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Wednesday, 14 February 2018

What we’re tracking on 14 February 2018

EXCLUSIVE- USD 4 bn eurobond issuance has closed and is 3x oversubscribed in a ringing endorsement of Egypt’s macro fundamentals. “It’s excellent news,” Finance Minister Amr El Garhy told us on a call last night. “Egypt has effectively re-opened the window for emerging market bond issuances despite the recent turmoil in global markets.”

Egypt successfully priced and closed a USD 4 bn, three-tranche offering. It breaks down as USD 1.25 bn in five-year notes with a yield of 5.58%; USD 1.25 bn in 10-year notes with a yield of 6.59%; and USD 1.5 bn in 30-year notes with a yield of 7.91%. “The pricing is very good in view of recent developments in international markets including rising US interest rates and…sharp fluctuations in global capital markets during the past two weeks,” the Finance Ministry said in a statement (pdf).

Strong demand from all corners of the world, including new appetite from Asia and the Middle East: Turbulence in global markets over the last two weeks failed to curb investor appetite for the sale, which was 3x oversubscribed only a few hours into its launch, opening with a total order book north of USD 12 bn from some 550 investors. As expected, US and European institutions had strong appetite for the offering, but Middle Eastern and Asian funds are represented in the order book in larger numbers than they were in Egypt’s previous offerings, Vice Minister of Finance Ahmed Kouchouk told us in a call overnight. “The issuance reflects foreign investors’ continued confidence in the Egyptian economy and faith in the government’s economic reform program,” he said.

Appetite was strong across all three tranches, capturing investors looking to exposure over both the short and long haul, among them global giants including Blackrock, Kouchouk said.

Egypt is the first emerging market to close a eurobond offering since before the selloff, Kouchouk said, echoing El Garhy and noting that a number of other EM including Indonesia have postponed or called off offerings in view of the global climate right now.

USD proceeds will be used to bolster the central bank’s foreign currency reserves, the ministry statement notes. El Garhy had previously said that the the bonds will be issued on the London and Luxembourg stock exchanges.

The offering is being closely watched by the international press, with the Financial Times noting (before the sale closed yesterday) that Egypt was betting on the international debt market in turbulent times.

Advisors: HSBC, Citigroup, JPMorgan Chase & Co, Morgan Stanley, and National Bank of Abu Dhabi led the issuance. Al Tamimi & Co. and Dechert were legal advisors to the government, while Linklater and Zaki Hashem & Partners were counsel to the bankers.

It’s a busy news day here at home: Today is the Accidental Legislation and Regulation Edition of Enterprise, with a flood of news on key economic legislation, including the executive regulations to the Natural Gas Act; amendments to the Capital Markets Act; a preliminary nod from the House on the Consumer Protection Act; and changes to the Customs Act. We have chapter and verse in Speed Round, below.

…and all is quiet (at the moment) on the international front as markets seem to have taken a breather in anticipation of US inflation figures due out later today that the Financial Times says will “set a tone after a week of turmoil…If the violent swings of the past few days have put portfolio managers on notice that the era of tranquil markets is over, the degree of inflationary pressure building in the US economy will be crucial in shaping what exactly the new environment looks like for fixed-income and equity investors.” CNBC also has a solid take on the story.

Need an explainer on rising US inflation and what it means for markets? Reuters has got your back.

The planned hike in the price of railway tickets has been delayed again until the end of the current school year, Transport Minister Hisham Arafat told reporters yesterday, according to Al Shorouk. The delay, which follows months of confusion on when the new prices would be announced, comes as the ministry waits for more students and state employees to register for discount cards, the minister said.

The general assembly of the House of Representatives is going into recess until 4 March, Al Shorouk reports. No details were provided on the reasoning behind the two-week recess. We’re also waiting for clarity on what this means for committee work, but our expectation is that committees will continue to meet. As we noted yesterday, parliament will also go into recess during the presidential elections, which are scheduled to take place on 26-28 March.

It’s a big day for Israel… Police have recommended that Prime Minister Benjamin Netanyahu be indicted on charges of bribery, fraud and breach of trust, Reuters and Bloomberg report. The Israeli leader claims the charges are being trumped up by enemies. The investigations, one of which alleges bribes upwards of USD 280k, have been ongoing for a year and now move into the hands of the attorney general, meaning we’re looking at weeks (if not months) of political turmoil wracking our eastern neighbor.

…and for South Africa, where the ruling ANC has ordered President Jacob Zuma to step down. Zuma appears to be defying the party, and there was “confusion on Tuesday evening over whether Zuma would address the public” this morning, Reuters reports.

And from all of us to all of you out there, Happy Valentine’s Day, in honor of which we join the Wall Street Journal in noting that “nothing says love like a plate of chicken wings.” (The killjoys at the Journal would also like you to know that they believe dark chocolate is the only healthy choice of chocolate for Valentine’s Day. We maintain there is no such thing as bad chocolate other than white chocolate … which ain’t chocolate.)

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2018 Enterprise Ventures LLC.