What we’re tracking on 2 February 2020
Good morning, wonderful people, and welcome back to another gorgeous midwinter day in Egypt. It’s a moderately heavy newsday in which no single story is dominating the agenda here at home. Abroad, newswatchers are like hound dogs watching ping pong, their gaze languidly flipping back and forth between Joe Biden’s first real test in Congress over a covid relief bill (and the simultaneous post-Trump twitches of the GOP) and the ongoing “rampage of retail” investors on Wall Street.
Also: Happy Groundhog Day. That’s all covid is, right? We’re all actors in some real, live, global and digital recreation of the Bill Murray classic?
Aside from a smattering of M&A and investment news, the big story here at home remains the fact that It’s interest rate week. There are conflicting signals on what the CBE will do when it meets on Thursday, with our poll of economists forecasting a hold, but a move by the National Investment Bank’s (NIB) to slash yields on investment certificates it sells through the National Bank of Egypt (NBE) possibly signposting a cut, Reuters suggested earlier this week.
Don’t read too much into NIB’s move: EFG Hermes’ Mohamed Abu Basha said in a note yesterday that the rate reduction may be a byproduct of ongoing restructuring under our USD 5.2 bn standby arrangement with the IMF, which includes changes designed to confine the role of the bank. After doling out above-market rates, the state-owned bank will likely have been forced to pay a lower rate of interest after — according to local reports — it sold to the National Bank of Egypt its deposit portfolio, which amounted to EGP 435 bn in December. The NIB also lost a key tax advantage last year when the government scrapped the withholding tax exemption on treasuries. This all suggests that the move is not necessarily market-driven, and is unlikely to have “much wider market implications,” Abu Basha wrote. He’s sticking by his call that the central bank will leave rates unchanged on Thursday.
Meanwhile, the National Bank of Egypt and Banque Misr have left rates unchanged on their three-year platinum savings certificates at 11%. Banque Misr last cut the yield on these certificates in December, Deputy Chairman Akef El Maghraby told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 9:15) last night.
WHAT ABOUT THE RETAIL HORDE? It’s still the #1 story in the global business press this morning. The Reddit crowd has taken silver to an eight-year high — and prompted Chinese investors to jump into “poor man’s gold,” Reuters adds. GameStop was down nearly 31% yesterday, but Redditors pushed up AMC and BlackBerry as they continue to try to squeeze short sellers. The story leads the front pages of the Financial Times and the Wall Street Journal, and the salmon-colored paper looks at how online broker Robinhood’s bid to “democratize finance” has “collided with Wall Street reality.” Robinhood just raised USD 2.4 bn to land its second cash infusion in just days and is now said to be looking at debt markets.
Meanwhile, the Republican Party is (messily) sorting out its post-Trump future. Dozens of former Bush administration officials (you remember him — the nice man who invaded Iraq?) have quit the party in recent days, “dismayed by a failure of many elected Republicans to disown Donald Trump.” Meanwhile, Mitch MCConnell is slurping down a big bowl of his just reward as he denounces “looney lies and conspiracy theories” spread by QAnon nutter (and elected representative) Marjorie Taylor Greene.
PSA #1- If you (or your offspring) are in the New York area (or pretty much anywhere in the Northeast), it’s snowmageddon once more. More than 15 inches (that’s 38 cm) of the white stuff is already on the ground in the Big Apple as the storm swept up the seaboard into New England. It should hit Atlantic Canada in a few hours’ time.
PSA #2- Here at home, the weather is gorgeous as we reap our customary midwinter reward for putting up with the nonsense known as “Cairo in July and August.” Look for daytime highs of 27°C in the capital city and 24°C in Alexandria today and tomorrow. Cairo and Alex are both in for cooler temperatures and some rain on Thursday and Friday, according to our favorite weather app.
KEEP YOUR EYE ON-
The business community has until 10 February to give comments on the Unified Tax Act’s executive regulations that were finalized by the Finance Ministry last month, the cabinet said in a statement yesterday. The Unified Tax Act saw the creation of Egypt’s single tax platform as a way to overhaul tax administration, encourage informal businesses to go legit, and grant authorities better oversight on commercial transactions and tax accounts. The pilot phase launched in January, with 11k of the country’s largest taxpayers now filing returns and paying taxes via the platform.
MORNING MUST READS-
FOR FINANCE NERDS- If you care about the future of the industry, you want to read the Economist’s take on where asset management will be in 2030. By then, the “sorting of the industry into a small club of giant asset managers and a bigger one of niche managers will be largely complete.” ETFs and index-tracking funds will account for “the bulk of all stockholdings.” Products are going to look super-tailored, and competition between niche firms for the AUM that haven’t been hoovered up by the passive giants is going to be intense.
And forget it if you think ESG is going to be the savior of active asset management: “By 2030 it will be too mainstream to be a source of differentiation [and] despite the increased salience of corporate governance, the big passive funds may ultimately choose not to use their vast voting power to influence firms.”
Read the full story here, including how the “newspaper” thinks private markets and China will shake out.
But there’s still lots and lots of room to play with ESG in the meantime: UK outfit Aviva could pull its investments from 30 of the world’s largest oil, gas and mining companies if they do not commit to going green in the coming three years, the Financial Times reports. The companies must set net zero emissions goals and outline clear plans for the energy transition, or risk divestment, Aviva has declined to name the companies it is targeting, though it is among the top 30 shareholders of both BP and Shell.
MEANWHILE- Egypt is leading the way for Africa and the Middle East in its push towards a greener future, with major projects such as the flagship Benban solar power park and the Al Mahsamma wastewater treatment plant in Sinai, according to an FDI Intelligence piece co-authored by International Cooperation Minister Rania Al Mashat and International Finance Corporation MENA Vice President Sergio Pimenta. The green drive is helping Egypt set up its economy to be “more robust and resilient to external shocks” and set an example for the region to follow, with the help of development finance institutions.
We’re on the penultimate day of CI Capital’s 5th Annual MENA Investor Conference, which kicked off on 26 January and wraps tomorrow. The virtual event gathers 320 investors representing 100 global institutional investment firms who together have over USD 10 tn assets under management, according to a press release (pdf).
Other news triggers coming up this month:
- Purchasing managers’ index: January PMI data for Egypt, Saudi Arabia and the UAE will land tomorrow at 6:15 CLT.
- Foreign reserves figures for January should be out toward the end of this week.
- Inflation figures for January will be released on 10 February.
- The deadline for businesses to file wage tax returns is now 28 February after the Finance Ministry extended the cut-off date.
Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.