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Wednesday, 21 August 2019

What we’re tracking on 21 August 2019

The Eid news slowdown is showing no signs of letting up…

Tomorrow is interest rate day: The Central Bank of Egypt’s Monetary Policy Committee will announce its interest rate decision tomorrow. Three-quarters of economists surveyed by Enterprise this week see the central bank easing (with most anticipating a 100 bps cut). A Reuters poll yesterday showed that 10 out of 13 economists expect the bank to ease: seven see a 100 bps cut, three expect a more aggressive 150 bps cut, while three think it will leave rates on hold. The MPC last cut interest rates in February, when the overnight deposit and lending rates were reduced by 100 bps to 15.75% and 16.75%, respectively.

How will a cut affect the EGX? Shuaa Securities’ sees a 79% chance that the EGX is positive one month after the meeting if the CBE cuts rates.

The private sector needs at least a 300 bps cut to resume capex borrowing, says Monette Doss, banking analyst at HC Securities’ equity research department, citing bank surveys. Our poll of nine companies across several industries earlier this year found that businesses are waiting for interest rates to fall within pre-float levels of 10-13% before ramping up capex borrowing. HC Securities sees this happening before the end of next year, with 100–200 bps worth of cuts coming in 2H19 and another 200-300 bps in 2020. This would fully reverse the 700 bps of rate hikes enacted since 2016.

Investors are hoping the US can avoid a recession now that the yield curve is steepening, but “history indicates that the reprieve may be brief, before a more sustained, severe flip occurs,” Reuters says. US Federal Reserve officials are gathering at Jackson Hole this week and could cause the yield curve to invert once again if Fed boss Jay Powell indicates that the central bank is not “fully on board for an all-out rate-cutting mode, which would drive short-term rates higher.”

All this talk of the inverted yield curve has apparently caused a spike in Google searches on what exactly the term means, according to the newswire. Are you among those who need a crash course? We’ve got you covered.

Meanwhile, rebounding US stocks are pushing the VIX lower: Derivatives traders are expecting less market volatility as major indices in the US, including the Dow Jones, have begun recouping losses from last week’s declines, according to the Wall Street Journal. The expectations have driven the volatility index (VIX) lower. “Leveraged funds like hedge funds recently increased bearish wagers on futures linked to the VIX to the highest level since September … A bearish bet on the VIX is akin to a bullish one on stocks, since the volatility gauge and S&P 500 tend to move in opposite directions. Investors can tap futures to make directional bets or hedge other parts of their portfolios,” the piece explains.

EM equities rebound on easing hopes: EM stocks rose for a third consecutive day yesterday as expectations for accelerated easing in developed economies grew, Reuters reports. The MSCI EM Equities Index inched 0.2% higher following movements in global equities. Mark Haefele, CEO at UBS Global Wealth Management, said that the effects of renewed stimulus would make the EM carry trade more attractive for investors. “The combination of muted growth and low yields creates a conducive environment for carry strategies,” he wrote in a note.

Lazard, Moelis to advise on Aramco IPO: Saudi Aramco has chosen investment banks Lazard and Moelis & Co. to advise on what is expected to be the world’s largest ever IPO, sources told Bloomberg. The banks have already started work on the listing, and will help to select the underwriters, identify suitable markets, and ensure that the company is valued in line with expectations. The IPO was originally scheduled to take place last year but the company put it on hold prioritizing instead its purchase of Saudi chemicals giant Sabic. Aramco now intends to list as early as 2020, although sources say plans could yet be delayed.

Are shorter working hours the key to bringing more women into banking? European banking and asset management organizations, including the Association for Financial Markets in Europe (AFME) and the UK’s Investment Association, are discussing a proposal to reduce stock market trading hours in a bid to attract more women to the sector, the Financial Times reports. The idea is that cutting down on standard trading hours would make the industry, which is notoriously male-dominated, a more appealing option for parents and simultaneously promote better mental health for all employees.

Sudan civilian-army coalition disbands military council: Sudan’s civilian coalition and the army have disbanded the military council and established a joint ruling body that will govern the country until elections are held in 2022, the Associated Press reports. The 11-member Sovereign Council is comprised of six civilians and five generals, and will be led for the first 21 months by General Abdel Fattah Burhan. The two sides signed the final power-sharing agreement last week, which paves the way for the creation of a new legislative assembly and a cabinet appointed by the opposition.

Facebook ads are apparently about to get less annoying (and hopefully less creepy): The social media company is launching a new tool that lets users put a cap on what information can be gathered about them from other websites and apps, the AP notes. The tool will let users delete past browsing history from Facebook and prevent the website from keeping track of future activities.

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