615 mn contract (pdf) with construction firm EDECS to complete network and infrastructure work at Alexandria Port.

Yet another record daily tally: The Health Ministry reported 2,223 new covid-19 infections yesterday, up from 2,210 the day before — a sixth consecutive record high as the omicron wave continues. Egypt has now disclosed a total of 425,911 confirmed cases of covid-19. The ministry also reported 31 new deaths, bringing the country’s total death toll to 22,635.

Remember: Cases aren’t expected to peak until at least the middle of this month, according to the head of Vacsera’s allergy center.

The vaccine tally: 26,138,418 people are now fully vaccinated against the virus, while some 11.3 mn people have received only their first shots and 620,004 people have received booster shots.

The government is aiming to have vaccinated 70% of the population by the start of 2H2022, Youm7 quoted health ministry spokesperson Hossam Abdel Ghaffar as saying. The country has so far inoculated 42% of people in targeted groups, he added. Around 60 mn people are eligible for vaccination.

We’ve received our first batch of Evusheld doses: 15k doses of AstraZeneca’s preventative antibody cocktail for the immunocompromised, Evusheld, arrived at Cairo International Airport on Saturday, the company announced in a press release (pdf). This makes Egypt the first country in Africa and the fourth worldwide to receive the med, according to the release. A total of 50k doses are expected to arrive this year, with more deliveries set to come in the next few weeks.

Where’s our Paxlovid? We were also expecting a shipment of Pfizer’s covid pill, Paxlovid, sometime in January, after we signed an agreement with the pharma giant to provide pills to treat some 20k people, but there’s been no word on those yet. Meanwhile, Merck’s Molnupiravir antiviral covid treatment was approved for emergency use in hospitals last week, paving the way for five local firms to begin supplying local hospitals with the medication.

Biden names Qatar a major non-NATO ally to the US: US President Joe Biden will designate Qatar a major non-NATO ally in a bid to deepen “bilateral defense and security cooperation” with Doha, he announced in a White House statement ahead of his meeting with Qatar’s emir, Sheikh Tamim bin Hamad al-Thani, yesterday. The move comes as Biden tries to secure more natural gas supplies from Doha — which is the world’s second-biggest exporter of liquefied natural gas — in hopes of resolving Europe’s looming energy crisis.

Plane-purchase diplomacy: Qatar Airways signed a record deal at the White House with Boeing for up to 100 passenger aircraft — an order worth USD 34 bn at list prices, CNBC reports. The transaction deals a blow to European competitor Airbus, which earlier in January canceled a contract with Qatar Airways for 50 new planes amid a dispute over alleged surface issues.

Also worth knowing this morning:

• The UAE intercepted and destroyed a ballistic missile fired by the Yemeni Houthi terrorist group according to state-run WAM news agency. The attack coincided with Israeli President Isaac Herzog’s first visit to the Emirates, Reuters reports.
• Libya could have a new PM by next week: Libya’s parliament is set to vote on a new prime minister to replace incumbent Abdul Hamid Dbeibah next Tuesday, February 8, Bloomberg reports, after critical presidential elections were postponed in December on the back of “threats to the ballot.”