Thursday, 8 October 2015

Foreign exchange crunch in the spotlight as CBE reserves tumble again


Foreign currency crunch grips the nation as CBE reserves fall again (Speed Round)

USD 1.5 bn in Saudi assistance on hold? (Speed Round)

“We’re not blocking Skype” –Vodafone Egypt (Speed Round)

Alhokair in talks to acquire the Cinnabon’s franchisee in Egypt (Speed Round)

Rift between Investment, Housing ministries growing? (Speed Round)

Will gas in the Med create a “new axis of conflict in the region”? (Egypt in the News)

Finance Ministry targets self-employed tax evaders (Egypt Politics + Economics)

Libya denies USD 2 bn deposit was for extradition of Libyan exiles (Egypt Politics + Economics)

By the Numbers + Why cash will outperform securities amid the FX crunch


The African Refiners Association (ASA) Work Group will wrap up today in Suez City under the auspices of the Oil Minister and the Governor of Suez.


French Prime Minister Manuel Valls will arrive in Cairo on Saturday, 10 October, to discuss projects and sign agreements in meetings with Prime Minister Sherif Ismail, Ahram Online reports.

09-11 October (Friday – Sunday): 2015 Annual Meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF) in Lima, Peru.


13 October (Tuesday): Inaugural N Gage Debate tackling the African Tripartite Free-Trade Agreement. You can download their overview report on trade relations with Africa without charge here(pdf). The conference agenda is here (pdf), and the registration form for the paid event is online here.

19-20 October (Monday-Tuesday): Third Annual Public Private Partnership (PPP) conference, held under the auspices of Prime Minister Sherif Ismail. Four Seasons Hotel Nile Plaza, Cairo. The Finance Ministry will present three desalination plant projects at the conference: One plant is proposed for El-Tor, Sinai, set to treat 20k cubic meters of water per day, with the other two will be in Safaga (40k cubic meters) and Alamein (80-100k cubic meters). The ministry plans to present 13 new PPP projects next year worth an estimated EGP 18 bn which will include four stadiums. (Read in Arabic)

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Ibrahim Eissa began his Wednesday night program by casting light on President Abdel Fattah El-Sisi’s statement on Monday that the current Cabinet may stay in place if its agenda is approved by the incoming parliament, as Reuters reported and as we noted in yesterday’s issue.

The host then transitioned to a discussion on the impact of smartphones on Egyptian society, sparked by the recent rumor that the Egyptian government was behind reported bans on the use of voice-over-IP applications including WhatsApp and Viber. “There have been calls by government officials for the banning of long-distance internet phone calls. They claim that these calls, which are not supervised or monitored by any national entity, are a threat to national security. This argument, however, begs the question: Why is the state interested in monitoring my calls? Is it the state’s right to spy on citizens’ calls? That said, the concerns regarding the security of international internet voice calls are legitimate. Viber, for instance, is an Israeli company and I can assure you that it has been used to spy [on Egyptians],” said the host.

Khairy Ramadan, host of CBC’s Momkin, sat down with El Sayed El Badawi, president of liberal-ish political party Al Wafd, to discuss his party’s plan for the upcoming parliamentary elections.

Badawi: We believe in a laissez-faire economy. That said, we are also believers in social justice, human rights. Al Wafd’s platform focuses on decreasing poverty, corruption, and illiteracy … Al Wafd has strong on the ground support. We are highly organized.” Would that it were so, sir. Would that it were so. Very organized indeed.


Speed Round is presented in association with


Today’s top story is the ongoing FX crunch — which the media has taken to bluntly calling a foreign currency “liquidity crisis” — and its far-reaching effect on various sectors.

The Central Bank of Egypt’s reserves dropped USD 1.76 bn to USD 16.34 bn in September, with the CBE blaming debt repayment, Reuters reported. CBE sources told Al Mal the drop was almost entirely due to a USD 1.25 bn repayment on bonds that had matured as well as the final coupon payment for that obligation. (Read in Arabic)

Hepatitis-C cure Sovaldi has disappeared from the local market, Al Masry Al Youm claims, with an English translation appearing in Egypt Independent. Both the Arabic and English versions of the story offering vague and dubious explanations. Gilead Sciences, Sovaldi’s main producer and patent holder, has not delivered the contracted amounts to the Egyptian market due to what “informed sources” tell AMAY was the health ministry’s “lack of follow-up.” This overwhelming“lack of follow-up” was also reportedly to blame for the dwindling supply of generics from local producers.

Speaking anonymously, Health Ministry officials had a more credible explanation for Al Borsa: The Sovaldi shortage is being caused by the reported inability of Ibis Pharma (the Health Ministry’s contracted importer) to pay USD 4.4 mn due to the shortage of hard currency, leaving a shipment of 16K bottles of the medication sitting in customs since 30 September. According to Al Borsa, Banque Misr has agreed to offer the company the funds to pay for the shipment after being urged to do so by the Ministry of Health. Ministry sources have stated that this shortage is expected to re-appear again in two weeks time, as Ibis ordered shipments of 30-35K bottles of the drug for USD 9 mn.

Foreign currency woes have also reportedly hit Cairo For Development & Cars Manufacturing (CDCM). Peugeot’s Egyptian distributor is allegedly having difficulty making paying some USD 100 mn due to Peugeot. The culprit? The CBE’s FX policies, naturally, which are hammering a company that the press claims imports c. USD 12 mn in goods monthly. (Read in Arabic)

Tariffs are now being used as a tool to stem the outflow of hard currency, according to theFEI and the Chambers of Commerce, AMAY reports. According to the head of the Federation of the Chambers of Commerce Ahmed El Wakeel, the dangers of this policy may be greater than simply higher tariffs and could extend to violations of trade agreements. These could cause other countries to extend this policy to Egyptian exports, such as with EU car imports. FEI head Mohamed El Sewedy points to a number of alternative customs policies, including better enforcement of customs as they stand, and having banks prioritize hard currency expenditures on imports deemed vital for the industrial sector. Asimilar critique was lobbed at the government on Saturday by Ahmed Al Wakeel, president of the Alexandria Chamber of Commerce and the Federation of Egyptian Chambers of Commerce in Al Mal, as noted in our Sunday issue. We also noted at the top of the Speed Round of the same issue that following President Abdel Fattah El Sisi’s meeting with the Cabinet, Ittihadiya issued a statement calling on the need for import substitution to ease the pressure on foreign currency reserves.

In this connection, readers may want to have a read through this morning’s Pharos Note (a word from one of our sponsors), where the research department concludes net foreign assets at banks have dwindled to USD 2.5 bn as of August. Their conclusion: The bulk of foreign currency deposits owned by households have been already drawn down to finance the FC requirements of the government and selected businesses.

In other news this morning:

Is USD 1.5 bn in Saudi assistance on hold? That’s the speculation in this Al Mal piece, added almost as an afterthought to a story saying Saudi Arabia has begun delivery of the last tranche of some USD 750 mn worth of in-kind assistance in the form of oil energy shipments. The final tranche is worth some USD 250 mn, but the larger story could be the note that USD 1.5 bn in assistance packages promised at the EEDC this past March are being kept on hold until the Saudi King visits Egypt — a trip that has yet to be scheduled.

“We’re not blocking Skype” –Vodafone Egypt: Blocking Skype was a technical error and has been rectified, Vodafone Egypt’s External Affairs Director said. All VoIP apps are working normally on Vodafone’s networks, he added, and the company has not blocked any service thus far. Vodafone’s statement followed the NTRA’s denial that it had asked telecom providers to block VoIP apps. That said: Anecdotal evidence suggests that VoIP calls over WhatsApp are still not functional.

Alhokair in talks to acquire the Cinnabon’s franchisee in Egypt: The Alhokair group has begun talks to acquire 100% of the United Beverage & Food Company (UBF Egypt). UBF Egypt operates chains including Cinnabon, Carvel, and Ruby Tuesday domestically. Al Borsa says Alhokair is already conducting its due diligence and expects to reach an agreement within two weeks.
(Editor’s note: in the emailed version of Enterprise the acquiring company was referred to incorrectly as the Fawaz Alhokair Group. This post was edited accordingly.)

The rift between the Investment Ministry and the Housing, which we covered on Monday’s issue, appears to be growing as the Housing Ministry has officially requested that Cabinet exempt the New Urban Communities Authority from some articles of the Unified Investment Law. The ministry wants NUCA to have some of GAFI’s powers, namely, the ability to independently issue tenders for land. Under the law, there must be dual coordination and approval with the Investment Ministry. Housing bureaucrats say the Investment Ministry is behind delays in opening some 1,500 feddans for investment. (Read in Arabic)

The Ismail cabinet held its weekly meeting yesterday, with an agenda that focused on the organization of the elections, reviewing the latest figures of injured and missing hajj pilgrims and providing aid to their families, and a new strategy presented by the planning minister on meeting Egypt’s sustainability goals by 2030, according to the post-meeting press conference. Otherwise, key decisionstaken include shuffling bureaucrats from newly-merged ministries to new reporting lines (we have abreakdown here, for those interested). Ministers also signed-off on administrative procedures for the Beyt El Watan housing program, which will target Egyptians living abroad.

SMEs: Egypt’s broken backbone? Daily News Egypt has a long read on the various challenges preventing the full development of small and medium sized enterprises in Egypt, including human capital, import restrictions, and a lack of an overarching strategy. (Read)

What oil price drop? “The luxury segment in the MENA region continues to remain resilient in the face of global economic challenges,” Visa’s Ramadan and Eid Spend Report 2015 said, as cardholders across MENA spent nearly USD 9.3 bn buy stuff during the period. Most of the spending went toward fashion retail, ATM cash, supermarkets, and luxury goods. D

288 injured in new wave of West Bank clashes, Palestinian Red Cross says: The protests were sparked after 13-year-old Palestinian Abd El Rahman Shadi Obeidllah was shot dead by the IDF in the Aida refugee camp in Bethlehem on Tuesday. Obeidllah was throwing stones at IDF troops with other local youth from the camp. According to a policy adopted last year by the Knesset, the IDF has the right to jail Palestinian stone throwers of up to 20 years.

…In related news, Luke Baker, a Reuters reporter in Ramallah, tweeted that undercover Israeli police were among Palestinian protesters yesterday in the West Bank. In a video being circulated on social media, confirmed by Baker himself, the undercover police abruptly drew their weapons against the protestors and signaled for IDF personnel to arrest the stone throwers. Electronic Intifada has the details here. (Watch video of the incident here, running time 1:39)

The unrest is prompting Western pundits to begin wondering aloud whether we’re on the cusp of a third intifada. This Guardian piece is typical.


Natural gas exploration activities in the East Mediterranean could create “a new axis of conflict in the region” as demarcating the region’s international maritime borders remains incomplete,” Al Monitor writes. The latest gas discoveries have raised tensions as “‘Israel has six discoveries in the Mediterranean region, most of which fall in the disputed areas between Lebanon and Syria. Cyprus has discoveries in a common basin with Egypt and Israel,’ Khalda Petroleum’s former Chairman said. Even if demarcation is complete, the conflict would not be resolved completely, a former government official noted as “the underground gas and oil reservoirs in this area are located at varying depths and [some] reserves span [international borders].”


Investors hoping to set up shop in Egypt run into red tape wrangles: Veteran financial writer Patrick Werr reports that despite the strides made in streamlining the process to start a company in Egypt, attempting to get a factory off the ground is as Kafkaesque as ever, with the process potentially stretching into years. (Read)


Putin: Who created ISIS? While we don’t buy the notion that Daesh is the primary target of Russian President Vladimir Putin’s airstrikes in Syria, his point of view as to how the Syrian civil war got to this point is definitely worth a listen. The following video is Putin’s response to an American journalist at the 2014 Valdai International Discussion Club in Sochi. (Watch in Russian with English subtitles, running time: 7:12)


Following Saudi journalist Jamal Al Khashoggi’s op-ed criticizing Egypt for its support of Russian airstrikes and his insisting that Saudi would not stand for it, published on Saturday in Al Hayat, (Read in Arabic) the journalist cryptically tweeted on Wednesday in Arabic that “Egypt’s position on Syria may change soon,” without offering any further explanation, before he deleted the tweet altogether. The link to the now missing tweet, for what it’s worth, used to behere.

President Abdel Fattah El-Sisi discussed regional developments with Russian President Vladimir Putin by telephone on Wednesday, reports Al Masry Al Youm. The leaders also discussed means of enhancing bilateral ties between the countries.

Diplomacy Must Watch: UK Channel 4’s Jon Snow grills UK Prime Minister David Cameron on why the UK made a secret agreement that ensured Saudi Arabia a seat on the UN Human Rights Council in 2013, as first exposed by an investigative piece last week by the Financial Times (paywall) based on a Wikileak cable translated in this tweet. Watch David Cameron attempt to explain himself in an interview The Independent is calling “excruciating.“ (Watch, running time: 8:44)


Apollonia unconventional site holds 700 bcf of gas, Shell and Apache say
Shell and Apache said the Apollonia site at which they are using unconventional techniques to extract hydrocarbons holds around 700 bcf of recoverable natural gas. A source at EGAS said the production cost from the site is estimated to be USD 3-4 per mmBtu. The source added that surface facilities at the site will be completed by next December or January. Shell and Apache, through Bapetco and Khalda, have allocated USD 23 mn to this project. (Read in Arabic)

ASORC to begin producing higher octane fuels within two years, Chairman says
The Assiut Oil Refining Company (ASORC) will begin producing high octane fuels within the next two years, Chairman Mohamed Allam told Al Mal. ASORC is now engaged in an expansion project to allow it to produce 660k tonnes of high octane fuel annually. In total, the company is targeting the refining of 4 mn bbl of crude this year. (Read in Arabic)

Petroleum Ministry to spend USD 7 bn to upgrade refining capacity
The Petroleum Ministry has plans to invest USD 7 bn in raising the refining capacity of a number of facilities including Midor, Assiut Oil Refining Co (ASORC), Alexandria National Refining & Petrochemicals Co (ANRPC), Suez Oil Processing Co, and Mostorod. The story adds nothing new — the plans are all in the public domain and we’ve been talking about them at length for the past three years. The piece is significant only in that it suggests the ministry has the ability to deliver a consistent narrative. (Read in Arabic)

Triangle Group competes over 200 MW solar power project
Triangle Group is looking to compete for a 200 MW solar power project tendered by the Ministry of Electricity, according to head of operations financing at Triangle Group, Mohamed Ali. The company will present its B.O.O offer to the Egyptian Electricity Transportation Company (EETC) within days, he added, noting that the total cost of the project is estimated around EUR 200 mn. (Read in Arabic)


EGP 200 mn cost of infrastructure for 25k feddans in Qena
The Horizontal Expansion and Projects department of the Ministry of Irrigation and Water Resources has begun conducting studies and designs to build infrastructure on 25.5k feddans as part of the 1.5 mn feddans land reclamation project in Murashida, Qena, according to Ali Kamal, head of the department. (Read in Arabic)

Arab Contractors to complete Wahat-Fayoum road by December
The Arab Contractors are aiming to complete the Wahat-Fayoum road by December at a total cost of EGP 400 mn. The road is considered one of the more important parts of the first phase of the National Roads Project. Originally slated for June delivery, the project was delayed due to a land settlement issue with a religious establishment, says board member Tarek Sakr. (Read in Arabic)

Alexandria investing EGP 140 mn in developing its sewage network
EGP 140 mn will be spent developing the sewage infrastructure in Alexandria before the start of the rainy winter season. The head of the General Company for Disposal in Alexandria said the company is working to extend the sewer network to new areas. (Read in Arabic)


Industry Minister forms committee to complete census of all factories, build online  database
Trade and Industry Minister Tarek Kabil ordered the formation of a committee to take a census of all industrial facilities in Egypt and update their information in the Industrial Registry. Each facility will then be issued its own identification number and stored in a new electronic database. (Read in Arabic)


Medical supplies manufacturers want to be regulated separately from pharma industry
Members of the medical equipment chamber of commerce and its counterpart division at the Federation of Industries have denounced provisions in the draft Medications Law — which orders the formation of a General Authority for Medications. Producers of medical supplies want to be regulated separately from the pharmaceutical sector. Opponents of the bill, which was drafted by the Pharmacists’ Syndicate, say that the move would be detrimental to the healthcare system, as medical equipment and pharmaceuticals are two separate disciplines and must be regulated separately. Makers of medical supplies also denounced a stipulation that 51% of any public medical supplies company be reserved for licensed pharmacists. (Read in Arabic)

Al Azhar president to students: “We have cameras following you from the moment you wake up”
In a brief talk with students today, Abdel Hayy Azzab, Al Azhar University’s president, justified a ban on water bottles on campus, claiming that water bottles were previously used in “disruptive acts” against the university, Youm7 reports. Channeling his inner Orwell, Azzab explained to students that he’ll not allow any disruptive acts on campus, saying: “I have cameras that follow [students] from the moment they wake up and come to campus,” prompting a gale of laughter from assembled students. (Watch video of Azzab’s talk here in Arabic, running time 2:54).


Wadi Degla Holding company wins contract to develop food court at Mövenpick in Cairo
The Wadi Degla Holding Company has won an EGP 70 mn contract to develop a food court at the Mövenpick Resort Cairo-Pyramids. The tender to develop the 7,500 sqm food court was issued in April and development is expected to begin before the end of the year. The agreement is currently awaiting ratification by the Tourism Urbanization Company’s (TUC) board, which owns the hotel, and which is expected to take place next week, said Essam El Hady, Chairman of the TUC. (Read in Arabic)


NTRA to complete installing internet quality measurement devices by December
The NTRA that it plans to install quality measurement devices across TE’s internet infrastructure and telephone exchanges to measure the functionality of internet services, said its acting Executive President Mustafa Abdul Wahid. He adds that the NTRA is meeting with internet service providers to discuss coordinating the installations with an eye to completing it by December. (Read in Arabic)


EgyptAir receives TCO authorization from EASA
EgyptAir has received a third-country operator (TCO) authorization to operate aircrafts in the EU from the European Aviation Safety Agency. Under EU regulations, all flight operators not based in the EU which manage aircrafts unregistered in EU countries must receive a TCO authorization to operate, which include strict safety guidelines. EgyptAir chairman Sherif Fathy said that the move is a testament to the airline’s improved safety record. (Read in Arabic)


Awqaf receives proceeds of Bisco Misr sale, considers investing in the one mn feddan reclamation project
The Egyptian Awqaf Authority has received the proceeds from its sale of its shares in Bisco Misr to Kellogg, Al Borsa reported. The Authority received a total of EGP 52.7 mn and is considering investing at least a portion of it in the government’s one mn feddan reclamation project. A portion of the sales’ proceeds will also to continuing the financing of the Authority’s residential projects. (Read in Arabic)

Financial securities chamber calls meeting on Sunday to aid brokerage firms
The Financial Securities Chamber of Commerce will hold a meeting on Sunday to discuss ways to aid brokerage firms floundering as a result of a drop in trading volumes over this recent period. The Chamber has invited all brokerage firms to participate in a bid to mitigate financial losses resulting from a turbulent trading environment. (Read in Arabic)

QNB-Egypt’s 9M15 net profits reach EGP 2.2 bn
QNB-Egypt’s net profits grew to EGP 2.2 bn in 9M15, a 40% year-on-year growth over 9M14. The bank’s consolidated net profit for the period kept pace, surging 37% year-on-year to EGP 2.3 bn. QNB’s loan portfolio grew 19% growth to EGP 58 bn, while deposits for the period rose 22% to EGP 105 bn. (Read in Arabic)


Arab Contractors to inaugurate its first project in Ethiopia soon, MFA says
The Ministry of Foreign Affairs says Arab Contractors is close to inaugurating its first project in Ethiopia. The company is currently engaged in a USD 110 mn AfDB-financed project building two phases of a road connecting Addis Ababa with Nairobi. The first phase of the project, a 94 km stretch, is completed for the most part with some work remaining, the deputy Foreign Minister said. (Read in Arabic)

Shop owners at Serag Mall file lawsuit against Cairo Governor over mall’s closing
Samsung and Masrawy retailers working out of Serag Mall have filed a lawsuit with the State Council against the Governor of Cairo for closing down the mall. The Governor’s office had ordered the closing of Serag Mall prior to the Eid holiday, saying the building wasn’t properly licensed and that retailers were similarly operating without commercial licenses. Retailers, however, deny such accusations, saying they have the proper licenses and approvals from the Real Estate and Commercial registry. (Read in Arabic)


Manpower Minister to reshuffle legislative committee to draft Labor and Labor Unions Law
Manpower Minister Gamal Soroor will reshuffle a legislative committee within the Ministry to draft a Labor Law and a Labor Unions Law, in addition to handling all the legislative affairs of the ministry. The committee, which will be made up of prominent legal professionals and leading ministry officials, will also reshuffle a technical wing to conduct paralegal and research work. (Read in Arabic)


Libya denies having given Egypt USD 2 bn for extradition of fugitive
The Central Bank of Libya (CBL) denied it has ever granted Egypt USD 2 bn in return for handing over Libyans exiles. The amount was just deposited at the CBE and Libya still has the rights to it. The CBL said the deposit was made in accordance to Libyan laws at the time and that it is still generating revenues. (Read in Arabic)

El-Sisi follows up with the ACA on anti-corruption campaign
President Abdel Fattah El-Sisi met yesterday with Mohamed Gamal El Deen, the head of the Administrative Control Authority (ACA) to follow up on its anti-corruption efforts. The meeting discussed prevention strategies and hurdles hindering the ACA’s efforts. The President stressed the importance of the organization’s work. (Read in Arabic)

Finance Ministry tightens grip on self-employed tax evaders
The Ministry of Finance is implementing a new strategy to collect EGP 1.8 bn from self-employed income tax evaders in the coming tax season. Part of this strategy involves implementing the rules and principles of accounting with private and licensed tutoring centers, as well as surveying the unlicensed tutoring centers through their advertisements, sources told Al Mal. (Read in Arabic)

Interpol arrests Egyptian fugitive in Lebanon charged with graft in Egypt
The Lebanese division of the International Criminal Police Organization (Interpol), in cooperation with Egyptian authorities, have arrested “Medhat A. Sh.” as he arrived in Beirut from Italy. The fugitive was sentenced to seven years in prison in 2003, as well as an EGP 2.2m fine for the misappropriation of public funds, DNE reported.


President meets with Interior Minister to discuss elections security
President Abdel Fattah El-Sisi met with the Interior Minister Magdy Abdel Ghaffar to discuss security measures for the first phase of the upcoming parliamentary elections. According to Ittihadiya spokesman Alaa Youssef, this will include an operations room to manage and coordinate security across electoral districts, which will be coordinated with the armed forces. He added that these measures will only cover entrances and areas surrounding the polling stations so as to not interfere with the election process. (Read in Arabic)

An IED exploded on a street adjacent to Azbakeya Police Station on Wednesday night, reports Al Masry Al Youm. No casualties were reported.

Journalist and parliamentary candidate Nashaat El-Alwany was shot by unknown assailants in Egypt’s Kafr El-Sheikh on Tuesday, Ahram Online reported, citing Al Ahram. El-Alwany survived the attack but was reportedly in critical condition on Tuesday, with his family accusing five individuals from an ‘antiquities smuggling’ group of attacking him, following El-Alwany’s investigative piece on the theft of antiquities.


The Nobel Prize in Chemistry 2015 was awarded to Tomas Lindahl, Paul Modrich, and Aziz Sancar on Tuesday for mechanistic studies of DNA repair. The Royal Swedish Academy of Sciences said the scientists deserved the prize having mapped, at a molecular level, how cells repair damaged DNA and safeguard the genetic information. “Their work has provided fundamental knowledge of how a living cell functions and is, for instance, used for the development of new cancer treatments,” according to the official release (PDF). The literature prize will be awarded today, while the winner of the Nobel Peace Prize will be announced at 11am CLT on Friday. The prize for economics will be announced on Monday, 12 October.

CIB sponsored the world premiere of the ballet opera Days and Nights of the Heart Tree, performed by El Nour Wal Amal, an association focused on providing professional training and opportunities for blind women, as reported by Gomhoria Online, (Read in Arabic). The Days and Nights of the Heart Tree, written by Franco-Algerian writer and composer Tarik Benourka specifically for El Nour Wal Amal, debuted at the Cairo Opera House on 30 September, before continuing its tour in Paris, Abu Dhabi and Dubai. Watch behind the scenes footage of their rehearsals via Journal Misr, (Watch in Arabic, running time: 3:41)

From the tin-foil hat department: Anonymous sources wrote in Al Shorouk saying that they have received secret information showing that the deaths at Mena, outside Mecca, during the Hajj season were not entirely accidental, but were planned by foreign intelligence (read: Iran). The source added that there might be a “secret gas” that was used and contributed to the increased death toll.

El Watan appoints Mahmoud Meslem as its new editor-in-chief
Al Masry Al Youm editor-in-chief Mahmoud Meslem has resigned and will become the next editor of El Watan newspaper, an unnamed source told Youm7. Meslem had announced on 7 October that he was stepping down. (Read in Arabic)

Judging by your responses, it would seem quite a few of you have been suffering from the passive aggressive. Perhaps you’ve got some IT people problems as well? SNL’s Nick Burns, Your Company’s Computer Guy. (Watch, running time: 5:45)

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QUICK FACT: Egypt’s total imports from Nile Basin countries fell 30.5% in May 2015.

USD CBE auction (Wednesday, 07 October): 7.7301 (unchanged since Sunday, 05 July)
USD parallel market (Wednesday, 07 October): 8.05 (unchanged since Thursday, day, 01 October, Reuters)

EGX30 (Wednesday): 7,354.56 (+1.56%)
Turnover: EGP 394.0 mn (10% below the 90-day average)
EGX 30 year-to-date: -17.6%

Foreigners: Net Long | EGP +30.9 mn
Regional: Net Long | EGP + 1.4 mn
Local: Net Short | EGP -32.3 mn

Retail: 54.4% of total trades | 49.1% of buyers | 59.85% of sellers
Institutions: 45.6+% of total trades | 50.9% of buyers | 40.2% of sellers

Foreign: 32.2% of total | 36.2% of buyers | 28.3% of sellers
Regional: 6.4% of total | 6.6% of buyers | 6.2% of sellers
Domestic: 61.4% of total | 57.2% of buyers | 65.5% of sellers


Cash will outperform equities amid the foreign currency crunch

If you’re wondering why the the government is imposing import controls — and the CBE remains biased toward high real interest rates despite growing signs of lumpy and uneven growth — then read on:

Foreign currency deposits at banks to and foreign assets held by the CBE should, using a mix of August and June 2015 figures, total some USD 65.0bn. Out of this figure, only the cc USD 18.0bn held by the CBE is classified as foreign reserve assets. Netting out obligations to foreign entities, such as Paris Club members or GCC allies, we estimate the size of external debt / liabilities as of end August at USD 43.9bn. The bulk of these foreign liabilities is on the books of the government and the CBE, whereas we logically assume households (who own USD 22.0bn) to be FC debt-free.

We conservatively estimate that cc USD 21.1bn are free from external debt obligations. Now, given that the bulk of these “net” assets are parked by households at banks and assuming that these funds are invested by banks abroad, then we should have seen net NFA held by banks at a figure close to the USD 20bn mark. Yet, if banks have been using these deposits in financing the government or local businesses, the NFA figure would be much smaller. And that’s exactly the case: NFA at banks plunged from a little less than USD 20.0bn as of end 2010 to USD 2.5bn as of August 2015, leading us to conclude that the bulk of FC deposits owned by households have been already drawn down to finance the FC requirements of the government and selected businesses.

This helps explain the new government’s focus on imposing import controls as a key component of its mandate. It also largely explains the CBE’s bias towards maintaining high real interest rates despite growing signs of lumpy and uneven growth. This leads us to believe that equities will underperform cash in the near term as liquidity conditions tighten and corporate results are impacted by lower capacity utilization rates. Tap here to learn more.

WTI: USD 49.29 (+1.57%)
Brent: USD 52.80 (+1.69%)
Gold: USD 1,145.5 / troy ounce (-0.08%)

TASI: 7,602.7 (+1.9%)
ADX: 4,588.8 (+0.8%)
DFM: 3,711.7 (+1.4%)
KSE Weighted Index: 389.2 (-0.2%)
QE: 11,788.7 (+0.9%)
MSM: 5,860.5 (+0.5%)

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.