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Monday, 16 April 2018

What we’re tracking on 16 April 2018

Finance Minister Amr El Garhy will be in Washington, DC, today for the IMF and World Bank’s Spring Meetings, which will wrap on 22 April. Investment Minister Sahar Nasr and Central Bank Governor Tarek Amer are also attending. You can check out the landing page for the spring meetings here.

Does a US support for a World Bank capital mean more financing down the line for Egypt? The US administration is set to support an imminent USD 13 bn capital increase at the World Bank. Treasury Secretary Steven Mnuchin is expected to announce the news during the week’s spring meetings, sources told the FT. US government officials have been tight-lipped as the administration had “expressed reservations about World Bank lending to China and other middle-income countries at last October’s annual meetings,” which made it “wary of the plans for a capital increase.” World Bank Group Executive Director and Executive Board Dean Merza Hasan had said last month, during AmCham’s 2018 Doorknock mission to Washington, that Egypt could be looking at a financing package of over USD 1 bn this year if the Bank was able to up its capital.

Mideast markets were unaffected by airstrike carried out by the US, UK, and France against Syria on Saturday, analysts tell Bloomberg. EFG Hermes Research’s Mohamad Al Hajj says that geopolitical disputes are of little consequence to most Middle East investors. “Specifically in the MENA, political risk has always been there… But if we look at returns since the Arab spring, for example, banks like CIB in Egypt have delivered returns better than emerging markets. The leading companies in the GCC delivered returns better than emerging markets.” Regional equities rose yesterday, the business information service noted, with the Tadawul gaining 1.9% after a tough week last week and the DFM up 1.8%. The piece notes that in Egypt, SODIC shares rose by as much 4.3% and have “gained 11% in the past three sessions as it announced it was starting talks with MNHD” over a potential merger or acquisition.

A looming bank crisis in Bangladesh is an opportunity for Egyptian garment manufacturers. That’s our takeaway from a Financial Times piece this morning that suggests banks “in the south Asian nation face a credit crunch following mass deposit withdrawals in March and soaring levels of non-performing loans. Analysts and investors fear a full-blown crisis could spill over into Bangladesh’s strongest link to the global economy — the production of textiles and ready-made garments for fast fashion brands and retailers such as H&M, American Eagle Outfitters, Zara, Walmart and Target.” Bangladesh is the world’s second-largest RMG exporter after China. We get that exports are hard, but the opportunities, friends, is simply too large to ignore across multiple industries.

Making sense of the end of the world, Part I: With increasing volatility in equity markets, fears of a global trade war sparked by China and the US, and a rising tide of nationalism on just about every continent, it’s become vogue to speculate about how the coming global meltdown will play out. An emerging consensus suggests that it may not be as painful as the Chicken Littles would have had us believe. Wall Street economists are sticking to their forecasts of global growth at about 4% this year, Bloomberg reports, suggesting that “global growth is cresting, not collapsing.” (The story has money quotes from just about every major global sell-side house stacked one after the other — definitely worth reading.)

(The update to banks’ growth forecasts comes as the IMF prepares to release tomorrow its semi-annual update of its global economic outlook.)

Part II: The end of the nine-year-old bull market shouldn’t be agony, Morgan Stanley’s US equity strategists suggest. While it’s natural to “want to sell everything” when you remember the corrections of 2008-09 or 2000-02, the bank says, “we envision a 1-2-year consolidation with 10-20% price swings and concentrated pain in certain sectors that are either overbought, expensive or fundamentally challenged. This will not be the wipe-out scenario that some of the perma-bears out there have been warning about for the past eight years."

Part III: Are we headed for USD 80 oil? “Brent oil could spike to $80 a barrel if the U.S. and European Union reimpose sanctions on Iran and as Western powers expand the scope of the Syrian civil war, JPMorgan strategists,” Bloomberg reports.

Also making headlines this morning in the global business and finance press:

Where were the lawyers? Martin Sorrell’s resignation as chief of WPP, the world’s largest ads group, may mean “the end of the Mad Men era,” but guess what? Dude apparently hasn’t got a non-compete and his partisans have left the WSJ reporting that “left because of exasperation with the handling of the prive, not because he was worried about its details becoming public.” Is it the start of a final act for the 73-year-old?

Longtime readers will know we’re a sucker for this story from the headline alone: Bringing blockchain to the coffee cup. (WSJ)

Readers of a certain age will doubtless share our feeling that an era is closing as Barbara Bush, the wife of former president George H.W. Bush (the “good” Bush president) is reportedly in “failing health” and has decided to no longer seek medical treatment.

The war of words between former FBI Director James Comey and US President Donald Trump has deepened as Come calls Trump “morally unfit to be president.”

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