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Thursday, 18 March 2021

What we’re tracking on 18 March 2021

Good morning, everyone. We hope you’re looking forward to a fantastic Thursday as we wrap up week 11 of 2021. That means we have just a week and a half until the end of 1Q — and 26 days until the start of Ramadan. The Colonel was right: Time accelerates as you get older.

It’s interest rate day — and all signs point to a hold: All 12 people we surveyed last week forecast the central bank would leave rates unchanged when it meets later today, citing the possible impact of heightened commodity prices on domestic inflation, and the potential for rising bond yields in the US to hit our all-important carry trade. In a similar Reuters poll, 15 analysts expected rates to be left on hold and one penciled in a 50 bps cut.

Where rates stand currently: The CBE’s overnight deposit rate is at 8.25% and the lending rate is 9.25%, while the main operation and discount rates are at 8.75%. The central bank slashed rates by 400 bps last year, including an emergency 300-bps cut in March to protect the economy from the fallout from covid-19, and two 50-bps cuts in September and November.

IT’S A BIG DAY FOR: The AstraZeneca / Oxford jab, with a top European Union regulator set to announce the results of its investigation into blood clots in a vanishing small number of recipients of the jab. Both the head of the European Commission and the World Health Organization said late yesterday that they trust the AstraZeneca jab. “I trust AstraZeneca, I trust the vaccines,” EC boss Ursula von der Leyen said. In a collective freakout, EU countries including France, Germany, Ireland and more pulled the jab. Canada continues to use it, and Ireland, France and Italy have all signaled they’re ready to quickly resume using the AstraZeneca jab if today’s report allows it.

*** CATCH UP QUICK from Wednesday’s edition of EnterprisePM:

  • Anyone living in Egypt who is 18 or older can register now to be vaccinated against covid-19 as registration through the Health Ministry’s online portal is no longer limited to senior citizens, healthcare workers, and individuals with chronic conditions.
  • The sale of an 80-90% stake in military-owned Wataniya Petroleum has been pushed back to 2H2021 from the first half of the year as was previously expected.
  • EFG Hermes’ 2020 grew for the third year in a row as the company’s buy-side, non-bank lending, and capital markets businesses performed solidly throughout the year.

YOUR WEEKEND READING assignment: The Biden administration doesn’t seem to like freetrade any more than Agent Orange did, the New York Times writes. The idea that trade liberalization “like the spread of democracy and market capitalism … is a universal and worthy goal” is no longer “gospel” in DC, the Gray Lady suggests. Kathering Tai, Biden’s nominee to run the Office of the United States Trade Representative, is “promising to focus more on ensuring that trade [agreements] that protect the rights and interests of American workers, rather than exporters or consumers.”

PSA #1- The Tax Authority isn’t planning to extend the 31 March deadline for real estate tax filing, director of taxpayer services at the Egyptian Tax Authority Mohsen El Gayar told Yahduth fi Misr’s Sherif Amer (watch, runtime: 2:52).

PSA #2- But do you know who has given you more time to file your taxes? Your good old Uncle Sam. US citizens and dual nationals will have until 17 May to file their individual tax returns, the IRS said in a statement out overnight. You can also file something called Form 4868 to ask to have until 15 October to make your filing, but you’d still need to pay whatever taxes you think you owe by the May deadline. CNBC has more.

** EDITOR’S NOTE- EnterprisePM will not publish this afternoon. Longtime readers know we take occasional publication holidays to tool up for something new (and sometimes even take a breather). Today is one such day for EnterprisePM. Both our Morning and Afternoon Editions will be back in your inbox on Sunday morning at the appointed hour.


The US Federal Reserve reinforced its dovish stance, deciding yesterday to keep interest rates near zero in a unanimous vote. Fed officials expect to hold rates where they are until at least 2023, despite their projections (pdf) for economic growth and inflation indicating a more positive outlook than a few months ago, thanks to the Biden administration’s USD 1.9 tn stimulus program and the rollout of the vaccination program.

The Fed is now looking to bring inflation “moderately above 2% for some time” to compensate for the current shortfall and maintain the long-term average rate at 2%. It will only consider raising interest rates once inflation is “well anchored” at this target, the statement says. Bloomberg and the Wall Street Journal have more.

A stock market crash? That’s nothing to worry about, says veteran FT commentator Martin Wolf in a piece that calls for calm if and when stocks suffer a serious pullback after a record-breaking bull run. With interest rates rising in anticipation of a strong economic recovery and heightened inflation, a stock market accustomed to cheap debt may well suffer a correction. Equities do not equal the real economy though, and while a crash will certainly hurt investors, it would only produce a wider economic crisis if badly handled by policymakers, Wolf argues.

That’s all well and good if you’re in the US, but in EM? Emerging markets were concerned about potentially being faced with a situation similar to the 1980s debt crisis due to the aggressive stimulus measures in the US and what they thought might be sooner-than-expected tightening, Wolf writes. The asset class got a taste of that scenario earlier this month, when the bond sell-off in the US ricocheted into emerging markets, producing the first day of outflows in more than five months.

Investors are certainly worried: Rising inflation and interest rates have overtaken covid-19 as the #1 investment threat, according to a Bank of America survey of investors, the FT reports. Respondents, who collectively manage over USD 579 bn worth of assets, voiced concerns that a strong economic recovery will combine with the historic volumes of fiscal and monetary stimulus to send prices rising uncontrollably higher, and about a possible 2013-esque spike in interest rates.

Between a rock and a hard place: “The Fed’s challenge is to manage the transition from a low to a high interest rates regime without causing market mayhem,” said analysts for financial services group ING. That’s likely to be easier said than done though. “It’s a catch-22 for the Fed,” said Jim Caron, portfolio manager at Morgan Stanley Investment Management. “They want to communicate that they are going to be patient but the more patient they are, the more people will worry about inflation.”

The treasury sell-off is spreading to corporate bonds: Borrowing costs for US companies are rising as the sell-off in US treasuries seeps into the corporate bond market, the FT says. The average yield on investment-grade debt rose to 2.28% last week, up 0.17 percentage points in March and 0.5 points in 2021, according to data provider ICE Data Services. The average price of high-rated corporate debt is now at its weakest since 2Q2020.

The stock market mania may still have a while to run though, as the Biden administration prepares to dole out its USD 1.9 tn stimulus package. Analysts at Vanda Research predict that retail investors will buy almost USD 3 bn worth of stocks when stimulus checks are paid out this week, according to the FT. This would be some USD 1.5 bn higher than the average daily inflow over the past month, and set a new record for single-day retail buying activity.


Talking sustainable manufacturing with BEBA: The British-Egyptian Business Association (BEBA) will host a virtual conference on how Egyptian and UK firms can work together on sustainable manufacturing projects in Africa in the post-Brexit environment on Tuesday, 23 March. Check out the agenda here (pdf).

The second edition of the Egypt Retail Summit takes place at the Nile Ritz Carlton hotel next Tuesday 23 March, bringing together retail brands in Egypt and the region.

Our friends at the French Chamber of Commerce and Industry in Egypt are organizing a working breakfast with Sovereign Fund of Egypt CEO Ayman Soliman on Tuesday, 6 April at the residence of French ambassador Stéphane Romatet. Contact if you would like to attend.

BEBA is holding a webinar on digital banking and fintech on Wednesday, 7 April, it announced yesterday. Register here.

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