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Wednesday, 7 July 2021

THIS MORNING: Sayonara Ever Given; GERD meeting tomorrow; EGX hit by GERD? Oil tanks following OPEC+ meeting.

Good morning, friends — We have another politics-heavy issue for you this morning, and it’s likely to stay that way until the end of the week, with the UN GERD vote possibly happening tomorrow, the OPEC+ fail continuing to roil oil markets, and today’s big send off for our 400 meter-long friend in the Suez Canal. Speaking of which…

Today is the day we say sayonara to the Ever Given. The mega container vessel that managed to get itself stuck in the Suez Canal for six days in March will finally be allowed to leave Egypt today after its owner came to an agreement with Suez Canal Authority this week. A signing ceremony for the settlement will take place in Ismailia later today, after which the Ever Given will up-anchor and leave the Bitter Lake, where it has been detained for almost three months.

The final hurdle was cleared yesterday when the Ismailia Economic Court allowed the ship’s release, lifting a court order allowing the SCA to confiscate the vessel. This came a few days after the ship’s owner Shoei Kisen reportedly agreed to pay USD 540 mn to the authority (though we still don’t know the precise terms of the agreement). The story is receiving coverage in the Associated Press and Reuters.

THE BIG STORY ABROAD- There’s no single story dominating the front pages of the foreign press this morning:

  • Microsoft kicked off Pentagon contract: The Biden administration has cancelled Trump’s so-called “Jedi” contract that would have seen Microsoft provide cloud services to the Pentagon, and will likely choose Amazon instead. This has reportedly sent Jeff Bezos’ personal fortune soaring to a record USD 211 bn. (Reuters | WSJ | FT)
  • “Bad, bad, really bad news for the emerging markets”: A stand-out quote from this Washington Post article which asks what will happen in the developing world when the Federal Reserve raises interest rates.
  • The Big Apple may have a new mayor: Democratic candidate Eric Adams is poised to become New York’s new mayor. (Reuters | AP | NYT)

THE BIG STORY TOMORROW- The UN Security Council will hold its long-awaited meeting tomorrow to discuss the Grand Ethiopian Renaissance Dam (GERD). Foreign Minister Sameh Shoukry has been in New York this week in diplomatic meetings with Security Council member states, yesterday holding talks with the five permanent members of the council (US, China, Russia, UK and France) ahead of tomorrow’s meeting.

We have more details on what is happening with the draft resolution in this morning’s talk shows section, below,

Meanwhile, the dam is being filled: Egypt’s Irrigation Ministry said on Monday that Ethiopia had resumed filling the reservoir of the dam for the second time. Ethiopia is yet to comment on the ministry’s statement.

UN, US call for calm: The UN and US yesterday urged Egypt, Sudan and Ethiopia to avoid taking any unilateral action and called on them to return to the negotiating table, Reuters reports. UN Secretary-General Antonio Guterres reiterated support for the current African Union-mediated process, with his spokesperson calling on the countries to “recommit themselves to engage in good faith in a genuine process.”

Ethiopia has sent its own letter to the council, objecting to the “meddling” of the Arab League in the issue, according to the Ethiopian Foreign Ministry. The statement is referring to the emergency meeting last month in which the league called on the UN Security Council to intervene in the dispute.

And Saudi Arabia has reiterated its support for Egypt and Sudan, calling on the international community in a statement yesterday to “intensify efforts” to find a solution to the dispute.


EGX UPDATE- Blame the sell-off on the GERD: The 1.9% slump on the EGX 30 yesterday was the market reacting to the rising GERD tensions, Pharos Holding’s Radwa El Swaify told us yesterday. Rania Yacoub, chair of the board of directors of Three Way Brokerage, told Reuters the same, saying that “there are no other reasons for the decline.”

Every stock listed on the benchmark index except for Egypt Kuwait Holding finished in the red yesterday, with Ezz Steel (-5.0%), Pioneers Holding (-4.5%) and Heliopolis Housing (-4.0%) the biggest losers.

*** CATCH UP QUICK with the top stories from yesterday’s edition of EnterprisePM:

  • New caps on cement sales could come into effect next week, finally bringing some relief to the ailing industry which has struggled to pull itself out of a years-long slump caused by rampant oversupply.
  • Activity in Egypt’s non-oil private sector was close to growth in June, as growth in output and new orders strengthened the PMI gauge to 49.9 — just 0.1 points beneath the 50.0 mark that separates growth from contraction.
  • The EGX 30 closed nearly 2% in the red yesterday, with both foreign and local investors emerging as net sellers.

MARKET WATCH- Oil prices are whipsawing as the market tries to second-guess the fate of the teetering OPEC+ alliance. Brent briefly surged to a six-year high before closing almost 3% in the red today as the failure of OPEC+ to raise supply sharply increased market volatility. A rare, and as-yet unresolved public dispute between Saudi Arabia and the UAE over production quotas has the world wondering whether the alliance will be able to agree to raise supply.

The immediate risk: Rising prices and higher global inflation. A OPEC+ pact is needed to temper price which have surged in recent weeks as supply fails to meet surging demand.

And in the medium-term: Discord in OPEC+ could result in a new price war, with countries producing however much they want, and sending prices plummeting. As one analyst said; “If you have 23 oil-producing countries that are party to an agreement, and that agreement isn’t extended, and the price of crude is in the mid- USD 70s, that’s an engraved invitation to overproduce.” Bloomberg and CNBC have more.

Three Egyptian asset managers have made Forbes’ ME 30 Biggest Asset Managers 2021 list. EFG Hermes was the highest-ranked Egyptian firm, coming in at #17 with USD 3.5 bn in assets under management (AUM). Misr Capital placed at #22 with USD 2 bn and Al Ahly Financial Investments Management was ranked #28 with USD 1.4 bn AUM.

Saudi Arabia dominated the list with 16 entries, with NCB Capital coming at the top with USD 50 bn AUM, followed by the UAE with five companies and Bahrain with three.


CIRCLE YOUR CALENDAR-

Among the handful of dates to keep an eye on:

  • Fuel pricing: We should hear by Saturday whether the government will raise, hold or cut fuel prices for the coming quarter.
  • Inflation: Data for June will be released next week.

The EGX will hold its board elections for the 2021-2025 term on Wednesday, 14 July. Here’s a rundown of the candidates vying to fill board positions.

The Cairo International Book Fair is ongoing at Egypt International Exhibition Center today. The event will run through to 15 July.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

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