EGX posts worst one-week performance since March 2011 as global markets slump.
EGX posts worst one-week performance since March 2011 as global markets slump. Where do things go from here? (What We’re Tracking Today)
Rejecting the Civil Service Act could cost Egypt the second and third tranches of World Bank, AfDB loans, warns planning minister. (Speed Round)
Amer, bank chiefs discuss concentration risk, SME financing in sit-down. (Speed Round)
A gentle drumbeat of China news ahead of Chinese President Xi Jinping’s visit later this week. (Speed Round)
Our new parliamentary affairs roundup hits Planning and Budget committee, but Mortada won’t say what the House Committee on Human Rights is up to. (Speed Round)
Samih Sawiris blasts state, Mohamed El Sewedy backs import restrictions. (Last Night’s Talk Shows)
Iran emerges from “years of economic isolation” as sanctions are lifted. (What We’re Tracking Today)
National Defense Council extends military’s participation in Saudi-led Yemen campaign for up to one year. (Speed Round)
The Grand Ethiopian Renaissance Dam threatens Egypt in ways that most people haven’t even thought of. (Worth Reading)
The new Wadi El Hitan Fossils and Climate Change Museum in Fayoum is simply gorgeous. (Images of the Day)
WHAT WE’RE TRACKING TODAY
Stock markets across the Middle East tumbled on Thursday “as foreign investors exited the region amid a global selloff,” Bloomberg said. Cairo led the slump, with the EGX30 dropping 5.6% on Thursday, bringing its losses since the beginning of the year to 16.4%. The gauge was the worst performer among more than 90 tracked globally by Bloomberg, with Saudi Arabia’s Tadawul a close second. “Oil has been leading the free fall, China’s been adding to the selling pressure and we can’t dismiss the geopolitical tension in the region. These three ingredients are a bitter meal,” the executive director for advisory and institutions at NBAD Securities explained. Looking locally, a number of investors told Al Borsa that the slump in Egypt is driven by concerns that the CBE might issue restrictions tightening capital controls and restricting investors’ ability to repatriate funds. Last week was the EGX’s worst weekly performance since March 2011. On Thursday, the EGX issued a release (pdf) asking listed companies to disclose 2015 financial statements and any critical events that may have led to the slump.
Where to do we go from here? It’s inarguable that a classical bear market — down 20% from the EGX30’s “high” of 7,089 on 3 January — is within reach. We’re going to go out on a limb and say that how long we stay there will be as dependent on global forces as it is on domestic developments. With that in mind, required reading this morning includes:
- BlackRock boss Larry Fink says U.S. markets are going to fall at least another 10%, telling CNBC: “I actually believe there’s not enough blood in the streets. We’ll probably have to test the markets lower, and I think when we test the markets lower it’s going to be a pretty good buying opportunity.” Fink sees things better by 2H2016, though, noting: “Over the course of the next six months, we think it’s going to feel a lot better. There’s not that much leverage in the system. That’s why all the analogies to 2008 and 2009 are erroneous. We don’t have that type of leverage.”
- The FT’s John Authers notes that the S&P has only entered into bear territory without there being a wider recession three times in 30 years — and each time it was due to a “financial accident.” (Read: Black Monday in 1987, the collapse of LTCM and the Russian debt crisis of 1998, and the 2011 standoff over the U.S. debt ceiling.)
- We could be a long way from a ‘tradable bottom’ in the energy market, says a T. Rowe Price analyst who has called oil correctly so far, warning that, “crude oil will slip into the low- to mid-USD 20s within six months … [and] it ultimately could go lower as we spend the next decade digging out of a secular bear market in commodities and oil.” Read that alongside the Economist’s “USD 20 is the new USD 40.”
Things are going to get interesting in the wider region, folks: “Iran emerged from years of economic isolation on Saturday when world powers lifted crippling sanctions against the Islamic Republic in return for Tehran complying with a deal to curb its nuclear ambitions,” Reuters reports. The Financial Times has a brief Q&A on the move, and the Wall Street Journal has solid coverage, including a very solid explainer, including takes on the five sectors that will benefit from the lifting of sanctions, namely energy, transport, banking, trade and industry. The Journal also notes that “Western companies still will face formidable barriers to doing business in Iran following Saturday’s implementation of a nuclear agreement, including continued U.S. sanctions that particularly have financial firms nervous about running afoul of the law.”
We’re looking at cold weather tonight and a sandstorm tomorrow in the Greater Cairo Area, according to the Egyptian Meteorological Authority, Ahram Online reports.
WHAT WE’RE TRACKING THIS WEEK
Hold onto your hats because this week is looking to be busy. On the agenda:
- The Chinese Foreign Ministry has confirmed that President Xi Jinping will visit Egypt, Saudi Arabia and Iran on 19-23 January. The Chinese and Egyptian presidents are set to discuss potential investments in infrastructure projects with Egypt, a government spokesman said on Friday.
- Wednesday: The World Economic Forum is holding its annual meeting in Davos, this time under the theme: Mastering the Fourth Industrial Revolution. (Please don’t get us started on the theme.)
- Thursday: GERD talks are set to be the focus of President Abdel Fattah El Sisi’s visit to Addis Ababa for the 26th African Union Summit on 21-31 January. He is expected to hold a mini-summit with Ethiopian and Sudanese political leaders to push for increasing Egypt’s water share. (More on GERD in Speed Round + Egypt in the News + Worth Reading)
- With oil prices free falling, energy is on the region’s mind, making the timing particularly opportune for the World Future Energy Summit, which takes place in Abu Dhabi on 18-21 January, and the Egypt Energy Forum at the World Future Energy Summit, also in Abu Dhabi, on 20-22 January (download the draft agenda here).
- Also sometime this week, the CBE is expected to meet with NBE and Banque Misr to discuss methods of supporting distressed borrowers.
ON THE HORIZON
The nation is off a week from tomorrow for the anniversary of the 25 January Revolution.
The U.S. Federal Reserve’s Federal Open Market Committee meets on 26-27 January.
LAST NIGHT’S TALK SHOWS
The economy was back in the hot seat on talk shows last night, with Youssef El Housseiny hosting business tycoon Samih Sawiris on Al Sada Al Mohtaramoon. The lower-profile, but equally outspoken Sawiris brother unabashedly criticized the government, calling the public sector a hopeless case. “The private sector employs people who give as much as they take. At the end of each year, they are assessed on whether they fulfilled their goals and tasks or not … This is not the case in the public sector,” he said.
Sawiris also went on to compare the state’s Ebny Beitak with his low-income housing project Haram City, which has been on hold since 25 January, 2011. “Haram City makes Ebny Beitak look like a failure … the state doesn’t want a privately owned business to succeed while the public one fails. I am building my own infrastructure, cost the state nothing and housed 50,000 citizen, which makes the Ministry of Housing useless.”
He added that the state hasn’t handed over the rest of the land as stipulated in the contract, deliberately not interfered to remove squatters and is not paying utility bills for 2,000 units it bought. “This is bullying,” the less-than-subtle Sawiris said. Perhaps there’s a reason he isn’t the brother in politics.
Sawiris also believes the problems facing investment are bureaucracy, lack of transparency on regulations and the FX situation. But despite his many, many issues with Egypt, Sawiris has hope. “Egypt is a very promising country in terms of investment,” he said.
Federation of Egyptian Industries chief Mohamed El Sewedy told Osama Kamal on Cairo 360 that the Industry Minister’s recent decision requiring importers register offshore suppliers of a list of 50 goods protects consumers from products of unknown origins and stops foreign currency from being wasted. He added that some imports pose health risks and are of “extremely bad quality.”
On the recent SME initiative, El Sewedy said: “If I manage to attract medium and small investors, I succeed as a country.” He believes this can be done by providing the youth with facilities in industrial zones and offering up land through the usufruct system to make projects more affordable for SMEs.
Official spokesperson for the Holding Company for Water and Wastewater Mohi El-Serafy explained the new water billing system to a rather baffled Lamis El Hadidy on the phone last night. “The cost of a cubic meter of water is EGP 1.50, and has been set at EGP 0.23 since 1995 for the first strata of consumption,” he said. The first strata, consuming 0-10 cubic meters of water per month, represents 60% of consumers, El-Serafy explained, and will face an increase of EGP 0.07 per cubic meter. The last strata, consuming over 40 cubic meters per month, will face an increase of EGP 0.40 piasters to EGP 1.55 per cubic meter.
El Hadidy hosted the two Deputy Speakers of the House Mahmoud El Sherif and Soliman Wahdan who essentially sang their own praises, extolling the virtues of our current parliament. Both argued it was in the country’s best interest for the house to approve pending laws now and propose amendments after the 15-day deadline to approve over 300 laws is over. Head of the House Labor Committee Salah Eissa also called in to say the Civil Service Act was rejected last week based on five articles parliament believes need amendments.
Amr Adeeb hosted 10 opposition MPs last night on Al Qahera Al Youm who were on the attack, calling the Support Egypt bloc illegitimate, monopolizing and internally fragmented. They also argued that Speaker of the House Ali Abdel Aal is biased toward the ruling bloc, excluding non-bloc members from parliamentary committees.
Rejecting the Civil Service Act is going to cost Egypt USD 3 bn in financing from the second and third tranches of the World Bank and African Development Bank’s pledged loans, Planning Minister Al Araby said this weekend, according to Al Watan. Al Araby, who spoke extensively on the government’s reform agenda an event this weekend, described the House Committee’s vote on the act as “backtracking on agreed upon reform programs.” He did, however, express optimism that the parliament would back the cabinet’s reform agenda, including subsidy reform, which he said should be fast-tracked in light of plummeting oil prices the likely reduction in GCC fuel aid. Al Araby also says the reform process will include restructuring the state-run media apparatus, with the coming of the new Media Act and the formation of a national media authority and a supreme council on the media.
The cost of state-provided goods and services is untenable, Prime Minister Sherif Ismail told the same gathering. Planning Minister Ashraf Al Araby later noted that raising the price of state goods and services is a crucial element of the government’s subsidy and structural reform agenda, according to Al Borsa. The government’s primary challenges, according to Ismail, are the tourism crisis, pressure on the balance of payments due to imports, and the FX crunch.
Concentration risk topped the agenda of a meeting between CBE Governor Tarek Amer and bank chiefs yesterday, Al Mal reports. The CBE informed banks that loans backed by the Finance Ministry or local deposits would not be subject to concentration risk regulations, with ministry-backed loans typically issued to the EGPC and the Electricity Ministry. The CBE also made it mandatory for banks to raise their portfolio of SME loans to 20% in four years. As for regulations prohibiting banks from extending retail loans with monthly installments exceeding 35% of the borrower’s net income, the CBE will allow banks to count bonuses and profit sharing as part of a borrower’s net income.
Egypt’s import bill will be reduced by 25% y-o-y in 2016, CBE Governor Tarek Amer told Reuters in an interview carrying the same points Amer gave Bloomberg a day earlier, which we took note of on Thursday. The measures taken by the CBE aim to “boost local production and regulate monetary chaos to stabilize prices and inflation levels.” In related news: The Trade and Industry Ministry set up on Thursday a central unit in Cairo to begin registering manufacturers permitted to export finished goods to Egypt, Al Mal reported. Five representative offices were set up in other cities to facilitate the process.
All banking activities will be exempt from the value-added tax (VAT), said Finance Minister Hany Dimian, laying to rest (for now) an open question. The minister also noted that VAT legislation would be before the House of Representatives “soon.” Dimian said Egypt’s financing gap would stand at USD 4 bn in FY2015/16 due to loan agreements with the World Bank and the African Development Bank. The IMF had estimated that Egypt’s financing gap would reach USD 20 bn in 2016 and 2017 back in November. He adds that global economic instability makes issuing new USD bonds unfeasible at this time. The government had reversed a decision to issue USD 1.5 bn bonds during 4Q2015, Al Borsa reports.
El Zend outlines legislative agenda and judicial reform: The Ismail cabinet’s agenda, expected to go before the House of Representatives for approval after the 15-day period for reviewing laws passed by President Abdel Fattah El Sisi ends, will include amendments to acts on investment, industrial development, media, the Nile as well as nuclear power plants, land ownership and usufruct in Sinai and whistleblower protection, says Justice Minister Ahmed El Zend, Al Ahram reports. The government will also introduce legislation that aims fast-track cases through the justice system.
The Asian Infrastructure Investment Bank (AIIB) is keen to support Egypt’s infrastructure development efforts, says the bank’s President-designate, Jin Liqun, according to Al Ahram. Jin reportedly praised Egypt’s development strategy and national mega projects at a sit-down with International Cooperation Minister Sahar Nasr, who is attending the bank’s opening ceremony in Beijing. Representatives from 57 member states attended the China-led AIIB opening ceremony on Saturday, where China pledged USD 50 bn to a special fund to aid underdeveloped countries to realize infrastructure projects. The bank, which is being set up as a development financing alternative to the World Bank, is part of Beijing’s “One Belt One Road” policy to extend China’s economic influence in the region, Economic Times reports.
TEDA Egypt is looking to attract USD 2 bn in investments by developing 6 sq km in the Northwest Gulf of Suez region, announced CEO Wei Jianqing, who says the area aims to attract around 100 companies with projected sales of up to USD 10 bn, he added. The development will begin in February, to bring the total developed land area up to 30,000 sqm by the end of 2016, reported Amwal Al Ghad. Wei also stated that the slowdown in the Chinese economy will not impact Chinese investments in Egypt, and the company is already planning expansions to accommodate offers by Dayun, which plans to open a motorcycle factory in the area, and China Glass. Suez Governor Ahmed El Hayatmy noted that TEDA has attracted USD 900 mn in investments since they began operations in Egypt, according to Al Borsa. Meanwhile, Al Ahly for Real Estate Development says it will develop utilities on a 2 mn sqm area for the projects, Al Mal says.
Egypt prioritized laws dealing with the economy and investment in 2015, law practice Sharkawy & Sarhan said in their review of laws issued in 2015. The top four policy directions in 2015 in their opinion were betting on energy, luring foreign investment through regulatory reform, focusing on large-scale national projects and security and corruption, which were “not entirely off the agenda.”
PARLIAMENTARY ROUNDUP: The House Committee on Legislation held a meeting on Saturday to decide whether laws passed under President Adly Mansour merit a vote by parliament, as some MPs argue parliament is not required to decide on laws passed before the ratification of the 2014 constitution. No decision was reached on the debate, AMAY reports. In other parliament news, the House Committee on Planning and Budget reviewed and set recommendations on taxation and customs legislation. These include having the Finance Ministry clarify whether income generated abroad is subject to income tax. The committee also required the Tax Authority to present their interpretation of taxation laws. This will be the committee’s final meeting ahead of passing its recommendations to the House for discussions today, Al Mal reports. Apparently, transparency is not a priority for the House Human Rights Committee as the committee’s chair, Mortada Mansour, refused to disclose the laws under discussion and banned committee members from talking to the media about them. Al Mal published reports by the various committees on laws passed under President Abdel Fattah El Sisi and Mansour ahead of parliamentary deliberations which will take place today.
Investment Minister Ashraf Salman and other ministry officials made a number of key announcements at a workshop on the Investment Act held in Ain Sokhna over the weekend. These include:
- The government has no intention of cutting taxes in the Suez Canal economic zone below its current 22.5% rate, Salman said Salman.
- Some land in Upper Egypt zoned for manufacturing will be tendered for acquisition at no charge under the Investment Ministry’s incentive program, reports Al Mal.
- GAFI sent studies to the cabinet for approval to form free zones in Minya and Nuweiba, says the GAFI’s Head of Free Zones Hussam El Haddad. The Finance Ministry opposes the move as part of its longstanding objection to free zones, which it says encourage customs evasion.
Tech investment company A15 is getting back into the startup game, Wamda’s Iman Mostafa writes. “Our companies remain as they were under OTVentures, so we make sure to keep diversifying the investments into small and medium sized companies. We now have around 1,000 employees working in more than 20 countries in the region,” CEO Fadi Antaki told Wamda. A15, which is now owned by one of Accelero Capital’s investment funds after being spun out of OTVentures, said it is not planning any exists after agreeing to sell Otlob.com to Rocket Internet in late 2014, one year into a turnaround program. The company has USD 3 mn already set aside to invest in early stage companies regionally and it also launched a startup incubator.
Egypt’s National Defense Council extended the military’s participation in the operation in Yemen for up to one year, the presidency said in a statement. “This is for an extra year or until the end of the combat operation, whichever comes first,” the statement said.
Negotiations over the Grand Ethiopian Resistance Dam (GERD) have been postponed two weeks, Al Mal quotes Alaa Yassin, an advisor to Egypt’s Minister of Water Resources and Irrigation, as saying. The meetings between the foreign and irrigation ministers of Egypt, Ethiopia and Sudan were set to take place at the start of February in Khartoum. France’s Artelia and BRL, the firms conducting the studies on the GERD’s impact, “needed a longer duration to better explain the results,” Yassin tells Daily News Egypt. The results of the studies are expected out at the end of January instead of this week as originally planned, says Yassin.
Saudi Arabia is looking to establish a new sovereign wealth fund, Reuters reports in what it is billing as an exclusive. “Saudi Arabia plans to create a new sovereign fund to manage part of its oil wealth and diversify its investments, and has asked investment banks and consultancies to submit proposals for the project,” the newswire reports, saying the move could shake things up at big U.S. asset managers.
Abu Dhabi-owned Masdar plans to double its power generation capacity from solar and wind plants across the Middle East, CEO Ahmad Belhoul told Bloomberg. “We’re looking at demand in the Middle East and North Africa region doubling by 2030,” Belhoul said, and the company is working on matching the doubling in demand by engaging in investments in countries including the UAE, Jordan, Morocco and Egypt.
Dubai-based Propertyfinder Group has raised USD 20 mn in capital from Swedish investors Vostok New Ventures, valuing the group at USD 200 mn. Propertyfinder will use Vostok’s cash to further localize its platforms, by investing in technology and expanding its team,” Wamda reported. Vostok has investments in four other companies regionally.
JP Morgan Chase kicked off earnings season for the bulge bracket banks on Thursday with strong fourth quarter results (pdf), beating analyst expectations on both the top and bottom lines due to cost cutting and increased earnings for its investment banking division, according Market Watch. On Friday, other banks came in mixed:
- Citigroup reported earnings (pdf) per share of USD 1.06, better than the six cents it delivered a year ago;
- Wells Fargo reported earnings (pdf) of USD 1.03 per share, flat compared to last year, but “growth in other assets due in part to acquisitions Wells Fargo made from General Electric Co.’s finance arm pushed Wells Fargo’s total balance sheet past Citigroup Inc.’s to make it the third largest in the U.S.,” according to the Wall Street Journal. The top spots in the U.S. league table go to JPMorgan Chase and Bank of America.
Taiwan elected Tsai Ing-wen as its first female president on Saturday in a landslide victory for the Democratic Progressive party, the BBC writes.
CORRECTION: QNB Al Ahli announced it recorded a standalone net profit in 2015 of EGP 3.08 bn, a y-o-y growth of 40.1% from 2014’s figure of EGP 2.20 bn. In Thursday’s issue, we mentioned incorrectly that the figure only grew 3.8% y-o-y.
EGYPT IN THE NEWS
“This boon for Ethiopia is the bane of Egypt,” The Economist wrote, describing the Grand Ethiopian Renaissance Dam. Historical treaties aside, the newspaper looks to Cairo saying that “officials in Egypt, while loth to fix leaky pipes, moan that the dam will leave them high and dry.” President Abdel Fattah El Sisi is praised for his move to tacitly bless construction of the dam so long as there is no “significant harm” to downstream countries, but calls it long overdue. Keep your eye on Sudan, The Economist suggests, as it is starting to shift its support toward Ethiopia’s camp after promises it would receive some of the power produced by the dam. The paper warns that “disagreement between Egypt and Sudan over such things as the definition of ‘significant harm’ bodes ill,” but, ultimately, “if Egypt is made to feel at the mercy of its neighbours, it may not have finished rattling its sabre.”
The 25 January Revolution has not “failed” but is still ongoing, posits The Guardian’s Jack Shenker in an edited excerpt from the former Egypt correspondent’s book “The Egyptians: A Radical Story” (set set to come out at the end of the month). In the ramp up to the anniversary of the uprising, Shenker says the closest historical parallel isn’t Gamal Abdel Nasser’s coup in 1952, but “the stream of revolutions that swept across Europe in the late 1840s in which certain segments of society attempted for the first time to enter politics … Those uprisings appeared at first to have failed, as the old order clung on to formal rule. But the maelstrom they engendered continued for many decades and ultimately transformed the nature of the modern state as we know it.”
The dangerous consequences of Ethiopia’s GERD that no one is talking about: Most of our readers, as well as most foreign and domestic media outlets (such as in The Economist’s primer mentioned in Egypt in the News), seem to have some awareness of the main problem posed to Egypt by Ethiopia’s Grand Ethiopian Renaissance Dam (GERD): during the five to seven years required to fill the reservoir, Egypt’s share of the Nile water will be reduced by 12%-25%. The GERD’s construction is already halfway complete, while impact studies on downstream countries were apparently never considered by the Ethiopian government and have yet to even begin.
However, what seems to be glaringly absent from both the media and statements by Egyptian officials are a number of adverse effects of the dam’s completion that may prove much more devastating and difficult to reverse. A group of nonpartisan international researchers convened at MIT in November 2014 to discuss the GERD and its effects on downstream countries.
Increased salinization of Egypt’s agricultural lands in the Nile Delta: Increased salinization indirectly caused by the GERD is set to negatively affect mns of hectares of Egypt’s agricultural land. The report notes: “If there is a fast and significant buildup of salts in Egypt’s agricultural lands and in the Nile surface water in the Delta due to reduced flushing, Egyptian farmers and policymakers may be taken by surprise. They may be unprepared to respond quickly and effectively to address the problem. This salinization problem occurs in irrigated lands in all arid zones and can be managed provided that there is sufficient time to build infrastructure and implement the policies needed to address it.”
Design flaws: There are serious issues with the design of the GERD’s saddle dam, whose “purpose is to prevent water stored behind the GERD from spilling out of the northwestern end of the reservoir.” These flaws, if left unaccounted for and result in a rupture, could cause “an economic and humanitarian disaster for Sudan, where the waters released by a saddle dam failure would flow.”
The GERD is just the beginning: Ethiopia has a number of hydropower projects scheduled to come online this decade. The report speculates: “A second large water storage facility in the Blue Nile gorge would be the next step in a Blue Nile cascade.” (Read the 17-page report here, pdf)
IMAGE OF THE DAY
The AP’s 14-image photo gallery of the newly inaugurated Wadi El Hitan Fossils and Climate Change Museum in Fayoum: Unveiled to the public this past Thursday, the UNESCO World Heritage site museum’s “centerpiece is an intact, 37-million-year-old and 20-meter-long skeleton of a legged form of whale.” The AP’s Nour Youssef astutely takes note of the museum’s simple and elegant design: “The sand-colored, dome-shaped museum is barely discernible in the breathtaking desert landscape that stretches all around. ‘When you build something somewhere so beautiful and unique, it has to blend in with its surrounding … or it would be a crime against nature,’ the museum’s architect Gabriel Mikhail [CV, pdf] said, pointing to the surrounding sand dunes.” (View gallery, click on the image in the article to expand the photo gallery, all photographs by Thomas Hartwell for the AP)
While we have no idea who Mr. Mikhail is, and have no ties to him, we want to praise both his vision as well as every official who signed off on it, as it goes against every impulse in the Egyptian public and private sector’s conceptualization as to what a building should look like.
DIPLOMACY + FOREIGN TRADE
Foreign Affairs Minister Sameh Shoukry met with Siemens CEO Joe Kaeser on the last day of his four-day trip to Germany, the ministry announced. The two followed up on Siemens’ investments in Egypt, with Kaeser labelling the projects in Egypt as a model that will be used in other countries.
Jordanian investors association says Kabil’s foreign factory registry initiative violates free trade agreement: President of Jordan’s Society of East Amman Industrial Investors Iyad Abu Haltam said last week that Minister of Trade and Industry Tarek Kabil’s recently issued regulations for foreign factories to list in a registry will harm Jordan’s exports to Egypt, the Jordan Times reported. Abu Haltam said the regulations could constitute a violation of the Grand Arab Free Trade Zone Agreement (GAFTA), of which Egypt has been a party since 1981, but which only came into force in 1998 and witnessed significant reduction in trade barriers starting from 2005.
The EGPC and Iraq’s Oil Ministry reached a preliminary agreement that could see Egyptian companies provide technical and engineering assistance to develop Iraq’s oil and gas infrastructure, Al Mal reports. Projects expected from the agreement include providing engineering consulting, operating storage and refining facilities and connecting gas to homes. The two sides will now begin working on memoranda of understanding.
Edison looking to sell part of the Abu Qir field
Italy’s Edison is looking to sell part of its Abu Qir field in Egypt, Reuters reported. The company is believed to have opened the books to prospective buyers who reportedly include the Kuwait Foreign Petroleum Exploration Company. One source said that at least three other companies are having “a look.” Edison, which paid USD 1.4 bn for the field in 2009, “is considering reducing its stake in Abu Qir, but keeping the majority and remaining in Egypt as long-term operator,” the company’s spokesperson said. (Read)
Energy prices are unlikely to be reduced domestically, IOC dues to be reduced
It is unlikely that the government will reduce the prices of energy products domestically, despite the international drop in oil price, a source told Al Masry Al Youm. The source said the price drop will have a mixed impact on Egypt; it will help the general budget, but will impact refineries negatively. The government is also likely to use the price environment to lower the dues owed to IOCs. The changes explain why the ministries of electricity, oil and finance are looking to hold an emergency meeting to finalize the financial disentanglement between government entities. (Read in Arabic)
GANOPE expects USD 113 mn in investments in FY2016/17
GANOPE is targeting USD 113 mn in investments in FY2016/17, Chairman Abu Bakr Ibrahim told Al Borsa. Five agreements that have a minimum investment of USD 100 mn are set to be finalized soon. Ibrahim says production from concessions licensed by GANOPE is scheduled to reach 27,500 bbl per day. (Read in Arabic)
Petroleum Ministry unveils five-year plan for sector
The Petroleum Ministry expects demand for oil and gas to rise 22% from FY2015/16 to FY2020/21, according to a five-year plan unveiled by the ministry in what appears to be an exclusive to Daily News Egypt. To address the surge in demand, the ministry launched new exploration and discovery initiatives to add 6 bcf per day in the the next five years through the North Alex, Salamat, Atol, WDDM 9b and Zohr projects. While the supply / demand gap was expected to hit 54 mn tons by FY2020/21, under the ministry’s new strategy that number is set to dwindle to 3 mn. (Read)
Egypt to chair Irena general assembly
Egypt was chosen to chair the general assembly of the International Renewable Energy Agency (Irena) at the Sixth Assembly of Irena taking place in Abu Dhabi. In attendance was Electricity Minister Mohamed Shaker, who outlined Egypt’s renewable energy strategy and its plan to see renewable energy account for 65% of all production in Egypt by 2050. The conference, which was attended by officials of 150 countries and representatives from 130 organizations, explored accelerating the deployment of renewable energy as a means of achieving development and meeting climate change goals, Gulf Today reports. (Read in English and Arabic)
Misr Concrete completes EGP 250 mn South Alamein water plant
Misr Concrete Development Company has completed the EGP 250 mn South Alamein water plant, Al Borsa reported. The company will hand the project over to the Executive Agency for Water and Wastewater at the end of this month, noting that turnkey project was scheduled for last October. The project was delayed due to water shortages and equipment being installed by the authority. (Read in Arabic)
BASIC MATERIALS + COMMODITIES
Production from the Hamash goldmine to resume after a four-year hiatus
Operations at the Hamash goldmine are scheduled to resume this week following a four-year hiatus. An Egyptian Mineral Resources Authority geologist said the mine could produce 3,000 ounces of gold through next September. The company managing the goldmine, Hamash Egypt for Gold Mines, which is a JV between EMRA and Matz Holdings, estimates the mine’s reserves at 150k ounces of gold. The company began production in Egypt intermittently in 2007 until it froze operations in 2012. (Read in Arabic)
Plastic industry threatened by shortages in energy, raw materials, labor
Plastic production fell by up to 40% last year, according to Hamed Moussa, head of the Egyptian Plastic Exporters and Manufacturers Association (EPEMA). Rising energy prices, tariffs, long waiting times to clear raw materials at customs and a shortage of specialized labor are the main reasons for the slump, said Moussa. Around 3,500 facilities work in the plastic industry, according to data from the Chamber of Chemical Industries. 80% of those are SMEs. (Read in Arabic)
REAL ESTATE + HOUSING
Majid Al Futtaim Group broke ground on the EGP 4 bn City Center Almaza project
Majid Al Futtaim Group officially began work on the EGP 4 bn City Center Almaza project on Thursday with the laying of the corner stone. MAF CEO Alain Bejjani said the facility will be home to 300 retail outlets, a Carrefour hypermarket, a 16-screen cinema, an entertainment park as well as a 4,000-vehicle car park. The project is expected to open to the public in the first quarter of 2019. The Almaza City Center is the third of its kind in Egypt and the City Center’s 14th. (Read in Arabic)
Tourism sector running worst monthly losses in more than two decades
The tourism sector has been incurring losses of EGP 2.2 bn per month — the worst it’s endured in 20 years — since the Russian Metrojet crash in October 2015, Tourism Minister Hisham Zaazou told Al Arabiya on Friday. The flight bans on Egypt took the largest toll on the figure, he says: “The numbers of tourists have been decreasing since Russia and Britain banned flights to Egypt from their airports.” And while 2016 has not been good to the sector either, with three tourists stabbed in a Hurghada attack and several targeted in Cairo, the minister says these have not had a tangible impact on tourism.
EGP 300 mn earmarked for new security measures in bid to have travel bans lifted
Tourism Minister Hisham Zaazou said Egypt would spend EGP 250 mn to improve tourist security measures. The government will install “more CCTV cameras, sniffer dogs and X-ray machines at tourist resorts, to be installed within ‘a few weeks.’” Another EGP 50 mn will be spent on new security measures at temples in Luxor, the Telegraph’s Lizze Porter wrote. Moscow is still insisting on a more hands-on approach, Al Masry Al Youm reports: Russia wants to supervise every step tourists go through in Egyptian airports to ensure that security standards are met.
AUTOMOTIVE + TRANSPORTATION
Gov’t asks Bombardier to reduce cost of Sixth of October monorail
The government has asked Bombardier Inc. to reduce the cost of building the Sixth of October monorail, sources told Al Borsa, refusing to reveal the cost of the project. The monorail project, which will connect Sixth of October to Sheikh Zayed, was awarded to a consortium that includes Orascom Construction, the Arab Contractors, and Bombardier Inc. It will be funded through a USD 1.5 bn loan over 14 years and administered through NUCA. The foreign portion of the funding, USD 800 mn, will be provided by UK Export Finance and Export Development Canada, Al Borsa adds. (Read in Arabic)
Transport Minister studies domestic train manufacturing with AVIC
Transport Minister Saad El Geyoushi met with a delegation from the Aviation Industry Corporation of China to discuss domestic manufacturing of trains for the electric rail project in Tenth of Ramadan. El Geyoushi announced a fleet of 20 trains will be needed, as well as a ticket price of EGP 28. The project involves 14 stations between Al Obour and Belbeis, with a second parallel freight train running alongside it. (Read in Arabic)
Gov’t to partner with private sector to “save railroads”
The government has been taking steps toward increasing cooperation with the private sector in the railway industry, following continued poor fiscal performance and Egyptian National Railway’s debt of over EGP 26 bn to the state, reported Al Borsa. An investment plan up to 2030 worth around EGP 90 bn will be issued to the private sector, with the authority open to PPP, BOT or JV projects. Additionally, the Transport Ministry has issued a tender for a consulting office to restructure its subsidiaries, which have caused more financial harm than good in recent years. (Read in Arabic)
PM inaugurates river line between Cairo and Damietta
Prime Minister Sherif Ismail inaugurated the Nile river transport line between Cairo and Damietta at the Damietta river port on Saturday. Ismail describes the event as an important part of the river transport network, which handles 30% of all transportation, and saves the country USD 1.5 bn and 30 bn tons of diesel per annum. The government is hoping that 30% of all internal cargo shipping will be executed via river transportation, which will help mitigate inflation, says Transportation Minister Saad El Geyoushi. (Read in Arabic)
OTHER BUSINESS NEWS OF NOTE
Naguib Sawiris invests in employment platform startup Shaghalni
Businessman Naguib Sawiris has invested in employment platform startup Shaghalni, he announced on Twitter, adding that it was part of his goal of curbing unemployment. Shaghalni CEO and Founder Amr Khalifa confirmed the news, but did not reveal any details on the investment. Shaghalni currently has 900 employers and 1,000 potential employees listed, which it aims to grow to 10,000 and 50,000 respectively in 2016. (Read in Arabic)
EGYPT POLITICS + ECONOMICS
Police arrest 47 Facebook page admins, activists in lead-up to 25 January
Egyptian security force arrested the administrators of 47 Facebook pages that, according to Reuters, the interior ministry says are run by the Muslim Brotherhood, in the lead up to 25 January. On Friday Doctors’ Syndicate activist Taher Mokhtar was arrested along with two others for the possession of flyers that call for the overthrow of the current regime and protests on 25 January, reported Ahram Online. “Egyptian security forces have arrested several activists and shut down cultural spaces to prevent them from gathering, while government-appointed clerics have preached against protests,” Reuters says. It was not clear how many people are involved in managing the 47 Facebook pages. (Read)
Mohamed Elneny finalizes move to Arsenal FC
Arsenal has officially signed Mohamed Elneny from FC Basel, according to the Arsenal website. The 23-year-old midfielder spent three years with Swiss outfit Basel FC, making over 90 league appearances and winning three consecutive Super League titles. He also helped the Egyptian national team to the quarter-finals of the London Olympics in 2012. The move is reported to have cost Arsenal GBP 7.4 mn. (Read)
ON YOUR WAY OUT
Golden Pyramids Plaza’s board of directors has agreed to proceed with delisting the company from the EGX, Al Mal reported. The company, owned by Saudi businessman Hassan Sharbatly, owns the City Stars mall in Cairo and has capital of USD 539 mn.
Switzerland will only return the USD 650 mn frozen assets of Egyptian ex-President Hosni Mubarak if it can prove the funds were obtained by embezzling public funds, says Swiss attorney general Michael Lauber, according to Aswat Masriya.
Banque Misr will expand its online and mobile banking services in 2016, according to Al Borsa.
Daesh has reportedly created a secure proprietary Android app to use as a messaging platform after it was suspended from Telegram in October, according to Sputnik.
USD CBE auction (Thursday, 14 January): 7.7301 (unchanged since Wednesday, 11 November)
USD parallel market (Thursday, 14 January): 8.58 (unchanged since Tuesday, 12 January)
EGX30 (Thursday): 5,857.7 (-5.6%)
Turnover: EGP 394.9 mn (9% below the 90-day average)
EGX 30 year-to-date: -16.4%
THE MARKET ON THURSDAY: The EGX30 sunk 5.6% to 5,857.7 points on Thursday — its lowest level since October 2013 — with all indices in the red. Ezz Steel, Orascom Construction, and Orascom Telecom Media and Technology were among the worst performers. With a market turnover of EGP 394.9 mn, local investors were the sole net sellers. Regional indices didn’t perform much better, with the TASI down 3.3%, ADX 1.6% and DFM 3.6%. On the global front, the Nikkei 225 posted a 2.7% decline and European indices were also in the red, with the FTSE 100 down 1.5%, DAX 2.5% and CAC 40 2.4%.
Foreigners: Net long | EGP + 6.7 mn
Regional: Net long | EGP + 33.3 mn
Domestic: Net short | EGP – 40.0 mn
Retail: 73.3% of total trades | 79.4% of buyers | 67.1% of sellers
Institutions: 26.7% of total trades | 20.6% of buyers | 32.9% of sellers
Foreign: 11.1% of total | 11.9% of buyers | 10.3% of sellers
Regional: 11.2% of total | 15.4% of buyers | 6.9% of sellers
Domestic: 77.7% of total | 72.7% of buyers | 82.8% of sellers
WTI: USD 29.42 (-3.82%)
Brent: USD 28.94 (-3.79%)
Gold: USD 1,090.70 / troy ounce (-0.20%)
TASI: 5,838.1 (-3.3%)
ADX: 3,955.1 (-1.6%)
DFM: 2,815.5 (-3.6%)
KSE Weighted Index: 355.4 (-2.2%)
QE: 9,185.1 (-2.3%)
MSM: 5,112.5 (-1.7%)