Back to the complete issue
Monday, 28 June 2021

Bahrain over Egypt, says Arqaam Capital

Rising oil prices have Arqaam favoring Bahrain’s bonds over Egypt’s: The Egyptian bond market may be underpricing the country’s vulnerability to rising oil prices, Abdul Kadir Hussain, managing director of fixed income asset management at Arqaam Capital, suggested in an interview with Bloomberg Daybreak yesterday (watch, runtime 6:11). Although many of the region’s sovereign yield spreads have priced-in higher oil prices, Hussain suggested that Egyptian spreads may not be reflecting the level of risk that the country — a net importer of oil — faces as prices climb. “Even though Egypt trades wider than Bahrain, we think that the spread differential is not wide enough, given the headwinds Egypt might face from higher oil prices, even in the face of improving tourism,” he said.

Global oil prices have surged in recent weeks amid surging post-lockdown demand and a supply shortfall. The price of Brent crude rose to USD 76.18 / bbl at the end of last week, its highest level since October 2018, and more than USD 11 above the benchmark price used for Egypt’s 2020/2021 state budget. A number of market players have called a return to USD 100 oil in recent weeks as prices have continued to climb. And this week’s OPEC+ meeting isn’t expected to deliver the extra supply needed to put a ceiling over prices, meaning further rises in the days and weeks ahead.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.