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Monday, 24 September 2018

What we’re tracking on 24 September 2018

Yields on EGP-denominated short-term treasuries continue to rise, central bank data showed, according to Reuters’ Arabic service. An auction yesterday saw yields on 91-day bills rise to 19.62% from 19.43%, while yields at the nine-month auction rose to 19.84% from 19.75% previously. The Finance Ministry has called off three treasury bond auctions this month as a result of soaring yields amid a wider emerging market sell-off.

The higher yields have not put a damper on Egypt’s sale of debt instruments, Finance Minister Mohamed Maait tells Al Mal. The call-off of three auctions is an indication that the state is not being forced to accept investors’ demands for yields beyond “logical limits,” the minister said.

UK Trade Envoy Sir Jeffrey Donaldson is in Cairo with a delegation of unnamed British companies eyeing investments in the finance, technology, education, health, and other “future-focused” sectors, according to a statement from the British Embassy in Cairo. It’s Donaldson’s eighth visit to Egypt in two years. Sir Jeffrey will meet with the ministers of finance, public enterprises, health, oil, planning, and electricity while in town.

El Sisi discusses EU migration pact? President Abdel Fattah El Sisi, in New York for the UN General Assembly, met yesterday with European Council President Donald Tusk and Austrian Chancellor Sebastian Kurz to discuss Egypt’s efforts to stem illegal migration, according to an Ittihadiya statement. The sit-down comes just days after Kurz nudged his EU counterparts to begin formal talks with Egypt on expanding cooperation on migration and potentially reaching a Turkey-style assistance pact, as we noted yesterday. El Sisi also met yesterday with the UAE’s foreign minister, according to an Ittihadiya statement.

The president is expected to meet with US President Donald Trump this week. The sit-down will be the first between the two presidents since El Sisi won a second term — and since the Trump administration normalized annual military aid to Egypt. El Sisi is also expected to meet with US business leaders and to hold talks on the sidelines with German Chancellor Angela Merkel and French President Emmanuel Macron as well as with the leaders of Israel, Britain, France, South Korea and Japan. Foreign Minister Sameh Shoukry is also in New York and has met with UNDP administrator Achim Steiner as well as his counterparts from Saudi Arabia, the UAE and Kuwait.

**#3 You are forewarned: The House is due back in session next week. President Abdel Fattah El Sisi issued yesterday a decree calling the House of Representatives back into session for its fall term on Tuesday, 2 October at 10am, Ahram Gate reports. The House is looking at a stacked legislative agenda for its fourth session, but will prioritize the Local Administration Act, Criminal Procedures Act, and the new Social Security and Pensions Act, spokesman Salah Hasaballah said yesterday, according to Al Shorouk.

House Speaker Ali Abdel Aal is celebrating his final days of freedom with a jaunt to Ireland,where he will meet with Irish legislators, reports Ahram Gate.

**#2 Actis has apparently landed the right to manage Abraaj’s Africa funds, the Financial Times claims, citing an email sent to Abraaj staff that reportedly says liquidators chose the EM private equity specialist because of the “level of on the ground diligence undertaken, flexibility in their approach and immediate working capital support.” Colony Capital is apparently in line to take over Abraaj’s Latin American funds, while Canada’s Brookfield Asset Management could take the Turkish fund and Abu Dhabi Financial Group is still gunning for “legacy” Mideast assets. “The liquidators’ attempts to sell Abraaj Investment Management Limited, the group’s funds platform, have floundered amid resistance from investors,” the FT adds, noting that, “Actis could become a sub-manager for a broader range of Abraaj funds on behalf of investors pending the completion of due diligence, people aware of the matter said. Liquidators are finalising documentation before limited partners (LPs), the fund investors, are asked to approve the transfer of the management rights away from Abraaj.”

You know (of) Actis even if you’re not in PE. The company’s North African investments include LSE-traded, Cairo-headquartered consumer healthcare multinational IDH. Former portfolio companies include snackfoods giant Edita, fast-food chain Mo’men and halawa and tahina maker Rashidi El Mizan. You can explore Actis’ portfolio here.

“New” OPIC could have USD 60 bn lending ceiling to counter Chinese “economic warfare”: Readers will recall we have previously noted the Trump administration intends to beef up OPIC, the US Overseas Private Investment Corporation, a development finance agency it now sees as crucial to a “commercial diplomacy” bid to outgun China. The Financial Times is now back on the story, quoting OPIC’s president and CEO as saying that the new agency will be able to “invest up to USD 60 bn in the developing world in an effort to counter what some in Washington describe as China’s use of debt to wage ‘economic warfare.’” Legislation to create the proposed International Development Finance Corporation has reportedly been “sold to the president.” Backers hope the so-called Build Act (Better Utilization of Investments Leading to Development), which passed the US House of Representatives in August, will pass the Senate before midterm elections in November.

Should you care? Only if you run a bank or need to close and infrastructure project and could use a few extra bn in financing. OPIC has previously backed or proposed backing Qalaa Holdings (back in 2011), oil and gas player Apache, CIB, Carbon Holdings’ Tahrir Petrochemicals Corporation and microfinance players, among others.

Expect oil at around USD 80 for a while to come. Crude inched up again yesterday as Washington prepares to implement new sanctions on Iranian oil as early as next week, Reuters reports. “OPEC producers largely agree that oil prices above USD 80 a barrel would be too high. But there is widespread disagreement on how the cartel and its allies should contain crude prices,” the Wall Street Journal adds in its wrap-up of a meeting in Algiers yesterday between OPEC members and non-member producers. Producers were reportedly lukewarm to The Donald’s demand that they ramp up production to reduce prices.

It’s Domesday for US equities, and you have the tech sector to thank. There might just be hyperbole running through that statement, but it’s not ours: It’s the theme running through one end of the international business press, with both Business Insider and CNBC tipping suggestions that a “perfect storm” is brewing in stocks. What gives? An analyst’s report noting that “42% of the S&P 500’s gains since the stock market’s correction in early February” is accounted for by tech and tech-led shares such as Apple, Amazon, Netflix, Facebook, Alphabet, Microsoft, Google, Visa, and Mastercard.

It’s only fitting that this kind of talk should surface on the second day of autumn — the Wall Street Journal reminds us that “Some of the worst days in Wall Street’s history have hit during September and October. But that’s no reason to panic.”

In miscellany this morning:

  • Of insurance and totalitarianism: A top US insurer will soon start to sell you only if you agree to track fitness and health data through wearable devices and smartphones. (Reuters)
  • Do stoned lobsters feel pain? Do octopuses (octopi? octopodes?) really get happy on ecstasy?
  • Google’s fall event is coming up on 3 October, and there are plenty of leaks to ponder. We’re unabashed iSheep. We also like stock Android very much, having owned Nexus and Pixel devices and flashed ROMs onto both a Samsung S4 and an HTC One because the Google Play Edition was not available domestically.

Egypt, Algeria, and Morocco have a lower rate of criminal violence than counterpart cities in the West, according to a UN Office on Drugs and Crime report (pdf) picked up by the Wall Street Journal. Just sayin’.

PSA #1- Expect cloudy skies and, possibly, “somewhat heavy” rainfall in coastal cities for the balance this week, says Egyptian weather office boss Ahmed Abdel Aal, according to Al Masry Al Youm.

PSA #2- 60k gov’t schools are back in session. God grant us all patience on the roads this morning.

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