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Wednesday, 13 February 2019

What we’re tracking on 13 February 2019

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It’s shaping up to be a quiet day in a week that has been all oil and gas, all the time thanks to the Egypt Petroleum Show, which concludes today.

The big non-petroleum news today will still be a yawner as the House of Representatives votes in plenary session on a report on the proposed amendments to the constitution. The vote, which was originally scheduled for next week, is a prerequisite for the proposed amendments to be referred to the legislative committee, which will then have 60 days to review them. The report was prepared by its House’s general committee, which includes the speaker of the House and the chairpersons of its committees.

The world is Aramco’s playground, apparently: Saudi Aramco plans to launch an international hydrocarbon exploration and production company that will see it expand overseas for the first time, Saudi Energy Minister Khaled Al Falih told the FT. “We are no longer going to be inward-looking,” the minister said. “Going forward the world is going to be Saudi Aramco’s playground.”

Khalifa Haftar’s Libyan National Army has seized control of Libya’s largest oilfield, reports Bloomberg. Armed protesters had shut down the 300k-bpd field back in December. An LNA spokesman announced following the operation that the Egypt- and UAE-backed forces intend to hand control of the field back to the National Oil Corporation.

Is the (kinda modest) rally in emerging markets going to be fuelled by electric vehicles? Here’s how that could work: Copper prices could rise to USD 6,700 per tonne in 2019 from a current USD 6,139 as China ramps up its production of electric vehicles (EV), Citigroup analysts have predicted, according to the Financial Times (paywall). Chinese demand for the commodity is set to grow by 2% this year, more than offsetting the loss of demand from the country’s declining production of gasoline-powered cars, the analysts said. What’s the link to EM? As we noted in October, the price of copper has lately correlated closely with EM performance thanks to Chinese demand. Prices have already risen 5% this year, roughly correlating with the emerging market rally that began at the start of 2019.

Bn’aire Naguib Sawiris has spoken glowingly of opportunities in two non-traditional investment locations: Venezuela and North Korea. Egypt’s most outspoken business celebrity told Bloomberg that he is open to investing in Venezuela — on the condition, that is, that President Nicolás Maduro leave office. In a separate conversation with Reuters, Naguib said he is hopeful that talks between The Donald and North Korean leader Kim Jong Un will open up opportunities for investment in the world’s most isolated country, where Naguib founded the country’s mobile telecom operator, Koryolink.

Naguib singled out Saudi Arabia as one place we would not invest, telling CNBC, “Why would I go somewhere where I am not convinced there is a rule of law and order. And that there is real democracy, and that people are free.” He also urged the oil-rich kingdom to “come straight on human rights.” Sawiris was speaking in the run-up to a 27-28 February summit between US President Donald Trump and North Korean leader Kim Jong Un. Tap here for the full transcript of Naguib’s interview with CNBC.

Warning signs of an “earnings recession” in the US: Analysts have cut their 1Q2019 earnings forecasts for US companies, expecting S&P 500 companies’ profits to drop 1.7% y-o-y, the New York Times reports, citing data from John Butters, senior earnings analyst at FactSet. Earlier forecasts had expected earnings to grow 3.3% during the quarter — and that was a downward revision from October. Earnings in the US are now under pressure and the absence of new tax cuts to cushion the blow makes it more difficult.

On the flipside, EM are seeing a turnaround in sentiment from global investors. A Bank of America Merrill Lynch survey of 200 institutional investors found that February’s most popular trade is long EM, the Financial Times reports. Contrary to last year’s performance, MSCI’s EM stock index surged 7.7% this year, narrowly outperforming its DM counterpart, while bond spreads also narrowed as prices have risen. Investors are still not going full speed though on fears from the US-China trade spat and high borrowing by corporates.

PSA- You can expect decent weather today (mainly sunny with a high of 22°C), according to our favorite weather app, but it agrees with the national weather service that we’re looking at a sandstorm tomorrow — and, possibly, off-and-on showers on Friday.

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