Monday, 23 November 2015

Who’s to blame for Donald Trump’s rhetoric on Islam? Egypt, of course.


FX shortage is slowing down plans to expand solar energy in Egypt (Energy)

Sawiris denies Koryolink was nationalized by the DPRK: “It was a deconsolidation.” (Last Night’s Talk Shows)

Qalaa closes EGP 1 bn sale of cement, readymix units to Misr Qena Cement (Speed Round)

Ghabbour: “Are we serious about transforming Egypt into the automotive manufacturing hub of the region?” (Speed Round)

Juhayna under investigation for misleading production dates; CPA claims packs carried wrong production date. (Speed Round)

Gov’t earmarks EGP 175 mn to upgrade airports security; funds will be used to buy new scanners. (Speed Round)

No American chicken for you: Supply ministry nixes U.S. import tender after domestic industry backlash (Basic Materials + Commodities)

TE Data captures 72% of the ADSL market; competitors including Mobinil’s LinkDSL lodge antitrust complaints with NTRA. (Telecoms + ICT)

Who’s to blame for Donald Trump’s rhetoric on Islam? Egypt, of course, says U.S. prof (Egypt in the News)

By the Numbers + Hints that USD capital controls are coming to an end?


Government employees will have a half day off today to go vote in the elections for the House of Representatives, according to the Prime Minister’s office. Polls close today, with results to be announced individually at each voting center tonight or at the early hours of tomorrow. The final results will be announced by the Higher Elections Committee by end of the week. Find your polling station here and the list of candidates in your district here.

PwC and N Gage Consulting are hosting an open discussion on the impact of potential changes in monetary policy. The “Monetary Policy and Foreign Exchange Challenges
Workshop” gets underway today at the Four Seasons Nile Plaza at 9:00 am CLT.

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Tarek Amer takes over as governor of the Central Bank of Egypt on Friday, 27 November, while the new CBE board apparently steps into office the following Sunday.

A number of conferences are taking place this week:


OTMT CEO Naguib Sawiris called in to CBC Egypt’s Hona Al Assema to once again deny that Koryolink has been nationalized by the North Koreans. He reiterated that among the operational challenges faced was difficulty repatriating profits and the impending creation of a state-owned carrier to compete with Koryolink. He also emphasized it was a deconsolidation, not a nationalization, and that only the domestic media in Egypt were calling it the latter.

Later in the program, El Hadidy commented on news that former presidential candidate Abdel Moneim Aboul Fotouh is under investigation on charges of undermining the state and insulting the presidency for his suggestion that early presidential elections be held, charges filed by a third party. El Hadidy recited a long litany of things she finds objectionable about Aboul Fotouh and his call for early elections. “His party has what, 10 members? 15 members? 15 members.” She then said, however, that not everyone we disagree with should be labelled as a traitor. (Watch in Arabic, running time: 6:05)

Ibrahim Eissa on Al Kahera Wal Nas had some of the more interesting comments of the night, with regard to the composition of the incoming parliament, noting that a parliament that speaks with only one voice is actually a threat to stability. Eissa also dismissed remarks by head of Al Azhar Sheikh Ahmed Al Tayyeb on Sunday night, in which Al Tayyeb said, as quoted by Reuters: “We tell boycotters to stop this immediately; Egypt is like your mother, boycotting is like disobeying your parents,” with Eissa calling the statement a fatwa.


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OTMT says Koryolink has not been nationalized: Koryolink has not been nationalized by the North Korean government, Orascom Telecom Media and Technology Holding (OTMT) told the EGX, but rather has been de-consolidated from OTMT’s balance sheet because the sanctions on the country have affected its ability to repatriate profits. (Read the Reuters report in English or the disclosure in Arabic)

Qalaa completes EGP 1 bn sale of ASEC Minya Cement and ASEC Ready Mix to Misr Qena Cement: Qalaa Holdings’ subsidiary ASEC Cement announced the completion of the sale of its holdings in subsidiaries ASEC Minya Cement and ASEC Ready Mix to Misr Qena Cement for EGP 1 bn. The sale also reduces ASEC Cement’s indebtedness by around EGP 940 mn following the deconsolidation. At the time of sale, ASEC Cement held 46.5% of ASEC Minya Cement and 55% of ASEC Ready Mix. CI Capital Investment Banking was Financial Advisor and Arab Legal Consultants (ALC) served as Legal Advisors to Qalaa on the transaction. Next in the investment company’s divestment drive: The sale of storied confectioner Rashidi El Mizan. Qalaa business unit Gozour inked an SPA to sell Rashidi to Olayan about two weeks ago. (Read in English or Arabic)

An interview with Raouf Ghabbour carried by Reuters on Sunday quotes the GB Auto chief executive as saying: “The Egyptian government must decide: are we serious about transforming Egypt into the automotive manufacturing hub of the region or do we forget about supporting manufacturing and go back to all being importers? … If they don’t make a decision … I can go back to a small number of employees, open letters of credit worth hundreds of mns of USD a year and benefit while the country goes into a foreign exchange crunch, rather than bringing in bns of USD of revenues of hard currency.” Cabinet has yet to make clear when it will pass the so-called “automotive directive” that might shelter domestic assemblers from what they call unfair competition from EU, Moroccan and Turkish imports that enjoy preferential customs rates. Local assemblers are looking for a package of measures rewarding them for going deeper into manufacturing over a multi-year period.

Juhayna is under investigation for allegedly misprinting production dates on 1 L packs of whole milk, Consumer Protection Agency (CPA) chief Atef Yacoub said, per Al Mal. The packs — which were labeled with a production date of 24 November — were actually produced on 20 November, Yacoub alleges. The CPA and Health Ministry officials are currently investigating how much of the allegedly mis-labelled product is in the market and alongside any potential impact on public health. The CPA was alerted to the problem after photos appeared on Facebook on Sunday warning users of the issue.

Siemens and El Sewedy Electric signed a financing agreement for the 4.8 GW Beni Suef power station project, the Prime Minister’s office said in a statement. The agreement is worth EUR 2 bn, of which Siemens and El Sewedy will secure 85% as they undertake the project on an EPC-plus-finance basis. The power station is expected to come into service by the end of 2016 and reach its peak output by mid-2018.

The Central Bank of Egypt has confirmed it will shield ailing tourism companies from financial obligations to government bodies and banks. The word came at a long-awaiting meeting between CBE Deputy Governor Gamal Negm, banks and Sinai tourism investors and business owners on Sunday. These measures include postponing utility bills incurred by hotels and tourism companies; rescheduling loan repayments; providing sector operators with emergency medium-term loans to cover operating expenses; and postponing monthly installment payments on loans until June 2016 while eliminating fees on these installments. While these policies have been endorsed by the cabinet in their weekly meeting last Tuesday, the Sinai tourism industry has consistently sought confirmation from the CBE. Industry reps were particularly incensed when governor-designate Tarek Amer cancelled his scheduled meeting with investors last Sunday. (Read in Arabic)

The state holding company in charge of the nation’s airports has allocated EGP 174 mn to upgrade security. The Egyptian Holding Company for Airports and Air Navigation (EHCAAN) will invest in upgrades of scanners to screen luggage and passengers, a Civil Aviation Ministry official told Al Borsa. In parallel, a committee made up of airport and security officials is negotiating with foreign tech companies for advanced devices to detect explosive residue (bye, bye, kofta device). The move follows travel bans and doubts about the security of Egyptian airports after the Metrojet disaster saw the uncovering of significant security failures at Sharm El Sheikh airport.

Russia’s involvement in Syria has less to do with protecting its natural gas interests an a lot more to do with strategic considerations, David Butter says. “It has been erroneously contended that Russia perceives a need to control Syria to protect its dominance of the European gas market, in particular from a proposed Qatari pipeline that would cross Syrian territory,” he notes. Qatar’s need for the pipeline is overstated as it already has presence in Europe through LNG sales. Butter does not point to a specific driver behind the Russian involvement but says that identifying its strategic interests “can help to make sense of a conflict so brutal when explaining it in terms of naked power politics, state dysfunction, and warped ideology seem inadequate. However, the contention that Russia’s involvement in Syria is influenced by natural gas interests is farfetched.”

Putting things into perspective: If you thought Daesh was the deadliest terrorist organization in the world, think again. In the wake of news that more than 49 people were killed in suicide bombings in Nigeria, the 2015 Global Terrorism Index listed Boko Haram as the group that killed the largest number of people in world, and they have achieved this grim feat in fewer attacks. Egypt comes in the thirteenth place on the list of 124 countries affected by terrorism, while Iraq is ranked at the top. The landing page of the report is here and you can download the 2015 Global Terrorism Index in full here (PDF).

The other face of the “startup nation”: The WSJ (paywall) sheds light on the “unsightly side to Israeli tech” where a number of companies based there “operate across borders via the Internet in businesses that could cross legal lines.” One such business was run by Gery Shalon, who was once considered one of Tel Aviv’s most prosperous entrepreneurs. Shalon now sits in an Israeli jail accused of masterminding one of the largest-ever cyberattacks on U.S. corporations in history after being linked to hacking into the servers of companies that included J.P. Morgan and Dow Jones. The operation “allegedly involved illegal Internet casinos, a payment-processing service for criminals and an unlicensed exchange for bitcoin, a digital currency.” Shalon and his co-conspirators are accused of stealing personal information of more than 100 mn customers and using that information to further other operations.

Egypt was ranked the tenth worst country in the world for gender equality by the World Economic Forum’s Global Gender Gap Report for 2015 (pdf), coming in at 136 out of 145 countries. Egypt fell seven spots this year, largely on the back of an enormous drop in the health subindex from 57th place last year to 97th this year. This particular subindex has been problematic for Egypt, as the report’s explanatory notes on Egypt (pdf) points out: “Since 2006, the country has improved on three out of the four subindexes; the lone exception, the Health and Survival subindex.” The report analyzes six indicators to measure gender equality in economics, politics, health and education. These include: employment and leadership; education and technology; health; family; and rights and norms. Women in Egypt lag behind men in most indicators, with a 26% rate of participation in the labor force, 65% literacy rate (against 82% for men), and a purchasing power parity of USD 5.2K versus USD 17.4K for men.

Kurdish leader and co-chair of the secular HDP party in Turkey Selahattin Demirtaş was targeted by an assassination attempt on Sunday evening, Reuters reports, citing an HDP spokesperson. “The rear window of Demirtas’s bullet-proof car was hit once as he and his security team were driving in the city of Diyarbakir in the largely Kurdish southeast of the country, the spokesman said.” Demirtaş was unharmed in the incident; police are investigating.


Egyptians vote in second round of parliament elections dogged by apathy: “There is no reason to vote, these elections don’t mean anything. All these candidates are running so they can get MP perks,” Reuters quotes a 21-year old student as saying. The piece however, also notes: “The lack of interest in voting reflects disillusionment with politics but also voter fatigue after a turbulent few years. Egyptians have participated in two presidential elections, two parliamentary elections and three constitutional referendums since the 2011 uprising. Polls often drag out over several weeks with different rounds and run-offs draining them of momentum.”

The Nour Party’s dramatic fall from having secured 25% of all seats from the 2012 parliament to having won just 10 seats from a contested 102 in the first round of voting (the House of Representatives will have 588 seats in all), is detailed in a piece by Emily Crane Linn and Nicholas Linn in Foreign Policy magazine. “Nour has been quick to blame unfair electoral laws, the hostile media, and corrupt officials for their catastrophic first round. But that isn’t why they lost, said Ashraf El Sherif, a political science professor at the American University of Cairo and former associate with the Carnegie Endowment. ‘They lost because the main Salafist constituency did not go to vote for the Nour Party,’ said El Sherif. ‘This is because they think Nour sold out the Islamist cause and the Salafist cause.’” (Read The Nour Party Goes Dim)

Who is to blame for Donald Trump’s rhetoric on Islam? Egypt, of course, says Marc Lynch: In his latest entry in the Washington Post blog the Monkey Cage on Friday, George Washington University professor Marc Lynch says the “mainstreaming of once fringe ideas about Islam” by Republican politicians in the United States is due, in part, to Egypt. “Above all, the 2013 Egyptian military coup and subsequent repressive campaign against the Muslim Brotherhood severely weakened one of al-Qaeda’s traditionally most powerful competitors … The political push by Egypt, Saudi Arabia and the United Arab Emirates to label the Brotherhood a terrorist organization has reshaped the politics of the issue as well. Propaganda from the region against the Muslim Brotherhood then refracts through the Western public discourse. Old debates revolving around the Brotherhood’s role as a firewall against extremism are now far less relevant, with its organization shattered and ideology of peaceful participation discredited.”

Meanwhile, the political arm of that “firewall against extremism” — the Freedom and Justice Party, which readers will recall was meeting with US State Department officials at least as recently as this past January — published a report in Arabic alleging that like the 11 September 2001 attacks against the United States, the recent attacks in Paris appear to be the work of intelligence agencies. Israeli intelligence in particular, they hint.

Meanwhile, Egypt has been the subject of the lion’s share of opinion pieces in Al Hayat in recent days. Particularly notable: Elections for the House of Representatives, now in the home stretch, prompted Mohamed Salah to suggest the nation had best be happy with what it has now. The finer points of politics and parliaments are moot to the hundreds of thousands of Arab refugees sleeping in European camps, he says, contrasting their reality with the state of play in Egypt today, where the country is completing its third milestone on the road map to democracy (having already passed a constitution and elected a president). Unhappy with weak candidates and low turnaround, he asks? “You have a country with its people. There is a state with laws, a judiciary and law enforcement. They may not live up to your ideals, but this can change.” For a reminder of what another path looks like, he suggests, cast your gaze at Arab refugees in Europe.


How Politics Breaks Our Brains: While we disagree with Marc Lynch’s assertion above that Egypt’s political polarization is driving the increasing negative sentiment against Islam in the United States, the results of research performed on the impact of political bias in processing information among American test subjects has obvious applications to the way media and political events are processed by Egyptians. Brian Resnick explored the fascinating research being done at New York University’s Social Perception and Evaluation Lab, as well as in other facilities, in his 4,000-word essay in the Atlantic last year:

“Once this partisanship mentality kicks in, the brain almost automatically pre-filters facts—even noncontroversial ones—that offend our political sensibilities … The control group saw this question: ‘Would you say that compared to 2008, the level of unemployment in this country has gotten better, stayed the same, or gotten worse?’ A separate group saw this one: ‘Would you say that the level of unemployment in this country has gotten better, stayed the same, or gotten worse since Barack Obama was elected President?’“ When answering the second question where Obama is name-dropped: “Around 60 percent of Democrats said unemployment had gotten better or somewhat better, and about 75 percent of Republicans said the opposite.” Interestingly, money was found to incentivize people to abandon their political bias and more accurately respond to questions. “All it took was USD 1 or USD 2 to dramatically improve the chances of a right answer, cutting the partisan gap between Republicans and Democrats in half—half.”


This racist tweet from Donald Trump, the current frontrunner for the Republican party, is filled with inaccurate statistics on the homicide rates between blacks and whites in the United States — bogus statistics retweeted thousands of times and seemingly accepted wholeheartedly by his supporters, judging by their comments. The numbers were quickly debunked by Think Progress, relying on FBI statistics: Donald Trump Tweets Fake, Racist And Wildly Inaccurate Murder Statistics.


Drone racing, first person POV, with pilots using goggles linked to video mounted on the drone, is the next big thing for nerds. The footage is immersive and comes across like Super Mario Kart on steroids. Watch one of these drone races to better understand how easily addictive gameplay can be. (Watch, running time: 1:39)


Defence Minister Sedki Sobhi discussed security cooperation yesterday with Rep. Joseph Wittman (R-VA), the chairman of the House Armed Services Committee’s Subcommittee on Readiness. The meeting took place on the second day of a visit to Egypt by a delegation from the U.S. House of Representatives.


Egypt’s FX shortage is slowing down plans to expand solar energy in Egypt, Bloomberg reports. One example is Cairo Solar’s chairman, who says he is worried about paying a USD 51 mn IFC loan back as the government has only guaranteed payment in EGP. Even more worrying is the possibility of having Egypt’s renewable energy plans being held back altogether if the government will not provide payment to developers in foreign currency, Bloomberg suggests. “Convertibility ‘is an issue of the country not only energy projects.’ The electricity ministry has asked the government to guarantee currency convertibility,” Mohamed El Sobki, Chairman of the New and Renewable Energy Authority said. (Read)

Egypt, Israel, Cyprus examining option to export gas to Turkey, Israeli Minister says
Egypt, Israel, and Cyprus are discussing the possibility of exporting natural gas to Turkey, Israel’s Energy Minister, Yuval Steinitz, says. “The first option is the joint development of reservoirs and through the existing liquefied gas installations in Egypt and a second option is building a gas pipeline to Turkey, and from there the gas can continue to Europe,” he added. Steinitz also added that progress is being made on signing the unitisation agreement between Cyprus and Israel to “regulate the treatment of gas fields that cross the maritime boundary.” (Read)

Jordan’s Arab Potash looking to import gas from Israel’s Tamar field
Jordan’s Arab Potash company is looking to import natural gas from Israel’s Tamar field. Senior company executives are in technical discussions on conditions that would facilitate the sale of gas to Jordan, sources said. “It is believed that the Israel gas pipeline will be connected to the Jordanian pipeline in two locations: north of Beit Shean and in the vicinity of the Dead Sea,” Globes says. A letter of intent to export 1.8 bcm of natural gas to Jordanian companies including Arab Potash and Jordan Bromine from Tamar was signed in 2014. (Read)


Supply Ministry puts brakes on tender to import U.S. chicken, turns to domestic poultry suppliers
Seems we won’t be eating U.S. chicken after all after the Supply Ministry pulled a tender under pressure from domestic producers. The Supply Ministry is in talks with eight domestic poultry companies to import 550 tons of chicken, reports Al Borsa. The move is part an initial wave of poultry import tenders issued by the ministry to supply cooperatives with chicken at reduced prices. These include the recently signed tender with Al Watania Poultry to import 10K chicken at EGP 20 a piece. These will then be sold at cooperatives for EGP 4. The Supply Ministry also halted tenders to import frozen chicken parts, which it undertook last week by awarding five US-based companies a tender to import 2K tons of frozen chicken parts, said Al Watania board member Tharwat El Zeiny. This comes after the Egyptian Poultry Association sent an official notice to the Supply Ministry on the “catastrophic” ramification the move would have on the domestic poultry industry. While the ministry does appear to have shifted towards domestic importers, it continues to rely on imported poultry, which could be sourced from the EGP 25 bn domestic industry. (Read in Arabic)


IDA to issue 40 mn sqm of land to investors
The Industrial Development Authority will issue 40 mn sqm of land to potential investors in the upcoming period, Amwal Al Ghad reported. The land will be issued in industrial areas including the cities of Tenth of Ramadan, Sadat, Borg El Arab, and Beni Suef. This comes as part of the government’s target of achieving a 24% industrial growth rate by 2020. (Read in Arabic)

PACHIN to establish a subsidiary in Oman next month
Egypt’s Paints and Chemicals Industries Co. (better known as PACHIN) plans expand operations in the GCC region by establishing a subsidiary in Oman before the end of 2015, said the company’s chairman Mahmoud El Refai at the Big Show Exhibit in Oman. The new company, PACHIN-Gulf, will be a JV with as of yet unnamed Oman-based company. PACHIN’s net profits for the 2014/2015 fiscal year dropped 38% to EGP 46 mn, on the back of a 52% drop in sales in its Libya operations, reports Al Borsa. Undoubtedly, the company sees this upcoming expansion as a means to diversify its exports to stable markets. (Read in Arabic)


NUCA finishes reviewing Palm Hills, ARCO contracts
The New Urban Communities Authority (NUCA) has reportedly finished revising contracts with Palm Hills Developments and Al-Arabia Co for Real Estate Development (ARCO). The contracts, which were agreed to at the EEDC, await signing. The Palm Hills contract is for a 500-feddan project in New Cairo with an investment cost of some EGP 30 bn, whereas ARCO is looking to invest as much as EGP 26 bn in a 2,800-feddan project. (Read in Arabic)


Kuwait to launch new direct flights to Sharm El-Sheikh in December
Kuwait will begin direct flights to Sharm El Sheikh in December, according to Kuwait’s Minister of Information and Minister of State for Youth Affairs Sheikh Salman Sabah Al Salem Al Humoud Al Sabah, who is currently visiting Cairo. The announcement was made following the Kuwaiti information minister’s meeting with tourism minister Hisham Zaazou on Sunday, and the first of such flights is set to begin on 1 December, Kuwait state news agency KUNA reported.

Rixos to inaugurate new Sharm El Sheikh hotel in December
Rixos Hotels is inaugurating its Sharm El Sheikh Seagate hotel in mid-December, Al Shorouk reported. The 800-room hotel will be become Rixos’ third in Egypt. Rixos Seagate’s GM said there are already bookings from Arab countries for the hotel and said the aim is attract tourists for the Christmas holidays and New Year season. (Read in Arabic)


TE Data captures 72% of the ADSL market, spurring continued cries of monopoly
Once again, reports of TE Data gaining market share — up to 72% with 2.6 mn users in 3Q15 — is stoking outcry from the industry over monopolistic practices. TE Data captured 100% of new ADSL subscribers during the quarter, due in part, to poor ADSL connection quality competitors delivered while TE was upgrading telecommunications infrastructure, Al Borsa reports. This prompted a number of competitors including Mobinil’s LinkDSL to lodge antitrust complaints with the NTRA, alleging that TE Data had been poaching clients as a result of network outages caused by its parent company—which owns and operates the infrastructure all network providers use. Internet subscribers have grown 20% over 2015, while the market shares of TE Data’s competitors continue to decline. (Read in Arabic)

NTRA issues a new model contract governing the distribution of phone subscriptions
The National Telecommunications Regulatory Associations (NTRA) has issued a new model contract for telecom majors to sign with retailers as part of its drive to ensure that authorized outlets fully document the personal information of new subscribers. The know-your-customer rules are a key component of NTRA’s security policy, and full customer information would be among the keys to any future loosing of current restrictions on mobile money use. The NTRA has extended its ban on mobile phone SIM cards being sold by non-registered mobile operator outlets until 20 January 2016, in the hope that telecoms can standardize the use of this new contract with their authorized outlets by then. The NTRA—which handed down the regulations in part to meet global standards and practices in the telecommunications industry—has been clamping down on both retailers and telecoms, enforcing fines on the latter, and conducting a sweeping crackdown on the former, as we noted last week. (Read in Arabic)


Alhokair repays EGP 100 mn in dues to banks
Egyptian Centres, a subsidiary of Alhokair group, has successfully repaid EGP 100 mn in overdue payments to banks, a source told Al Shorouk. Egyptian Centres owes domestic banks EGP 1.565 bn in total. The payment the company made accounts for the overdue instalments and interest accumulated. Sources added that Egyptian Centres will repay another EGP 50 mn in December. (Read in Arabic)


Government shelves draft export rebate system, reinstates old one
The Ministers of Trade and Industry and Agriculture announced that the pre-2014 export rebate system will be reinstated, Al Masry Al Youm reported. This replaces the system proposed in July 2014 which had not come to effect. EGP 225 mn has been allocated to support the exhibitions and the system will be applied retroactively. The government is looking to increase exports and expand foreign currency revenue earnings. (Read in Arabic)

Former presidential candidate Aboul Fotouh under investigation for conspiring to undermine state
Former presidential candidate Abdel Moniem Aboul Fotouh is being investigated for allegedly undermining the state and insulting the presidency, Al Mal reported. Aboul Fotouh’s charges followed his suggestion to hold early presidential elections, driving a third party lawyer to lodge the complaints against him. (Read in Arabic)


A huge pill to swallow: Pfizer is set to buy Allergan in a USD 150 bn transaction that would create the world’s largest drugmaker, Reuters reports.

The decline and fall of (advanced) economies? The Wall Street Journal launched this morning a week-long series of interactive stories on the planet’s “Demographic Destiny.” Dubbed WSJ 2050, the first installment in the package is headlined “How demographics rule the global economy” and is slugged “developed world’s working-age population to start declining next year, threatening global growth in decades ahead.” The piece is worth scrolling through in equal measure for the story it tells and for the very rich digital storytelling techniques it uses in the process. (Read, paywall)

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QUICK FACT: Competition in the food and beverage sector is forcing large Egyptian F&B companies to allocate a higher share of their revenues to SG&A expenses. In 2015, the ratio of SG&A-to-sales in tier-1 F&B firms listed on the EGX approached the 20% mark, up from rates closer to 15% pre 2011.

USD CBE auction (Sunday, 23 November): 7.7301 (unchanged since Wednesday, 11 November)
USD parallel market (Sunday, 23 November): 8.55 (-0.02 from Wednesday, 18 November, Reuters)

EGX30 (Sunday): 6,607.53 (+0.59%)
Turnover: EGP 299.9 mn
EGX 30 year-to-date: -25.97%

THE MARKETS ON SUNDAY: Egypt’s benchmark index EGX30 edged up 0.6% yesterday, with top gainers including GB Auto, Amer Group, and Palm Hills. GB Auto surged on news news claiming that its Bajaj motorcycle and three-wheelers plant will start production in 2017. Among those closing in the red yesterday, OTMT slid as its North Korean unit Koryolink hit the skids, while both Misr Cement-Qena and Al Qalaa Holdings shed 0.6% after an announcement Misr Qena had completed its acquisition of Qalaa’s ASEC Minya and ASEC Readymix plants. At a market turnover of EGP 299.9m, regional investors were the sole net buyers. Regionally, Saudi’s TASI and Dubai’s General Index both up modestly.

Foreigners: Net Short | EGP -9.8 mn
Regional: Net Long | EGP +15.6 mn
Local: Net Short | EGP -5.8 mn

Retail: 71.6% of total trades | 72.4% of buyers | 70.9% of sellers
Institutions: 28.4% of total trades | 27.6% of buyers | 29.1% of sellers

Foreign: 10.1% of total | 8.5% of buyers | 11.7% of sellers
Regional: 6.1% of total | 8.7% of buyers | 3.5% of sellers
Domestic: 83.8% of total | 82.8% of buyers | 84.8% of sellers


High-yield CDs in exchange for USD hints at end of capital and current account control measures

Al Baraka Bank Egypt has confirmed it is now allowing depositors to convert USD (and other foreign currencies) at its branches in exchange for investing in its newly-launched 3Y EGP-denominated CD that offers an annual rate of 13.5%. Redemption of the accumulated figure at the end of three-years is in EGP. Representatives from the National Bank of Egypt, CIB and QNB Al-Ahli pointed out that they have not received any official information with regards to the newly-issued CD by their smaller peer. NBE and Banque Misr, Egypt’s two largest banks by asset size, had issued EGP-denominated savings certificates on 8 November 2015 with an interest rate of 12.5% per annum, already at least c. 250-300 bps above the rates they had previously offered.

Our take: Al Baraka Bank Egypt’s newly issued CD suggests that the CBE might be taking its first steps towards ending restrictions on FC deposits (USD 10,000 per day or USD 50,000 per month). We particularly view this as consistent with the government’s reinstatement of the pre-FY-15 export rebate programme, in its attempt to support its existing and reach out to new sources of foreign currency in light of the country’s ongoing foreign currency shortage.


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