Wednesday, 6 October 2021

TONIGHT- It’s Armed Forces Day + e-Finance releases public subscription notice. + Global markets under pressure but Aramco breezes past.

It’s Armed Forces Day here in Egypt, ladies and gentlemen, and we’re very thankful for a three-day weekend starting tomorrow. Just a couple more hours now…

President Abdel Fattah El Sisi observed the occasion with a speech today (excerpt: watch, runtime: 3:01) thanking the Armed Forces and people of Egypt for their sacrifices on the battlefield and for facing down economic hardships. The speech also expressed thanks to our regional allies for their support during the 1973 war as well as more recent economic assistance.

A REMINDER that today is about much more than the start of a long weekend, courtesy the Twitter feed of Abdel Hamid Ahmed Hamdi, chairman and CEO of the Eastern Mediterranean Gas Co. (LinkedIn). Hamdi lost his father at age 10 (and his mother was widowed at 28) when his father was killed in the October War. He and his mom visited his father’s grave today (here and here).


1- e-Finance released its public subscription notice (or “PSN” in insider-speak) as its offering to domestic retail investors will kick off on Sunday, 10 October. The subscription period for retail investors hoping to be allocated shares in one of the largest IPOs the country has seen in recent years runs through Sunday, 17 October. Expect e-Finance to announce early next week how it will price the offering. At the EGP 12.50-13.98 range outlined in its price range release, the IPO could be worth as much as EGP 3.6 bn and value e-Finance, a state-owned fintech platform and payments infrastructure company, at up to EGP 22.37 bn. The IPO will see 14.5% of the company offered to domestic and international investors. You can learn more about the transaction here, check out the PSN here (pdf) or visit the transaction microsite here.


Corrected the subscription period for the retail offering to from from 10-17 October, instead of 6-14 October. 

2- Egyptian banks could be in line for up to USD 1 bn in funding from the African Export Import Bank (Afreximbank), according to statements attributed to the bank’s head of intra-African trade and corporate finance, Ayman Elzoghby, by Al Mal. He reportedly told the newspaper that the bank is in talks with four local banks for packages worth between USD 600 mn and USD 1 bn.

3- The Senate has constituted a full set of committees, electing members, heads and deputy heads for each. We’ll have the full list in Sunday’s EnterpriseAM.

HAPPENING NOW- It may be a slow news day here on the eve of a long weekend, but it’s bonkers abroad, between turbulence in global stock and bond markets, a global corporate tax agreement seeming within reach, new calls for Facebook to be regulated or broken up, and pundits waking up to the notion that what we’re going through right now on the energy front is the first energy crisis of the green power era.

LET’S START WITH GLOBAL MARKETS, where European markets are taking it on the chin and futures suggest shares on Wall Street and in Toronto are going to be under pressure at the opening bell. The DAX, CAC, FTSE and STOXX are all in the red (each down more than 1% at dispatch time as they clawed back steeper losses from earlier in the session). CNBC says investors are getting the jitters as spiraling energy prices raise the specter that higher inflation could be here to stay for a good, long while. An unexpectedly sharp decline in German industrial orders at the same time as Spanish output grew slower than expected each added to the bearish sentiment in Europe.

The EGX bucked the trend and closed up 1% for the day. The benchmark index is now down 2.8% year-to-date.

You know who’s coming out on top of this? Oil and gas majors generally, and Aramco specifically. Aramco shares have been rising on the back of rising energy prices, bringing Aramco’s valuation at USD 2 tn and closing on Apple’s (the most valuable company in the world) USD 2.3 tn market cap, according to Bloomberg.

Aramco’s share price was also buoyed by a potential multi-bn USD sale of stakes in its natural gas pipeline network, with major PE players such as BlackRock, Apollo Global Management and Brookfield Asset Management all reportedly interested, people familiar with the matter tell Bloomberg. Aramco’s shares on the Tadawul rose 0.67% today to SAR 37.30 at dispatch time.

You know who’s taking the worst of it? This year’s high-profile European IPOs, Bloomberg writes, saying “many of this year’s biggest initial public offerings in Europe are now trading in the red” as investors are prompted by “surging bond yields … to dump highly valued growth shares.”

Could the energy crisis nibble into our carry trade? While equities have come under pressure this week, US and European bond yields are rising, making them more attractive to international bond buyers. The 10-year break even rate (difference in yield between inflation-protected and nominal debt of the same maturity) in the UK — one of the countries hardest hit by the EU gas crisis — climbed 10 basis points to 4.08%, Bloomberg reports. UK 10-year gilt rates reportedly surged to their highest since May 2019, according to the FT. Across the pond, yields on 10-year US treasury notes rose to 1.547% from 1.528% on Tuesday, according to the WSJ, while 10- and 30-year bonds reached their highest since June.

The conversation now turns to policymakers and the possibility of higher interest rates. The US Federal Reserve has already signalled it may start tapering its stimulus program as early as next month. With climbing yields in the UK, analysts speaking with Bloomberg say the market has already priced a rate increase by the Bank of England when it meets in December.

This makes this month’s central bank Monetary Policy Committee (MPC) a particularly interesting one. While Egypt still maintains one of the highest real interest rates in the world (the CBE has held rates steady for seven consecutive meetings), increasingly attractive yields abroad and rising interest rates in developed economies could have an impact on inflows here. The MPC is next due to meet on 28 October and one more time on 16 December before the year is out.

Oh, and speaking of shortages that could last into winter: Your favourite imported breakfast cereal may soon be in short supply. Workers at all of Kellogg’s US cereal plants went on strike today.

SIGN OF THE TIMES- Allbirds is walking back some of its “sustainable IPO” claims. The company said in its prospectus early last month that it would do an “SPO” (that’s a “sustainable public equity offering”). Yesterday in New York, it filed a revised document that removes the claim it is “conducting this offering while following the SPO framework.” The Financial Times has more.

A RAY OF SUNSHINE (unless, of course, you’re a CFO trying to “maximize shareholder value”): “We are one millimeter away” from a global tax agreement, France’s finance minister has said. The declaration came after Ireland said it was “confident” that it can sign onto a revised agreement that would set a global minimum corporate tax rate of 15%. Look for more news on Friday at an OECD meeting that the Financial TImes says the European Union is billing as “make or break.”

** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

  • Private sector activity hits four-month low: Business activity in Egypt’s non-oil private sector continued to contract for the tenth consecutive month in September, but on the bright side, employment and business confidence are up.
  • VC firm Sequence Ventures launches new EGP 500 mn fund: Dubbed Egypt Deep-Tech, the fund plans to invest in Egyptian startups operating in health-tech, fintech, ed-tech, prop-tech, logistics, and DevOps.
  • Digital ins. startup Amenli raises USD 2.3 mn in seed round: The company will use the proceeds to expand its team and grow its operations of selling life, medical and car policies to middle-income Egyptians.

MEANWHILE- The Sovereign Fund of Egypt is now a member of the One Planet Sovereign Wealth Funds (OPSWF), according to a cabinet statement. OPSWF is a network of some 18 global sovereign funds that support one another in taking into account climate risks during the investment process and transitioning to a greener economy.

You can now listen to Making It on Spotify here in Egypt: The audio streamer randomly decided it will let Egyptians (and we’re guessing the rest of MENA) into its podcast world. One of us stumbled on the magic button earlier today. All of Spotify’s podcast roster is now available including The Joe Rogan Experience. However, we’re more interested in something closer to home, namely Enterprise’s podcast Making It, on which we speak with the founders and CEOs of brand-name businesses about how to build a great business here in Egypt.

RANDOM ASIDE: When you’re a corporate drone, but also an art nerd.

☀️ YOUR WEEKEND WEATHER- Expect daytime highs between 31-32°C and nighttime lows of 19°C over the holiday weekend, according to our favorite weather app.

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