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Tuesday, 27 February 2018

What we’re tracking on 27 February 2018

We have plenty of news for you folks this morning, particularly on the M&A and investment front, where transactions announced, in the pipeline and contemplated are keeping our friends at the nation’s law firms very busy indeed. We have the details in this morning’s Speed Round, below:

But first: The Finance Ministry will announce the timeline for the state IPO program next week, said Vice Minister of Finance Ahmed Kouchouk at an Amcham gathering ahead of the group’s annual Doorknock mission the Washington, DC, next month. The ministry hopes the program will grow the capital market’s contribution to the economy to 50-60% of GDP, from a current 20-21%, he added, according to a ministry statement. Planning Minister Hala El Saeed had said on Sunday that the National Investment Bank sent the Finance Ministry a list of 13 subsidiaries that it is looking to enroll in the state’s IPO program. State energy firm Enppi was set to kick off the IPO program late last year, but then transaction has been postponed to the end of 2018.

The ministry has completed its proposed tax framework for SMEs, which would help bring them into the formal economy, Finance Minister Amr El Garhy told the AmCham meeting. The minister offered no further detail of the plan.

El Garhy also noted that the ministry is projecting 20% y-o-y growth in tax revenues in FY2017-18.

“Egypt investors now bold enough to look for USD themselves”: That’s the good-news headline atop a Bloomberg piece by Ahmed Feteha noting that “Foreign holders of Egypt’s local debt have been using the open currency market more frequently to get USD. Not only is it a sign they’re more comfortable getting cash out of the country, but it also means the days of a stagnant EGP may be numbered…It’s a marked shift for a country where a crippling USD shortage had made it near impossible for foreign investors to repatriate profits.” Investors are turning to the open market because (a) greenbacks are available and (b) the central bank raised the price of using its repatriation scheme when it slapped on a one percent entrance fee late last year.

Ratings agency S&P sees MENA sovereign borrowing dropping by as much as 6% in 2018, after decreasing 30% last year “chiefly because fiscal consolidation measures in all GCC countries and higher oil prices will likely reduce GCC sovereigns’ funding needs.” Egypt remains the largest borrower in MENA, with its share of the region’s gross commercial long-term debt at 26%, which makes it MENA’s largest borrower with USD 46.4 bn in debt, followed by Iraq with USD 35 bn, and Saudi Arabia with USD 31 bn. S&P sees that “Egypt [will] account for 19% of the total commercial debt we expect the region’s sovereigns will issue by the end of 2018…We calculate that Egypt will face the highest debt-rollover ratio (including short-term debt) in the region, reaching 41% of GDP, followed by Iraq (32%) and Lebanon (24%),” S&P says in a report picked up by Saudi Gazette. The GCC’s total sovereign debt is expected to come in at USD 68 bn by the end of 2018.

Banks in the region have been “rising to the top of the list for Middle East stock investors and analysts,” Filipe Pacheco writes for Bloomberg. Despite the drop in Egypt’s key interest rates, banks are expected to maintain “high profit levels … because banks should see stronger fees and commissions generated by increased lending,” says CI Capital’s head of financials, Monsef Morsy, who expects 2018 and 2019 to witness a “pickup in loan volumes in working financing to the corporate segment.”

Mars inaugurates factory expansion today: Trade and Industry Minister Tarek Kabil and Investment Minister Sahar Nasr will inaugurate Mars’ EGP 750 mn factory expansion today, according to Youm7.

Central Bank Governor Tarek Amer is in Abu Dhabi today, where he’s to be a panelist in a discussion of “regional regulatory convergence” at the emirate’s Global Financial Markets Forum, which runs today and tomorrow, according to the event’s agenda.

Mark Mobius is going to be investing in EM companies that could do well on ESG: The veteran emerging markets investor, who left Franklin Templeton in January after a 30-year run, says he is setting up a European fund management outfit that will “focus on companies in emerging markets that have the potential to show improvements in environmental, social and governance metrics,” the Financial Times notes in passing.

New Fed chairman Jay Powell makes his public debut today with inaugural testimony at the House Financial Services Committee. He’ll follow that up with remarks to the Senate Banking Committee on Thursday. Stating the obvious, the FT quotes an analyst noting that: “The backdrop ahead of chair Powell’s first major appearance is one of equity markets making an attempt at coming full circle from the massive volatility event earlier this month.” Wall Street got a bounce yesterday ahead of the remarks. The WSJ has a solid look at what to expect, as does the Washington Post, depending on where you prefer to get your background.

China will abolish constitutional limits on presidential terms, “effectively allowing President Xi Jinping to lead China indefinitely,” the New York Times reports, calling it “the latest and arguably most significant sign of the world’s decisive tilt toward authoritarian governance, often built on the highly personalized exercise of power.” The Times has more here.

Apple will introduce three new phones this fall, and one of them will have a “giant” screen in a device the same size as the iPhone 8 Plus, Bloomberg wonderkind Mark Gurman reports, with an assist from Debby Wu. In other Apple news, the company’s shares got a boost yesterday when Warren Buffett said his Berkshire Hathaway had “bought more Apple shares than any other stock over the past year,” CNBC reports.

Our friend Ian Gray is retiring. The former Vodafone Egypt boss, who had effectively been called back from retirement to run the company’s joint venture in Qatar, will retire after a March 19 shareholder meeting. That comes as Vodafone Europe agreed to sell its stake in the JV to an arm of the Qatari government for EUR 301 mn, Bloomberg says. Reuters also has the story.

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