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Wednesday, 11 April 2018

What we’re tracking on 11 April 2018

THE story of what was a relatively quiet news day is, without doubt, Madinet Nasr Housing & Development’s (MNHD) announcement that it is opening dialogue to either acquire or merge with SODIC — a transaction which could very well reshape the real estate sector and could potentially be among the biggest upcoming M&As. So far, we’re only hearing from MNHD, and we should be seeing a response to the announcement from SODIC sometime this week. Full details are in the Speed Round, below.

Russian flights are finally here: The first direct flight between Russia and Egypt in over two years will take off from Moscow’s Sheremetyevo International Airport tonight and will land at 12:25am in Cairo International Airport,according to Russian carrier Aeroflot. EgyptAir’s first flight will take off at 9:35am CLT to Moscow’s Domodedovo Airport tomorrow morning.

Not ones to simply let something good happen without a fuss, Russia has sent what we’re hoping will be its final security team to do a sweep of security procedures yesterday, according to Ahram Gate. Egypt’s national carrier will run three flights a week to Russia until the World Cup in June, where it has scheduled additional flights.

Russians are returning to a very different tourism market than when they left. Years of haggling on airport security coincided with tourism largely picking up, particularly from Germany, the Ukraine and China.

This comes as the Russian ruble continues to drop, after the country was hit by fresh US sanctions on Friday over suspected involvement in the 2016 election that brought Donald Trump to power. That coupled with an escalation in the situation in Syria has also pressured Russian stocks, which “suffered their worst session in four years,” the FT says.

Are Saudi’s oil production cuts going to hit us where it hurts — our budget deficit? Saudi Arabia apparently wants to see oil prices get as high as USD 80 per bbl, sources who met with Saudi officials over the past month tell Bloomberg. The move, which has some in OPEC worried, comes as the kingdom looks to finance expensive domestic reforms, keep its head above water in Yemen, and get a high valuation for an upcoming Aramco IPO. Egypt’s FY2018-19 budget assumes an oil price of USD 67 per bbl and is planning to slash fuel subsidies by 26% y-o-y to EGP 89.08 bn (more on that in the Speed Round). With crude oil futures already at USD 70.21 per bbl, these increases could make it harder for the government to hit its target of lowering the budget deficit to 8.4% of GDP next fiscal year.

Will the Qatar beef play out in the international bond market? Right off the heels of Egypt’s successful USD 2.46 bn eurobond issuance this week — the country’s last one of the year (more on that in the Speed Round) — regional rivals Saudi Arabia and Qatar are heading to the international bond market with their respective issuances. It’s looking like Saudi will beat Qatar to the punch, with orders for the USD 11 bn three-tranche offering topping USD 28 bn, sources tell Bloomberg. Saudi is marketing seven-, 12- and 31-year notes at a spread of 140 bps, 175 bps, and 210 bps respectively. “It is a clever move on the part of Saudi Arabia to come before Qatar,” said Hakki Kalsen, a portfolio manager for emerging market debt at Union Investment Privatfonds in Frankfurt. “Issuing now, Qatar will get a lower order book, which will put them in a less competitive place,” meaning Qatar may have to offer generous pricing to attract large demand, a fund manager told Reuters.

The regional aggression surrounding Qatar is also playing into a potential agreement that could see Doha invest in Exxon Mobil’s US gas resources, people close to the matter tell WSJ. Although Qatar’s financing would be of “significant strategic importance,” Exxon is aware that it is walking across a regional political landmine, particularly as the company does not wish to alienate the Arab Quartet. The investment talks surfaced as US President Donald Trump took a softer tone with Qatar, praising Doha for its anti-terrorism efforts during meeting with Emir Tamim bin Hamad Al Thani yesterday, which the WSJ reads as a reflection of concerns that further alienating Qatar will push it into Iran’s sphere of influence,

China’s President Xi Jinping sang all the right tunes for markets in his Tuesday speech, promising to open the country further and lower import tariffs, Reuters reports. Xi said China will widen market access for foreign investors, addressing a key complaint of the US, which has ratcheted its rhetoric and threatened bns in tariffs, driving markets to fear an imminent trade war over the past week.

US President Donald Trump tweeted that he was “very thankful for President Xi of China’s kind words on tariffs and automobile barriers…also, his enlightenment on intellectual property and technology transfers. We will make great progress together!” (Tap or click here for Martin Wolf’s piece for the FT on how “US-China rivalry will shape the 21st century”).

Global financial markets rose yesterday for the fifth consecutive day in response to the news, with fears of a full-blown trade war now dissipating, according to Reuters. “The pan-European FTSEurofirst 300 index rose 0.87%…Emerging market stocks rose 1.05%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.24% higher.”

On Wall Street, the S&P 500 gained 1.67%, while Nasdaq rose 2.07% at the end of yesterday’s session. Tech stocks gave the S&P 500 its “biggest boost,” the newswire also says, adding that Facebook in particular “added the most gains to the S&P 500, rising 4.5% after CEO Mark Zuckerberg began his testimony before Congress…in an attempt to blunt possible regulatory fallout from the privacy scandal engulfing his social network.”

Meanwhile, shake ups in the Trump administration continue as homeland security adviser, Tom Bossert, will resign at the request of new National Security Adviser John Bolton, Bloomberg reports. The administration sent a list of five nominations for government positions to the Senate on Monday, which includes Washington Institute for Near East Policy director David Schenker, who is nominated to become Assistant Secretary of State for Near Eastern Affairs — a post held by former ambassador to Egypt Anne Patterson, who was much-maligned for harboring Ikhwani sympathies.

US producer prices beat economists’ expectations on Tuesday, raising the expectation that the Federal Reserve will raise interest rates three more times this year, Reuters reports. Producer price index for final demand rose 0.3% last month, beating expectations of an increase of 0.1%.

In other miscellany worth noting this morning: The UAE took a big step on the region’s behalf towards gender parity by approving legislation guaranteeing men and women equal pay, Bloomberg reports. The move is the latest of the Emirates’ efforts to establish gender equality, including appointing women to leadership positions in state bodies.

Are gold-backed cryptocurrencies a way to calm anti-bitcoin Islamic sentiments? Dubai-based startup OneGram seems to think so, according to Reuters. Cryptocurrencies do not sit well with Islamic scholars, who generally see it as speculative and not-commodity backed.

The Game Sports Industry Conference— Egypt’s first-ever platform dedicated to the sports industry — kicks off in Cairo today.

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