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Monday, 29 July 2019

What we’re tracking on 29 July 2019

The Fawry IPO is up and running as retail investors requested 1 mn shares on the first day of the retail offering, the local press reports. There’s still a long way to go for the offering to be fully subscribed — there are a total of 35 mn shares up for grabs until 5 August — but it’s something to keep an eye on as it tests the waters of the anemic Egyptian IPO market ahead of bigger offerings to come. Further IPO details are available here and here.

The Fab15 conference is on its second day in El Gouna, bringing together participants from over 1,600 Fab Labs worldwide. The event runs from 28 July-2 August in El Gouna, before moving to Cairo on 3-4 August.

The seventh edition of the National Youth Conference kicks off tomorrow at the new administrative capital. The last iteration of the conference was held one year ago.

The two-day Fed meeting begins tomorrow: The Financial Times is still entertaining the idea that it may go big and surprise us with a 50 bps cut. As yesterday’s Reuters’ survey and the above graphic attest, the market emphatically believes that 25 bps is all we’re getting. But some analysts — such as Steven Oh, head of fixed income at PineBridge Investments — still believe that the Fed could spring a surprise. “There’s a case to provide a more impactful insurance cut right now and then pause to see how the economic data plays out,” he says. “The market will be disappointed by a [quarter point] cut.”

EMs won’t necessarily outperform, and the USD probably won’t weaken if the Fed moves ahead with a rate cut, simply because the Fed is not the only central bank whose policy factors into global conditions, Ivan Martchev writes for MarketWatch. Europe and Japan’s “subpar economic performance … is demanding that central banks keep their [quantitative easing] policies, in effect keeping interest rate differentials in favor of the USD.” Martchev says he is “having trouble seeing light at the end of the tunnel for the great global experiment called quantitative easing” that most other developed economies’ central banks are still in the middle of.

A trade agreement between the US and China, on the other hand, could give emerging markets a temporary boost by improving global trade volumes and spurring a USD selloff “due to its safe-haven status,” Martchev says. But that very same agreement would also bode well for the US trade deficit and, by extension, the USD.

Sabic is the latest chemical giant to feel the demand shock: Saudi Basic Industries Corp’s (Sabic) net profit fell by more than two thirds in 2Q2019 as global demand for chemicals and plastics falls. Financial statements show that profits fell to SAR 2.12 bn in 2Q from SAR 6.7 bn a year ago — the lowest level since 2009. Other major chemical companies, including BASF and DowDuPont, have also issued profit warnings this year as the industry feels the effects of the global slowdown.

Apple and Intel signed a USD 1 bn agreement that will see Apple acquire the majority of Intel’s smartphone modem division, the tech giant announced on Thursday. The acquisition, which is expected to close next quarter, would see 2,200 Intel employees join Apple. The agreement covers Apple’s acquisition of the employees, intellectual property, and other equipment. Fun fact: Apple was Intel’s only modem customer, says CNBC.

Netflix shed USD 26 bn in market value after its disappointing second-quarter earnings report last week drove its shares down 20%, according to Forbes. Netflix founder Reed Hastings’ net worth also took a hit, dropping USD 850 mn to USD 3.4 bn. “The downturn comes during an otherwise positive year. Shares had risen 35% between January 1 and July 17. On that day, Netflix published its quarterly results, which showed a decline of 126,000 U.S. subscribers, compared with an expected gain of 300,000. Globally, it added 2.7 mn subscribers, far short of its forecast of 5 mn.” The streaming service is planning to offer subscriptions to India’s mobile users for less than half of the country’s cheapest rate to beef up its subscriber base.

Investors are catching on to climate change: Fights are breaking out in boardrooms as investors push companies for low-carbon solutions, the Financial Times reports. “We are saying to these companies that [climate change is everyone’s] problem. Every company, and its directors, needs to think how they will be affected,” said Natasha Landell-Mills, head of stewardship at Sarasin & Partners, a British asset manager. Pressure was initially brought on boardrooms of fossil fuel companies, but investors are now calling on executives of food producers, chemical makers and car manufacturers to adopt environmentally-friendly policies.

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