House of Reps shoots down Civil Service Act, will need to debate emergency spending bill or state bureaucracy will go unpaid
The House of Representatives will need to consider an emergency spending bill after sending the Civil Service Act down in flames. (Speed Round)
Even with oil at under USD 30 a barrel, the state is still subsidizing petroleum products. (Speed Round)
Fitch agrees with Moody’s: New pro-SME regulations could weaken asset quality in banking sector. (Speed Round)
EFG Hermes, HSBC, Nomura were top fee earners among Middle East investment banks in 2015; total fee wallet for investment banks shrank to lowest level since 2012. (Speed Round)
Is Abraaj looking to acquire Rameda Pharma? (Speed Round)
No plans to raise retirement age, gag order on Genena case. (Speed Round)
Then again, maybe not. Or: The economic wisdom of Jamie Dimon. (The Macro Picture)
People’s Bank of China interested in Zohr field, Suez Canal development zone, new administrative capital. (Spotlight)
WHAT WE’RE TRACKING TODAY
The FTSE All-World Index slipped into bear territory yesterday as global markets plunged, the Financial Times reports, bringing U.K., French and Japanese benchmarks to 20% below their 2015 highs. The Wall Street Journal also has a take on yesterday’s bloodletting, but unless you’ve been living under a rock, neither piece is likely to make you look any differently at what’s going on in markets. Oh, and oil closed yesterday below USD 27 per barrel.
Chinese President Xi Jinping is expected to visit Luxor today after landing in Cairo yesterday. Xi is reportedly attending a celebration at Luxor temple commemorating 60 years of Chinese-Egyptian relations. Ahram Online is also reporting that Xi and President Abdel Fattah El Sisi will hold a press conference today at Kasr El-Kobba, according to Ittihadiya, and Xi is making a stop at the newly seated House of Representatives, giving a speech at the Arab League headquarters, and attending the launch of the second phase of the Egyptian-Chinese commercial and economic project in Ain Sokhna. Also expected: An award for the busiest schedule any world leader has ever had to manage.
The 26th African Union Summit kicks off today in Addis Ababa. President Abdel Fattah El Sisi is attending the event, having scheduled a mini-summit to discuss GERD with Ethiopia and Sudan.
The World Economic Forum is on its second day of meetings in Davos today. WEF has a live blog up of yesterday’s events. The Guardian has far more interesting coverage, asking experts at the event one recurring question: Are we on the brink of another financial crisis? The answers include: “It’s a correction,” “Yes, we are heading for a crash,” and an honest to goodness, “I don’t know.” Bloomberg has an even more entertaining Davos lineup entitled The Charts That Tell You Everything About Davos, including a Davos Twister board, a chart tracking jobs lost to tech by 2020 and one on the number of women at Davos over the years (good news: it’s double what it was in 2002, bad news: it’s still under 30%). We’re following the hashtag #wef today for more updates.
ON THE HORIZON
Monday marks the fifth anniversary of the 25 January Revolution, meaning the nation is taking the day off (Enterprise included). The Foreign Affairs Ministry is launching a campaign called “Egypt Is Better Today” in the lead up to anniversary, just in case you missed how much better we’re doing with all that revolution business behind us. The campaign, according to the ministry, aims to outline the achievements accomplished since 2011. The ministry will be tweeting under the hastag #EgyptBetterToday.
The U.S. Federal Reserve’s Federal Open Market Committee will meet on Tuesday.
The Central Bank of Egypt’s Monetary Policy Committee will meet on Thursday, 28 January to look at interest rates.
LAST NIGHT’S TALK SHOWS
Talk shows were a little slow last night without the rather animated Amr Adeeb and Lamis El Hadidy, but Khairy Ramadan held court on the economy, hosting Head of the Customs Authority Magdy Abdel Aziz.
“In 2015, the authority’s revenue from customs on cars was EGP 5.5 bn, and the total authority’s revenue was EGP 22.5 bn, which was 6% above target,” Abdel Aziz said.
Abdel Aziz argued that many products are exempt from customs and most goods imported are in the 0%-10% tariff bracket, but the exemption is often not reflected in the final price the consumer pays. This includes mobile phones and cars from Turkey, Morocco and Arab countries. Ramadan and his callers on Momken were concerned about customs on passenger cars for the better part of the interview. Looks like Ramadan is in the market for a new ride. Abdel Aziz assured Ramadan that by 2019, all cars from the European Union will be exempt from customs, so perhaps he should hold off for a few years.
Customs exemptions on tea imports should have saved a total of EGP 44 mn, Abdel Aziz argued, but none of this reflected on the final price of tea bags. “In fact, some teas were actually made more expensive after the exemption was implemented,” Abdel Aziz said. “But it is not the Customs Authority’s role to monitor the final product’s price; other bodies should be in charge of this to keep prices in check.”
Things were not as rosy on the parliamentary front last night. MPs called Ramadan to argue about the rejection of the Civil Service Act (more in Speed Round, below), with MP Abdel Rehim Ali calling it a “democratic battle.” He went so far as to call parliamentarians “lions” for standing up to the bill despite pressure to pass it. On the other hand, MP Ossama Heikal called the decision “a true disaster,” adding that the consequences of rejecting the bill are “worse than approving it because salaries, which should be paid next week, will be put on hold until a new [bill] is issued and approved. This will take at least a month.”
Ibrahim Eissa labeled the decision “a slap in the government’s face,” and called the state a “failure” for not being able to “market” its laws.
And in a parallel universe, Samir Farag, strategic expert and former head of the military’s Department of Morale Affairs, called Al Qahera Al Youm and said: “There are documents and studies proving that Egypt will be the world’s largest gas exporter by 2019.” (No comment — not when you consider that Algeria [by far the largest North African gas exporter] and the number six exporter in the world is itself dwarfed by top exporters Russia, Qatar, Norway and Canada.)
Culture Minister Helmy El Namnam called in to Momken to discuss the Chinese president’s visit to Luxor, telling Ramadan that although the tourism sector had taken a hit these past three years, this season’s hotel occupancy rate was 60%, “which is relatively good considering the recent rates.”
The House of Representatives voted down the Civil Service Act on Wednesday amid a stormy debate that forced a half-hour recess, Al Mal reports. Representing the government at the session was Legal Affairs Minister Magdy Al Agaty, who pointed out that the rejection would mean a freeze on government salaries and pensions, the entire payment structure and legal framework for which is based on the controversial act. The vote was marred by lobbying campaigns by political parties that included fliers being distributed in the House calling for the bill’s rejection. The government itself went on the lobbying offensive yesterday when Prime Minister Sherif Ismail sent a letter drafted by his legal counsel to the Speaker of House warning of the danger to the reform process if the bill were shot down. The bill was rejected last week by the House Manpower Committee.
What’s next for the government? We may see another attempt to pass the bill in a watered-down form, as MPs who took a moderate stance acknowledged the need for reform but voted against it because of specific articles. To stave off a possible freeze on salaries, the government will be looking at running a temporary two-article bill through the House, said Al Agaty. This vote places a question mark on that other key reform bill — amendments to the tax code that would enact a value-added tax.
Where do we stand now? The House passed 13 pieces of legislation yesterday, Al Ahram reports, leaving — by our math — six acts as-yet not ratified.
Don’t let low gas prices fool you: The state is still subsidizing fuel prices domestically, Khaled Othman, the deputy head of EGPC tells Al Shorouk, denying remarks that the international price drop meant the government was overcharging consumers. The subsidy cost is calculated based on the average annual price, not on a day-to-day basis, he adds. However, 95-grade octane and fuel oil are no longer subsidized, he notes. Lower-grade fuel still receives government subsidies. Othman explains that even at an average of USD 40 per bbl, one liter of 92-grade octane gasoline costs EGP 3.40 per liter — but retails for EGP 2.60. Similarly, butane gas cylinders that cost EGP 11 are sold for EGP 8 and diesel is sold at EGP 1.8 per liter but costs the state EGP 3.3. Overall, Othman expects the state to save EGP 21 bn on fuel subsidy expenditures, given the oil price drop, to register EGP 55 bn for the whole year.
Fitch agrees with Moody’s: The new CBE regulations designed to boost SME lending could weaken asset quality in the sector. Fitch worries that “the drive to stimulate the domestic economy is ambitious and could — if implemented — force banks to lend to weaker borrowers to fulfil the lending quotas. It could encourage banks to restructure existing corporate and SME loans to meet the quotas, which could lead to understated asset quality indicators for the sector.” The other measures aimed at reducing concentration risk, however, are “moderately credit positive but are unlikely to significantly affect the banks’ overall risk profiles.” They will not have a big impact in reducing high concentration levels in the corporate loan books because “the large privately owned Egyptian banks rarely utilised the maximum available limits.”
The United Bank has not received any indication from the CBE that it will be listed on the EGX, a source tells Al Masry Al Youm. The decision to take the bank public is yet to be made, the source adds. Separately, a source at Bank of Alexandria says assessments to float the government’s 20% stake in the bank have been ongoing “for years.” Speculations arose that both banks might be listed following Tarek Amer’s comments yesterday.
EFG Hermes, HSBC and Nomura were the top earners last year as the Middle East fee wallet for investment banks shrank 16% to its lowest level since 2012, according to a data compiled by Thomson Reuters for its Middle Eastern IB Analysis 2015. Total fee income in the region fell to USD 636.4 mn in 2015 as an uptick in M&A activity failed to offset a 50% year-on-year drop in equity and equity-related issuances to USD 5.7 bn. Highlights of the report:
- HSBC was the top earner overall, with a 9.9% share of the total fee wallet;
- EFG Hermes was number one on equity capital market underwriting fees;
- HSBC was the top earner on M&A fees;
- Nomura came first on debt capital markets;
- Mitsubishi UFJ took top place for syndicated loan fees.
EFG Hermes is the only Egyptian bank to have placed in the top 10 on the league tables in the past two years and edged out both global and regional peers for the top spot this year. The report notes that “EFG Hermes took the top spot for ECM underwriting fees in the region with a 15.5% share,” vaulting to the top of the rankings from fifth place last year. EFG also ranked number three on the list of top ECM bookrunners in 2015 at USD 581.3 mn, with a 10.1% market share on five deals, behind only Deutsche Bank (number two with three deals) and HSBC (number one, also with three deals). EFG was global coordinator and bookrunner on three of the five largest transactions in the region last year as ranked by Thomson Reuters, including Integrated Diagnostics Holdings, Emaar Misr and Edita Food Industries. The firm was also sponsor of Orascom Construction’s listing on the Nasdaq Dubai and global coordinator and joint bookrunner on OC’s listing on the EGX, both last year. The full report is available as a download after registering at dmi.thomsonreuters.com.
Adding some global flavor: JP Morgan was the top fee earner globally last year with USD 5.98 bn in fees and a 6.9% global market share, according Thomson Reuters’ Global Investment Banking Review. Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley and Citi rounded out the top five.
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MOVES- Alaa Saba, CEO of Beltone Financial, submitted his resignation from the EGX’s Board of Directors as he is soon to be leaving Beltone Financial Holding, according to the bourse.
Abraaj is at it again with plans to make an offer to acquire Rameda Pharmaceutical, Al Borsa claims. Abraaj’s push for Rameda was apparently spurred by Raya Holding Company and Sphinx Private Equity Management’s decision to sell their respective 30% and 17% stakes in Rameda. Abraaj has reportedly been seeking a pharmaceutical manufacturer since 2011.
MEG Misr for Glass, a fully owned subsidiary of Middle East Glass Manufacturing Company, has acquired 100% of the share capital of Misr Glass Manufacturing Company for EGP 735 mn. “The acquisition of Misr Glass Manufacturing Company will allow Middle East Glass to further expand its production capacity,” the press release says. HC Securities & Investment was the exclusive financial advisor to MEG Misr for Glass in the transaction.
The Chamber of Tourism Establishments has not announced the official shuttering of any hotels, says Hala El Khatib, head of the chamber. Her comments came as Federation of Tourism Chambers chief Elhamy El Zayat he had said 21 hotels in Sharm El Sheikh and Hurghada had shut down under pressure from the travel bans imposed after the Metrojet disaster, Amwal Al Ghad reported. He said he was misquoted.
It looks like the legislation that would create a value-added tax may still need some tweaking: Investment incentives, tax breaks and exemptions in key pieces of economic legislation including the income tax and leasing acts as well as state contracts on mineral and energy concessions are in direct conflict with the current draft of the VAT legislation, according to recommendations sent to the Finance Ministry by professional associations including including the Egyptian Taxation Society (ETS). The recommendations also attack elements of the VAT, including eliminating tax appeal committees and a lack of clarity on setting the 3% surtax on those not required to register for the VAT, Al Mal reports.
There are no plans to raise the retirement age in Egypt to 65, the head of the National Social Insurance Fund tells Al Masry Al Youm. National social insurance is currently being finalized and is expected to be made available for public dialog, he adds.
Gag order on Genena: Attorney General Nabil Sadek issued a gag order on the court case against Central Auditing Organization head Hesham Genena, Al Masry Al Youm reports.
BG Group’s 2015 results could exceed expectations: “Our excellent operational performance in 2015 is expected to deliver results in line with, or ahead of, our guidance for the year,” BG CEO Helge Lund said. Even though the company said its operational growth was primarily in Australia, Brazil and Norway, it managed to deliver 282 LNG cargos, including its first ever cargos to Egypt, Pakistan and Jordan. Shell, BG’s potential acquirer, is not doing as well, with its current cost of supplies earnings (a metric that excludes the impact of oil price changes on inventory) expected to drop to USD 1.1-1.9 bn in 4Q2015 from USD 4.2 bn in 4Q2014.
Shell’s bid to acquire BG Group received a boost on Wednesday, with Norway’s sovereign wealth fund Norges Bank Investment Management sending a statement to shareholders indicating it will vote in favor of the transaction, Reuters reported. “In an environment of low oil price, we believe the companies will stand stronger together,” according to the fund’s spokesperson.
Were 2014-2016 the hottest years on record? Depends on who you ask and which measure they’re using: Following reports from the Guardian stating 2014 was the hottest year on record, a report from Berkeley Earth saying the same for 2015, and the Guardian saying 2016 is projected to beat both records, it behooves us to ask who is saying what and according to what measures. In the Guardian piece on 2014, the source cited for the 2016 projections is the UK’s Met Office, which usually more or less fall in line with the same estimates used by reports coming out of the US from the National Oceanic and Atmospheric Administration (NOAA), NASA and Berkeley Earth, among others.
… So, where’s the controversy? James Taylor at Forbes decided to rain on everyone’s parade last week by asserting ‘2015 Was Not Even Close To Hottest Year On Record.’ “Satellite temperature readings going back to 1979 show 1998 was by far the warmest year in the satellite era, followed by 2010. 2015 comes in third. And these results are only for the period since 1979.” Further: “Scientists measuring oxygen isotopes from ice cores drilled in Greenland and Antarctica (among other methods) report that temperatures were significantly warmer than today for most of the past 10,000 years. . . . current temperatures remain cooler than almost all other time periods in human history.”
Other international headlines this morning that either carry implications for Egypt or that are simply worth noting in brief:
- China’s central bank wants to launch its own digital currencies “to cut the costs of circulating traditional paper money and boost policymakers’ control of money supply,” CNBC reports. The bank had set up a team to look into the move back in 2014, which will take the lead on the launch of currencies that will compete with the likes of Bitcoin.
- The next installment of the Star Wars epic will hit theaters worldwide on 15 December 2017, seven months later than originally planned, reports CNBC.
THE MACRO PICTURE
Most stories out there this morning are a rehash of the various theories we’ve seen this week, but CNBC’s “Emerging markets should brace for more outflows” is worth a look, citing as it does figures on capital flows from the Institute of International Finance. At the core: Last year was worse than expected, with capital outflows from EM of USD 735 bn against an original projection that outflows would ring in at about USD 540 bn. Either way: 2015 was the first year since 1988 to see net capital flight from emerging markets. IIF is suggesting we’re looking at net outflows of USD 448 bn this year. Look for flight from China to account for the lion’s share, it says.
Dimon waffles in Davos: Says the JPMorgan Chase Chairman and CEO: “When the market is this bad, it’s reasonable to say it might be telling you something, but it’s also reasonable to say ‘maybe it’s not.’” Wait, wait, it gets better: “I’m hopeful that this is just all a big adjustment. A fast adjustment might be better than a painful, slow death.” No [redacted], Sherlock. (Read on CNBC, or watch — run time 2:01)
EGYPT IN THE NEWS
“We have taken several measures to ensure activists don’t have breathing space and are unable to gather, and several cafes and other meeting places have been closed, while some have been arrested in order to scare the rest,” an official at the Homeland Security Agency tells Reuters. Activists, Facebook admins, galleries and a host of others have faced an alarming crackdown in the weeks leading up to 25 January, begging the question, Reuters’ Ahmed Aboulenein asks, who exactly is afraid of 25 January? “There is a high level of paranoia on the part of the government. It is an inadvertent admission that there have been a number of failures,” says Timothy Kaldas, nonresident fellow with the Tahrir Institute for Middle East Policy. The irony is that the majority of Egyptians are not actively opposed to President Abdel Fattah El Sisi, say activists, despite his slightly waning popularity due to a sluggish economy. “This is a regime that knows it has something to be scared of,” says the editor of Weghet Nazar political journal Ayman al-Sayyad.
German think tank Friedrich Naumann Foundation, which has links to Germany’s Free Democratic Party, is pulling its Middle East operations out of Egypt to Jordan as “ever-stricter government restrictions have made it impossible to carry out its work,” AP reports yesterday. “Since today, every political seminar, every conference that we organize with our Egyptian partners is misunderstood as a possible threat to the internal security of Egypt. We have no basis to operate,” says chairman of the organization, Wolfgang Gerhardt.
SPOTLIGHT on Chinese President Xi Jinping’s visit to Cairo
Eni’s Zohr field, the Suez Canal Development Area and the new administrative capital are among the projects the People’s Bank of China will be willing to help bankroll in Egypt, said Zhou Xiaochuan, the bank’s governor, at a meeting with Prime Minister Sherif Ismail and central bank governor Tarek Amer. Loans were also discussed, and it now appears that a USD 1 bn transfer to the CBE from China will be a loan and not a deposit, Al Mal quotes Zhou as saying. The three also discussed USD 800 mn in loans to NBE and Banque Misr and Egypt taking steps toward joining the One Belt, One Road initiative, a decision taken by the Ismail cabinet during its weekly meeting on Tuesday. President Abdel Fattah El Sisi and Chinese President Xi Jinping are expected to sign 21 cooperation agreements that would see Chinese companies participate in a number of strategic projects, which International Cooperation Minister Sahar Nasr estimates will be worth USD 14 bn, Al Ahram reports.
As for the loans, Banque Misr signed a USD 100 mn loan agreement with the China Development Bank, making it the first confirmed agreement with the visiting Chinese delegation. The five-year term loan allows Banque Misr to begin repayments after two years. The loan is a reflection of the confidence international finance institutions have in the Egyptian economy and banking sector, reads a statement from Banque Misr published in Al Borsa.
China wants in on Daba’a as well: China National Nuclear Corporation (CNNC) has offered to build a 1 GW nuclear power plant in Daba’a for USD 5 bn under relatively kind financing terms, which include loans from Chinese banks, Al Borsa reports. The Daba’a nuclear site can hold eight nuclear reactors, says first Deputy Power Minister Mohamed Al Yamany. Russia’s Rosatom will install four 4.8 GW nuclear reactors in Daba’a. Al Yamany adds that the ministry has received offers for plants from other Korean, Chinese and American companies.
Speaking of which: The final agreements for the Daba’a nuclear power station are expected to be signed by the end of January, a source tells Al Masry Al Youm. The agreement will be governed in accordance with Egyptian law, which will precede International Atomic Energy Agency regulations and Russian laws, respectively, according to the source. In more technical news, the station will be designed in a manner that allows it to run autonomously for 72 hours in the event of an accident.
Each charter airline seat carrying a tourist from China will be subsidized to the tune of USD 75 by the Tourism Ministry, aiming to attract 200k Chinese tourists in 2016, the ministry’s economic advisor Adla Ragab tells Al Mal. Charter flight operators will receive the subsidy as long as the plane is less than 75% booked. The subsidy for Chinese tourists is USD 30 higher than the per-head subsidy the ministry gives to airlines coming from other destinations. The ministry usually grants flights that are longer than 12 hours a USD 45 per-seat subsidy, which falls to USD 40 per seat if the flight is less than four hours long. (Read in Arabic)
“Egypt has been suffering from an acute case of doing the same thing over and over and expecting different results for decades,” writes veteran financial reporter Patrick Werr in a piece for The National entitled “Six misguided ideas about the Egyptian economy.” Werr hits the proverbial nail on the head, positing that the country’s overvalued currency is in large part responsible for its ailing economy. “Egypt has spent or borrowed tens of [bns] of USD to support the pound in the past five years. For what? In the end, it will devalue anyway.” Other things Werr believes simply won’t work just because we want them to: growing local wheat at the expense of more profitable produce for exports, the pipedream of turning Egypt’s deserts into green pastures, and the idea that moving government buildings out of city centers will alleviate traffic congestion. “If a ministry is moved to the outskirts of the city, that means the tens of thousands of employees and citizens needing services will simply have to travel farther, which means more cars and buses on city streets.”
DIPLOMACY + FOREIGN TRADE
In preparation for his visit, China’s President Xi Jinping penned a piece for Al Ahram outlining the strength of the relations between China and Arab countries generally, and Egypt specifically. The president notes that Egypt and China have enjoyed close relations for over 60 years, with this Middle East visit being his first in 2016. In his piece, Xi calls on stronger ties to restore and preserve peace regionally and reiterates his commitment to supporting an independent Palestinian state. He is also calling on Arab countries to join China’s One Belt, One Road initiative. You can read the piece in full here in Arabic.
International Cooperation Minister Sahar Nasr met with Japan’s ambassador to Egypt, Takahiro Kagawa, to discuss bilateral relations in preparation for President Abdel Fattah El Sisi’s upcoming visit to Tokyo, Al Ahram reports.
Cooperation between Russia and Egypt in combating international terrorism was the focus of a meeting between Russian Deputy Minister Oleg Syromolotov, Egypt’s Assistant Foreign Minister Mahmoud Samy and the Foreign Ministry’s Counterterrorism Unit Head Khaled Azmy. Both sides agreed to share information related to foreign fighters travelling to regional war zones. They also pledged to redouble cooperation on curbing the spread of fundamentalist ideology and terrorism financing, Al Borsa reports.
Growing UAE investments in Egyptian renewable energy projects topped discussions between Investment Minister Ashraf Salman and UAE minister of state and the Chairman of Masdar Sultan Ahmed Al Jaber, Al Mal reports.
EGPC in negotiations with Kuwait to renew fuel shipment agreement
EGPC is in negotiations with the Kuwait Petroleum Corporation to renew an agreement to import the equivalent of 3 mn bbl of crude per month with facilitated payments, set to end in September. The imported crude is used in refining companies to produce gasoline, diesel and mazut and sell them domestically, a government official tells Al Borsa. The government is looking to renew the contract as soon as possible to benefit from the oil price decline. (Read in Arabic)
Egyptian Refining Company on track to start production in second half of 2017
Qalaa Holdings-owned Egyptian Refining Company (ERC) plans to import 1.2 mn tons of crude oil per year to ensure it receives adequate feedstock from the EGPC-owned Cairo Oil Refining Company, according to ERC managing director Mohamed Saad, Al Borsa reports. Talks are in progress with Shell and Nigeria’s Sahara Energy to supply the crude. Meanwhile, production at its own Mostorod refinery is expected to begin in the second half of 2017 at a total cost of USD 3.7 bn, as 80% of construction work on the refinery has been completed, Al Ahram reports. Once completed, the refinery is expected to cut present-day diesel imports by half.
EGAS asks fertilizer manufacturers to reduce operational capacity by 10%
Fertilizer manufacturers have begun reducing their operational capacity by 10% in accordance with a request from EGAS, Al Borsa reports. Sources within MOPCO confirm they were told to reduce their capacity due to shortages in gas supply to the main network controlled by EGAS. Sources within the Alexandria Fertilizers Co. were concerned about another gas crisis, noting they lost EGP 6 mn last year due to supply disruptions. (Read in Arabic)
HEALTH + EDUCATION
Sovaldi prices could drop to EGP 800, manufacturers expect
Pharma manufacturers believe the Health Ministry’s decision to ban the import of hepatitis C medications will reduce prices by around 30%, Al Mal reports. The domestically manufactured medications will include generic versions of Harvoni, Daklinza and Olysio. The decision will impact the Egyptian patient directly, says Ahmed El Ezaby, head of the Chamber of Pharmaceuticals at the Chamber of Egyptian Industries, adding that manufacturing is open to any company creating competition. EIPICO Managing Director Osama Rostom believes Sovaldi could fall to as little as EGP 800 per pack, adding that it currently costs EGP 1,600 and was selling for EGP 15,000 earlier last year. (Read in Arabic)
REAL ESTATE + HOUSING
Madaar to invest EGP 700 mn in 2016 on Azha Resort developments
Madaar Development is looking to invest EGP 600-700 mn into its Ain Al-Sokhna Resort, Azha, in 2016, according to Managing Director Gasser Bahgat. The investment will be directed into construction contracts for the 1.6 mn sqm resort, he adds. Madaar has tapped design and consulting heavyweights Barton Willmore and Mixity to complete the project, says Bahgat. The company will issue new projects in Sheikh Zayed, the North Coast, the Cairo-Alexandria Desert Road and New Cairo, with a focus on commercial and administrative projects, adds Bahgat. (Read in Arabic)
Heliopolis Housing sells receivables to QNB-Egypt in factoring transaction
The Heliopolis Company for Housing sold EGP 410 mn in receivables Qatar National Bank-Egypt (QNB) in a factoring transaction worth EGP 320 mn. A source at the company tells Al Borsa that the two parties are in talks to on a further EGP 140 mn in receivables for EGP 110 mn. Both transactions are set to be completed before the end of 1Q2016, leaving Heliopolis receivables of EGP 500 mn. (Read in Arabic)
El Shams Housing completes final phase of Gardenia in July
El Shams Housing and Building are set to complete the fourth and final phase of the Gardenia project in July at a total cost of EGP 300 mn, according to Chairman Mahmoud Maghawri. The project is currently 45% complete, he adds, noting that the final phase includes 85 buildings and 720 apartments. The total cost of the Gardenia project in Sixth October is around EGP 1 bn. (Read in Arabic)
Manpower Ministry hands out EGP 11 mn to 15,000 tourism employees
The Manpower Ministry has issued EGP 11 mn out of its emergency fund to 15,000 tourism employees working for 126 non-performing companies, Al Borsa reports. The companies have been unable to pay salaries due to an ailing tourism sector. This brings the ministry’s total issued aid in January up to EGP 23.6 mn to 241 tourism companies. (Read in Arabic)
TELECOMS + ICT
TE Data managed to grow its market share of Egypt’s fixed-line ADSL to 73% in 4Q2015 after adding 144k new clients, bringing its client base to 3.79 mn, a source at NTRA tells Al Mal. A large number of LinkdotNet, Vodafone and Etisalat clients switched to TE Data due to service disruptions because of Telecom Egypt, TE Data’s parent company, replacing the existing copper wire cable network with fiber optics in MSAN booths.
4G mobile data services by year’s end?
Egypt plans to have 4G mobile services in place before the end of this year, says ICT Minister Yasser El Qady, according to Mubasher. The ministry is preparing a bundle of legislations related to the service to send to parliament for review, he says. The minister believes this is a step toward attracting more investments.
AUTOMOTIVE + TRANSPORTATION
Cairo river taxi hampered by bureaucracy
Efforts to expand the operations of the Nile Taxi in Cairo are stuck in “a bureaucratic snarl-up,” Rami Galal writes for Al Monitor. One transport expert describes it as a “total fiasco” as some feasibility studies imply fares could reach EGP 50 — too expensive for wide-scale public use. An even bigger problem is that the project so far targets car owners who are expected to park at the nearest river landing to take a river taxi. However, as of yet, there are no garages planned near the landings. (Read)
Bahri, Suez Canal Authority study joint navigation company
National Shipping Company of Saudi Arabia, better known as Bahri, has agreed with the Suez Canal Authority to study the feasibility of establishing a joint Egypt-Saudi navigation company, Bahri announced, reports Mubasher. The Egypt-based company would transport products and materials required by the Suez Canal Axis Development project.
BANKING + FINANCE
Banque Misr begins implementing CBE initiative to finance SMEs
Banque Misr is beginning to put forward financing products dedicated to small businesses that have revenues ranging between EGP 1 mn and EGP 20 mn annually to comply with the CBE’s regulation to increase lending to SMEs to 20% of banks’ loan books, Daily News Egypt Reports. Banque Misr will also provide financial advisory support to foster SME development and growth. (Read)
EFSA approves Faisal Bank’s murabaha contracts
EFSA has approved Faisal Bank’s murabaha contracts, which will be used as part of the bank’s mortgage finance initiative, Amwal Al Ghad reports. According to the Sharia-compliant contract, the bank will coordinate with NUCA and resell some of its housing units to clients. The most recent amendments added to the mortgage finance law allowed Islamic banks to engage in the government’s mortgage finance initiative through Sharia-compliant contracts, the paper adds. (Read in Arabic)
NBE applies for license to work in yuan at its Shanghai branch
NBE’s board has decided to apply for a license to work in Chinese yuan at its branch in Shanghai, Amwal Al Ghad reports. The bank expects the license by the end of this year, making it the first Arab or African bank to do so. Obtaining the licence would increase the bank’s capital to USD 49 mn from USD 32 mn. (Read in Arabic)
OTHER BUSINESS NEWS OF NOTE
SFD expects a USD 500k UNDP grant for Syrian refugees
The Social Fund for Development (SFD) expects negotiations for a USD 500k grant from the UNDP to be complete before June 2016, Al Mal reports. The grant will be used for development projects in areas where Syrian refugees live to create more job opportunities. The first project is expected to be implemented in Alexandria. (Read in Arabic)
Family Stores Market to invest EGP 500 mn to open 50 new stores
Retailer Family Stores Market plans to invest EGP 500 mn in the next three years to open 50 new stores in Egypt, Al Borsa reports. The company is particularly interested in expanding into Upper Egypt and the Delta regions, which have traditionally been underserved by the retail sector and show great growth potential, says Nabil Marzouk, managing director of Family Stores’ parent company AM Group for Import And Export. Marzouk adds that the company was encouraged by the Supply Ministry’s incentives to boost the number of retail outlets in Egypt as part of its strategy to keep prices down. (Read in Arabic)
EGYPT POLITICS + ECONOMICS
Agriculture Ministry officials implicated in a corruption scandal … again
Agriculture Ministry officials have once again been implicated in a corruption scandal, Al Ahram reports. Twelve non-senior ministry officials have been indicted for facilitating the sale of 85,000 feddans worth EGP 2 bn to 37 investors, following an investigation by a Giza financial crimes unit. The last ministry scandal was a major contributor to the fall of Prime Minister Ibrahim Mahlab and the arrest of his Agriculture Minister. (Read in Arabic)
Inter-Parliamentary Union President Saber Chowdhury supports Egypt’s membership with the IPU being resumed and invites the House of Representatives to participate in the IPU meetings at the United Nations in New York next February, Chowdhury said during a meeting with President Abdel Fattah El Sisi and House Speaker Ali Abdel Aaal, according to an Ittihadiya statement. Abdel Aal received a phone call last week from Secretary General of the IPU Martin Chungong, during which they discussed Egypt’s return to the union after its membership was frozen in 2013 upon the dissolution of parliament, according to the State Information Service. Chowdhury commended parliament for its unprecedented number of female and youth representatives, inviting young parliamentarians to attend IPU meetings to “enhance youth engagement in parliamentary work,” according to the statement. Both El Sisi and Abdel Aal expressed eagerness to resume Egypt’s parliamentary role in regional and international arenas.
ON YOUR WAY OUT
Technical difficulties with the electronic voting system tallied the number of votes in parliament at 693 (the House is comprised of 596 members) during the first day of its usage. Videos emerged of MPs using the system on behalf of colleagues who weren’t there. Journalists were allowed in, then not, then in again. No one seems to know if the sessions will be back on air. In other words: just another day in parliament.
Bank earnings season continues: Goldman Sachs reported (pdf) yesterday a 65% fall-off in quarterly profit due to weak trading conditions and the payment of a large regulatory penalty. Net income fell to USD 765 mn (USD 1.27 per share) from USD 2.17 bn (USD 4.38 per share) a year earlier. “Without the fine, Goldman would have posted an earnings increase,” writes the Wall Street Journal. Conversely, Bank of America posted the largest annual profit in nearly a decade on Tuesday, with FY2015 profit hitting USD 15.89 bn — more than double the figure reported last year, according to the Wall Street Journal.
In case you missed it, Google is honoring Egyptian actor Naguib El-Rihani in today’s Google doodle.
USD CBE auction (Wednesday, 20 January): 7.7301 (unchanged since Wednesday, 11 November)
USD parallel market (Wednesday, 20 January): 8.58 (unchanged since Tuesday, 12 January)
EGX30 (Wednesday): 5,776.59 (-5.26%)
Turnover: EGP 460.2 mn (6% above the 90-day average)
EGX 30 year-to-date: -17.5%
THE MARKET ON WEDNESDAY: Egyptian stocks and the benchmark index tumbled once again, dropping 5.3% to the day’s low of 5,777 points. All EGX30 constituents ended the day in the red except for Eastern Tobacco, whose shares were not traded at all. Index heavyweights CIB, EFG Hermes and TMG bore the brunt of today’s selling wave. At a turnover of EGP 460.2 mn, foreign investors were the sole net sellers. Equity markets in the oil-reliant GCC fell sharply as well, with the TASI down 5.0% and DFM 4.6%. European stock markets are currently witnessing similar declines, with Germany’s DAX down 2.5%, London’s FTSE 100 3.0% and France’s CAC 3.4%.
Foreigners: Net short | EGP – 42.5 mn
Regional: Net long | EGP + 22.6 mn
Domestic: Net long | EGP + 19.9 mn
Retail: 66.3% of total trades | 73.6% of buyers | 59.0% of sellers
Institutions: 33.7% of total trades | 26.4% of buyers | 41.0% of sellers
Foreign: 13.1% of total | 8.4% of buyers | 17.8% of sellers
Regional: 14.1% of total | 16.6% of buyers | 11.6% of sellers
Domestic: 72.8% of total | 75.0% of buyers | 70.6% of sellers
WTI: USD 28.6 (+1.60%)
Brent: USD 28.1 (-2.29%)
Gold: USD 1,101.30 / troy ounce (1.13%)
TASI: 5,459.8 (-5.0%)
ADX: 3,767.6 (-3.1%)
DFM: 2,638.8 (-4.6%)
KSE Weighted Index: 334.6 (-2.2%)
QE: 8,689.4 (-3.3%)