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Wednesday, 23 January 2019

What we’re tracking on 23 January 2019

Rejoice, for it is the last business day of the week: Banks and the stock market are closed tomorrow, as are government offices, in observance of the 25 January national holiday, which falls this year on Friday. We’re off tomorrow and will be back in your inboxes at the usual time on Sunday morning.

Expect a lot of talk about high prices heading into the long weekend as the House holds hearings. The House of Representatives’ planning committee will meet with government officials from no less than 18 ministries, a number of governors, and 13 university presidents to discuss “solutions” for rising prices, according to a statement by Support Egypt coalition head Abdel Hady El Kassaby picked up by Al Shorouk. The meeting comes after President Abdel Fattah El Sisi launched the “Decent Life” initiative to improve living conditions for those in need.

CI Capital’s MENA investor conference in New York wraps today. It’s the second leg of a two-city gathering that began last week in Cairo. Some 20 EGX-listed companies are participating, including our friends and sponsors CIB and SODIC.

It’s day two of the WEF in Davos today, and the mood among the grand wizards of global capitalism is … subdued, the Wall Street Journal reports: “Political paralysis in major developed economies, frayed trading links and concerns about concentration of corporate power created a jittery mood among business executives at the annual World Economic Forum. While many corporate bigwigs in Davos put on a brave face and said the economy has overcome the short-term challenges that manifested in a major market selloff at the end of 2018, there was a brooding sense that major risks lie ahead.”

The gloominess being prompted by the IMF’s downward revision of its global growth estimate is over-hyped, a Bloomberg opinion piece argues. In a riposte to the hypochondriacs, the article reminds us that the latest revisions are fairly negligible in the grand scheme of things and projections into 2020 remain stable.

Globalization 4.0 is this year’s WEF buzz phrase of choice, but what does it actually mean? Bloomberg gets speculative with a look at what our global economy may be facing in the not-too-distant future. Essentially, the fourth wave of globalization that some believe we are now entering will involve a marked shift towards digitally enabled services, rather than global trading in goods. Opportunities will be opening up in wealthier countries for workers in emerging markets to compete in previously inaccessible skilled service sectors, thanks to new tools and technology.

Will this fuel populism? Almost certainly. The challenges Davos faces in its bid to be open, how to reconcile the inevitable clashes between populism and globalism, and the need to be pragmatic in defense of an open world-trading system are all explored during the video discussion that accompanies the Bloomberg piece (watch, run time: 5:35).

2019 is looking promising for emerging market equities as some of the issues underpinning the Great Emerging Markets Zombie Apocalypse of 2018 ease, EM investment manager Ashmore Group says in a report (pdf). “Stronger expected economic and earnings growth, lighter investor positioning and depressed valuation multiples” could all help set up a decent run for equities in the year ahead, they write.

How will your earnings growth stack up? Solid corporate earnings supported by a weakening USD and stable domestic growth will drive the EM recovery over the long term. Look for EM earnings to rise about 10% (in USD terms) over the next 12 months, the report says, an expectation Ashmore believes is “reasonably prudent and deliverable.”

China and the US are the elephants in the room: Investors are yet to price the risk of continued trade friction between the US and China, which may escalate over the next 12 months. Ashmore is however predicting a negotiated solution sometime this year as political and economic costs rise for both countries.

Egypt gets a special shout-out: “Egypt and Nigeria stand out. In the former case, under powerful leadership the country has completed an IMF programme and devalued the currency. In turn, this has triggered improved economic growth, FDI flows, FX reserves and account balances. As a net energy importer, the volatility of energy prices in 2018 acted to slow the progress in subsidy removal. It also meant inflationary pressure remained high. This prevented the Central Bank from being able to cut interest rates to help kick-start the economy. However, this is a transitory impact and new energy sources coming on stream should reduce this reliance over time. Inflationary pressure has also recently started to print lower which paves the way for more expansionary monetary policy in 2019.”

Meanwhile, the MSCI rally continues: Ashmore’s forecast comes as the MSCI Emerging Markets equities index continues its most prolonged rally in over a year, signaling an increased risk-appetite among investors.

What about your first Oscar? 2019 Oscar nominations are out with Egyptian-American actor Rami Malek nominated for his performance as Freddy Mercury in ‘Bohemian Rhapsody,’ reports the Washington Post. The biopic scored a total of five nominations including one for Best Picture. Director Alfonso Curaón’s ‘Roma’ and 18th Century dark comedy ‘The Favourite’ both picked up ten nominations while Lady Gaga notched a Best Actress nod for her turn in ‘A Star Is Born’ and ‘Black Panther’ made history as the first superhero movie to earn a nomination for Best Picture. We’ll also keep an eye on Spike Lee’s ‘BlacKKKlansman’ come award night about the true story of a black policeman in 1970s Colorado Springs who infiltrates the local chapter of the Ku Klux Klan. This year’s Oscars is still host-less after comedian Kevin Hart dropped out following criticism of old homophobic jokes and tweets.

PSAExpect blowing sand across Egypt for the next couple of days, the head of the Meteorological Authority Ahmed Abdel Aal said, according to Masrawy. Dusty winds will hit the North Coast today and toll south into Cairo and Upper Egypt. Expect daytime highs of 20-22°C in the capital city through Friday.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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