What we’re tracking on 02 April 2020
We do not recall the last time we were this grateful for Thursday to have rolled around. There’s lots of news for you folks this morning below, after which we wish you a productive workday and a blessedly relaxing weekend.
SMART POLICY- Pushing back the deadline to file and pay taxes. The Federation of Investors’ Associations is calling on the government to postpone until 1 July the deadline for companies to file and pay income taxes. The federation is also saying companies should be allowed to delay paying social insurance and state-owned utilities for a six-month period, Al Mal reports. Hassan Allam Holding co-CEO Hassan Allam told us yesterday that the government should delay payment of 2019 taxes “until December … We’re seeing this in other countries that pay taxes in April, like the US, which has delayed payments until July.” Allam noted that he isn’t calling for a full tax holiday, but a delay to give businesses extra cash in difficult times. Companies have until the end of this month to file taxes.
FOOD FOR THOUGHT- As you head into the weekend, we offer a reading that kept us up at night and then something lighter to take your mind (momentarily) off of it:
You need to reassess what a “bad’ scenario looks like and what a “good scenario” might be for your business in the coming 21 months (that’s the rest of this year and next). We think the odds are good that few of us have been sufficiently aggressive in planning “good” and “bad” scenarios.
The CEOs and c-suite execs we speak with day in and day out feel we’re at something of a tipping point. We have a few days to a few weeks to prepare for either a gradual recovery or more pain, and it’s hard to tell which way it will break.
If we’re on the upswing, we need to remember the lesson of Chinese factory owners: First, their biggest concern was when they could get people back to work in their idle factories. They then found it was harder than expected to get factories up and running again — and then reality set in: Many of their export markets aren’t buying, because they are on covid lockdown. And changes in consumer behaviour “post-covid” are still making businesses’ heads spin — even as they face news that other parts of the country are now being locked down.
So, the reading? This piece by veteran NYT economics writer Peter Goodman compellingly suggests that the global recession is going to be long-lived and quite deep. Egypt has unquestionably escaped the worst — so far — of both covid and the economic damage that it has wrought in Europe and the United States. But even if the virus passes through leaving us relatively unscathed, we’re enmeshed in this thing called the global economy.
The antidote? Parents of a certain age will remember Samuel L. Jackson’s reading of the children’s book (really, parents’ book) Now go the F**k to Sleep. He’s back now reading the sequel: Now Stay the F**k at Home (watch starting here, or rewind to see Jackson’s interview with Jimmy Kimmel.) Sadly, network censors bleeped out the good bits.
COVID-19 IN EGYPT-
Egypt’s total number of covid-19 cases leapt to 779 overnight with 69 new cases yesterday, the Health Ministry said in a statement. The ministry also confirmed six new deaths from the disease, bringing the death toll to 52. A total of 179 patients are now reported to have fully recovered, while another 221 appear to be on the path to recovery after having tested negative for the virus. The ministry added that 94% of cases were people over 50 years’ old, with 22% aged between 50-59. Some 61% of the cases were men, while women so far account for just 39% of cases.
Virus “under control” -Madbouly: Prime Minister Moustafa Madbouly said that Egypt’s covid-19 outbreak is “under control” in a video conference call with the country’s governors, a cabinet statement said. He called for strict adherence to the government’s curfew and precautionary measures as well as the free movement of delivery trucks.
Some private hospitals are reportedly turning away people with respiratory problems. The Health Ministry has called on private hospitals to seal off wards for the isolation and treatment of covid-19 patients after it found that a number of hospitals had turned away people with respiratory problems and directed them to public facilities, a local press report claims.
The Industry Ministry has announced a ban until 17 June on exports of personal protective equipment and other key medical supplies including ethanol and disinfectants, the local press reports.
Pharma manufacturers need to have on hand a six-month supply of their meds for the domestic market before exporting, the head of the Egyptian Council of Pharma Exports Maged George tells the local press. Manufacturers have argued that maintaining a six-month inventory of all their products is unnecessary because production capacity is sufficient to cover both local market needs and exports, the report adds.
Evacuation flights are bringing home citizens, and they need to sign pledges to go straight into quarantine. Some 87 people returned on an EgyptAir flight from France yesterday, while another flight brought folks back from the United States. Passengers were only allowed to board after signing an undertaking to quarantine themselves on arrival. Immigration Minister Nabila Makram has previously said the government is prioritizing boarding for those stuck abroad on tourist visas.
Returnees who have already arrived home unprepared for quarantine may be able to get some relief from the Tahya Masr fund, reports Al Masry Al Youm. Information Minister Osama Heikal later clarified that the decision only applies retroactively to those that have already arrived and were caught unaware by the mandatory quarantine. Citizens returning home now are told in advance of the requirement and cannot board flights (above) unless they agree to abide by it.
The Tourism Ministry is setting up a hotline for workers to report layoffs, according to the local press. The ministry is meanwhile working on a request to the Madbouly government for emergency funds to cover near-term industry payrolls, Egyptian Tourism Federation Vice President Asim Wahid told Al Shorouk.
Restaurants and shops who rent at state-controlled tourism sites will get a rent holiday until the covid-19 crisis is over and the sector comes back to life, the domestic press reports. The Sports Ministry is giving a similar rent holiday to businesses in youth centers.
More than EGP 43 bn has now been invested in the new high-interest savings certificates launched by the National Bank of Egypt and Banque Misr the NBE said yesterday. More than EGP 30 bn has been put into the certificates issued by the NBE and Banque Misr has issued around EGP 13.4 bn worth. The two state-owned banks began offering the one-year 15% bonds on 22 March to discourage people from putting their savings into USD as the EGP comes under selling pressure.
ON THE GLOBAL FRONT-
Trump signs USD 2.2 tn aid package into law: President Trump signed the USD 2.2 tn emergency economic package into law after the bill gained House approval yesterday, Reuters reports. The historic legislation, quickly put together to support the economy as it almost certainly heads into recession, passed almost unanimously.
It speaks volumes that the passage of the bill — the largest financial bailout in US history — was almost entirely absent from the front pages of the global press yesterday, as covid case counts, market turmoil, medical warnings and lockdowns ate up column inches.
Confirmation that tns of USD are about to flood into the pockets of businesses and consumers across the US wasn’t enough to stop stocks from sinking into the red. US stock indexes fell more than 4% yesterday as the reality of an extended lockdown intensified concerns about the fate of corporate profits and dividend payouts. More US states issued stay-at-home orders after Trump warned of a “painful” two weeks ahead, and New York Governor Andrew Cuomo suggested that the outbreak may not peak until the end of April. This sent the S&P 500 falling 4.4% — the biggest daily drop in two weeks. The Dow Jones and Nasdaq followed suit, both closing the session down 4.4%.
Mohamed El Erian has some advice if you need to roll the dice and get back into the market Those looking to take a long position should divide it over five instalments, El Erian said on CNBC’s Squawk Box yesterday. Acknowledging the lack of sophistication with the strategy, El Erian said this is the safest way to enter the market right now as it is impossible to predict how the dynamics are going to play out.
As Saudi Arabia shows no sign of backing down in the oil price war, we could soon be entering the topsy-turvy world of negative oil prices, analysts say: Landlocked crude producers may soon have to start paying to offload their oil as global demand enters an unprecedented slump, CNBC reports. Goldman Sachs analysts warned earlier this week that while seaborne crude will remain in positive territory, the covid-19 shock is “extremely negative for oil prices and is sending landlocked crude prices into negative territory.”
For KSA, you reap what you sow: Despite contributing to the drop in oil prices by ramping up production, Saudi could be setting itself up for long-term disaster, President of Transversal Consulting Ellen Wald writes in a Bloomberg opinion piece. Saudi wanted to increase demand for its oil and assert its dominance over the global oil industry, but seems to have miscalculated just how low prices could go.
Saudi isn’t the only one ramping up production: US oil companies have also pushed output to near record levels of 13 mn bbl/d despite plunging demand, CNBC reports.
This morning’s dire economic prediction is brought to you by Blackrock MD Amer Bisat, who said yesterday that he expects the global economy to contract by 11% during the first half of 2020, Reuters reports. “To put this in context, this will be worse than the contraction that we saw in 2008, it will be worse than the one that people estimate happened during the (1918) Spanish flu,” he said. “It won’t be as bad as the (1930s) Global Depression, which is a significantly worse contraction, but it will certainly be the second-worst economic shock that we’ve seen globally.”
Europe may have written off a V-shaped recovery, but it could be getting the next best thing: The eurozone and the UK will likely see a “tick mark” recovery after a sharp downturn in the coming months, economists at Berenberg said yesterday, according to CNBC. Rather than a so-called ‘V-shaped recovery’ — where a sudden downturn is followed by a rapid surge in activity — Europe will take around two years to return to pre-covid levels of economic growth, they said.
Gulf states may not even get that: Oil states in the Gulf may witness an ‘L-shaped’ recovery for years after the crisis, Bloomberg Economics’ Ziad Daoud has said, suggesting that non-oil growth will push lower due to reticence of governments to spend due to the oil price crash.
M&A is at an 11-year low amid the market turmoil with share prices plummeting and executives more focused on saving their own companies than buying others, the Financial Times reports. M&A activity last week reached USD 12.5 bn, the lowest weekly total since April 2009, and the sharp decline in activity is expected to continue in the short term, according to Citigroup.
The risky asset class known as collateralized loan obligations (CLO) has plummeted in value this month, leaving several big banks left hanging for USD bns of debt, the Financial Times reports. The market for the derivatives — a key source of funds for businesses with speculative-grade credit ratings — has all but evaporated amid the covid-19 outbreak, which is set to leave investment banks holding bns in toxic assets.
BACK ON THE HOME FRONT-
It’s interest rate day: Ten of 11 analysts we surveyed expect the Central Bank of Egypt will leave rates on hold when its Monetary Policy Committee meets later today. This is the first meeting since the central bank delivered an historic 300 bps cut last month at a surprise meeting; that cut brought rates back down to pre-float levels. The overnight deposit rate is now at 9.25% and the lending rate is at 10.25%.
The government will review petrol prices today or on Sunday at the latest, Al Mal reports, citing unnamed government sources. Petrol prices are allowed to move up or down 10% when the committee meets every three months, moving in the same direction as global oil prices. The oil ministry has said that reports on social media that prices had already changed are false, Youm7 reports.
News triggers triggers to keep your eye on as April starts.
- PMI figures for Egypt, Saudi Arabia and the UAE will land (doubtless with a thud) on Sunday, 5 April.
- Foreign reserves figures for March will be released on or around Sunday, 5 April.
- Inflation figures for March are due on Thursday, 9 April.
How the markets are looking today: China and South Korea are in the green, while Hong Kong and India are all solidly in the red this morning. Futures suggest that European markets look set to open down, while the Dow, S&P and Nasdaq are presently projected to open in the green.
*** We’ve never asked you for a penny, but we’re doing so today — not to put a coin in our pocket, but to help the folks at the Breathe campaign raise funds to acquire ventilators the nation needs as the number of covid-19 cases rises.
The Breathe Campaign is raising funds to purchase mechanical ventilators for Egypian hospitals. The campaign, a pilot project by charity startup Humankind with the aid of the Egyptian Cure Bank, has created a star-studded campaign featuring public figures including Yosra, Amina Khalil and Naguib Sawiris simply inhaling and exhaling. You can keep up to date with the campaign on Instagram and check out the ad here (watch, runtime: 1:08).
Want to make a contribution? Hit up the Egyptian Cure Bank, Fawry or the FawryApp or check out the description section of the Youtube page for other options.