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Wednesday, 16 October 2019

What we’re tracking on 16 October 2019

The IMF’s World Economic Outlook October update is here, and it’s pretty much as bleak as everyone expected. The fund revised downwards its global growth projections for this year and the next on the back of challenging macro conditions, including the US-China trade war. We have chapter and verse in this morning’s Speed Round, below.

Prime Minister Moustafa Madbouly is in Washington, DC, to attend the annual meetings of the IMF and World Bank, according to Ahram Online. Investment and International Cooperation Minister Sahar Nasr is also in the American capital for the meetings, which run from 14-20 October. You can check out the meeting website here.

Euroclear agreement coming soon: The Finance Ministry expects to officially sign an MoU with Euroclear while its officials take part in the Washington events this week, the State Information Service said. Egypt’s debt instruments are expected to be clearable through the Belgium-based clearinghouse by the beginning of next year.

The big news of the morning for the buy- and sell-sides is that it looks likely that the (presently suspended) capital gains tax on EGX transactions is going the way of the dodo bird and with it (to a large extent) the stamp tax on EGX trades. More on that in today’s Speed Round, below. We’re widely (and accurately) accused of being pro-business. We say as much on our website: We have opinions, we express them, and they are generally “pro free-market, pro-reform and secular.” But this move leaves a taste in the mouth.

<rant>The potential scrapping of the capital gains tax for EGX investors begs the admittedly uncharitable and self-interested question: Why are those who take positions in publicly traded companies such a special breed that they must be protected from capital gains taxes and stamp taxes, while those who build privately held companies are comparatively wrung dry?

Smart tax policy is widening the tax base by encouraging SMEs to go legit or by moving to tax global giants (such as tech companies) that operate here effectively without paying a piaster in income tax. It is not squeezing blood from stones, nor is it rewarding people who have a shiny gauge to point at (say, the performance of the EGX30) and a willingness to protest (witness the literal protests that accompanied the original introduction of the capital gains tax on EGX transactions back in 2017). As it is, we’re rewarding those who invest in public equities and punishing those who spend years or decades building private businesses that similarly create jobs and contribute to economic growth.</rant>

The two-day ‘Egypt Can’ conference wraps today. The event brings together 65 top investors in Egypt as well as representatives from international financial institutions, the domestic business community and the Egyptian government.

BEBA doorknock mission next month: The British Egyptian Business Association (BEBA) will be heading to the UKby the end of November for their annual doorknock mission, according to the local press.

Key dates for your diaries this month:

  • Our friends at AmCham will be hosting Social Solidarity Minister Ghada Wali for their monthly luncheon next Sunday, 20 October. Members can register here.
  • The Intelligent Cities Exhibition & Conference will take place at the Hilton Heliopolis on 23-24 October.
  • A B2B conference for German and Egyptian companies to talk cooperation will take place on Monday, 28 October in Cairo. Click or tap here to register.
  • The US Federal Reserve will meet on 29-30 October to review key interest rates.

As expected, Goldman Sachs’ earnings showed the investment bank had a rough third quarter, with a 6% drop in its 3Q2019 net revenue and three of its four core divisions recording lower revenues during the quarter, Reuters reports. The bank’s investment banking revenue dipped 15% as a result of lower advisory and underwriting fees, while the bank’s investment and lending services saw revenues tanking by 40% during the quarter.

Misery loves company, but JPMorgan isn’t keeping Goldman company this time: The largest bank in the US reported an 8% y-o-y increase in its 3Q2019 profits, marking the seventh consecutive quarter to post a y-o-y rise in profit, according to the Wall Street Journal. “The consumer bank has remained resilient in the face of a potential economic slowdown, and executives have touted the strength of the US consumer compared with big corporate clients. It said deposit balances and consumer lending revenue increased, allowing it to expand margins in the business,” the journal says.

We’ll keep an eye out for Morgan Stanley’s results, which are set to be released tomorrow.

US stocks hit four-week high: JPMorgan’s strong earnings, as well positive figures from UnitedHealth Group and Johnson & Johnson, led to the Dow Jones closing up 0.9%. S&P 500 rose 1% led by health stocks, while the Nasdaq finished 1.2% in the green. (Bloomberg)

In global miscellany:

Investors in Turkish markets are bracing for the possibility of punitive measures from the US that could strike a blow to the country’s financial system, Bloomberg reports. The US congress is urging forceful retaliation against Turkey for its military incursion into Syria, after The Donald had warned that he could “obliterate” the Turkish economy. The Donald and the individual who presently runs Turkey are due to meet in Washington on 13 November.

Liberals, cover your eyes: Donald Trump will coast to victory in 2020, if Moody’s Analytics is to be believed. The ratings agency forecasts The Donald to improve on his margin of victory from 2016 based on how voters feel about their personal finances, stock market gains and the unemployment rate. For those of you sceptical about how the most widely reviled US president in modern history could sweep to a second term in office: Moody’s models have only been wrong once since the 1980 election. (CNBC)

Anyone for a 20-hour flight? No, thought not. Qantas Airways is set to break the record for the world’s longest flight when it trials a direct Sydney-New York route on Friday. Scientists and medical researchers will be on board to monitor the sanity of pilots and passengers alike. (Bloomberg)

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