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Wednesday, 15 August 2018

What we’re tracking on 15 August 2018

Its official folks, the CBE has declared (pdf) Monday 20 August-Thursday 23 August off for Eid Al Adha. The Labor Ministry has reportedly declared only Monday-Wednesday off as paid holiday, according to a statement yesterday picked up by Al Shorouk.

Is the EGX looking into setting up an index to collect and track real estate data? EGX boss Mohamed Farid and other officials met yesterday with representatives from 30 real estate companies to begin discussing a plan to launch an index for Egypt’s real estate market, sources close to the matter tell Al Mal. The index means to make accurate data available on prices of different types of developments across the country, as well as demand for real estate products, in addition to tracking changes in both, according to the sources. However, given the arbitrary and somewhat informal nature of the real estate sector in Egypt, the index is likely to only include information about new urban developments and cities — at least in its earlier phases, according to the sources. Real estate marketing firms, including Coldwell Banker, ERA, and JLL, attended the meeting.

It’s interest rate day tomorrow: The CBE’s Monetary Policy Committee (MPC) is expected to keep interest rates on hold when it meets tomorrow. Analysts’ expectations are that interest rates will remain unchanged comes despite inflation cooling in July to 13.5% after surging in June. Tomorrow’s MPC meeting is especially important as central banks across emerging markets look to contain the contagion from Turkey’s economic meltdown.

On that front, the IIF has a report out which puts Egypt among the countries most at risk of contagion from the Turkey fiasco. We have more on the report and further analysis in the Speed Round below.

The Turkish lira rallied for the first time in a week as Turks cashed in USD savings to take advantage of the huge slump in the local currency, Bloomberg reports. The lira jumped 5.9% to TYR 6.5 to the USD on Tuesday. The rally coincided with Turkish businesses and leading banks issuing calls for the government to end the spat with the US, improve ties with the EU, chart a clear path to single-digit inflation, and most crucially, raise interest rates.

Erdogan becomes a walking, breathing ad for Samsung: Undeterred, President Recep Tayyip Erdogan doubled down and said Turkey would boycott US electronics, including the iPhone. He suggested Turks buy Samsung or locally made Venus Vestel smartphones instead. Now there’s a solution.

El Erian weighs in on the Turkey, EM contagion debate: Allianz chief economic adviser Mohamed El Erian has offered some sage advice on how emerging market investors should view contagion from the Turkey crisis in an opinion piece on the FT. His view is that while the looming financial crisis facing Turkey can be relatively contained at the moment, unless meaningful policies are adopted soon, contagion risk could spread. “The longer Turkey maintains this posture, the greater the risk that unfavourable technical spillovers will be accompanied by more disruptive economic and financial contagion for both the country and emerging market assets as a whole.”

His advice to Turkey? Go the way of Egypt (though not in those words): EM crises are nothing new, and are usually stemmed through action by policymakers that can include a combination of higher interest rates, tightening fiscal and credit policies and access to exceptional external funding from the IMF, which comes with an endorsement for the domestic policy adjustments. “Until such a policy approach takes hold, the EM asset class as a whole tends to be vulnerable to capital outflows, especially on the part of “cross-over” investors,” El Erian says.

Sage advice to EM investors #1: Don’t expect a quick fix in the form of a detente with the US.

Sage advice to EM investors #2: “Rather than rushing to buy the asset class as a whole, investors would be well advised to show patience followed by great care. They should wait for more attractive levels to invest in local and foreign currency bonds issued by countries with responsive policy stances, large international reserves and few debt mismatches.”

Egyptian-born British-American economist Minouche Shafik is reportedly being considered for Bank of England’s (BoE) top job next year, according to Daily Mail. Shafik, currently the director of the London School of Economics, had served as BoE deputy governor for three years. Financial Conduct Authority chief executive Andrew Bailey is allegedly also being considered to replace current Governor Mark Carney, who steps down in June 2019.

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