Monday, 1 November 2021

TONIGHT: Egypt is getting on the SPAC train + NBE is getting a USD 200 mn loan for infrastructure onlending + COP26 gets underway with a sobering warning

To quote Bone-Thugs-N-Harmony: “Wake up, wake up. It’s the first of the month.” And already it’s looking very busy, with some major finance news at home, while the world seems occupied with COP26 and Fed day.

Before we dive into them, here are dates for some key news triggers as we enter November:

  • PMI: November’s purchasing managers’ indexes for Egypt, Saudi Arabia and the UAE will land this Wednesday, November 3;
  • Foreign reserves: October’s foreign reserves figures will be out sometime this week;
  • Inflation: Inflation figures for October will be released next Wednesday, 10 November;
  • There’s no MPC meeting this month — the central bank will next meet on 16 December to review interest rates for the final time this year. The CBE has yet to issue its MPC calendar for 2022.

THE BIG STORIES TODAY-

FRA is endorsing SPACs in Egypt: The Financial Regulatory Authority has given the green light to a proposal to allow the establishment and licensing in Egypt of companies created with the sole purpose of raising capital through an IPO to acquire or merge with another company (SPACs), the FRA announced in a statement today. This appears for now to simply be an official endorsement, with the FRA looking to issue regulations that allow them at some point down the line, the statement reads. Egyptian SPACs would be subject to the Capital Markets Act, and the authority will later issue new listing rules governing securities related to these companies, FRA head Mohamed Omran said.

Over in startup land, last mile delivery startup ShipBlue has raised USD 2.4 mn in a seed round led by Saudi Arabia’s Nama Ventures, TechCrunch reports. Though the founders did not specify how the funds would be deployed, one of the company’s founders Ali Nasser says he wants ShipBlu’s network and infrastructure to span 99% of Egypt within the next couple of months.

^^ We’ll have more on these stories and others in tomorrow’s EnterpriseAM.

ALSO HAPPENING TODAY- Gov’t stipulated minimum charges at the nation’s hotels came into effect: All five-star hotels must now charge a minimum of USD 40 per night, while four-star establishments must charge at least USD 28 per night, according to minimum rates set by the government in April. Putting a floor under pricing has been on policymakers’ agendas since 2017 as part of a series of measures to help boost the then-suffering industry.

Egypt will take over the chairmanship of the African Union’s Peace and Security Council today, succeeding Mozambique, the Foreign Ministry said yesterday. Egypt will chair the committee for the month of November and will focus on the fight against extremism and terrorism, the statement said.

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

  • Saudi Arabia provided Egypt with a USD 3 bn deposit at the CBE to help it overcome the effects of the pandemic and shore up its foreign reserves.
  • Liberalized natgas market? The government is considering implementing an automatic pricing mechanism on natural gas, which would see the price of natgas supplied to industry changed every 3-4 months.
  • Zilla acquires two firms, eyes two more acquisitions: Investment firm Zilla Capital has acquired Naeem Holdings subsidiary Naeem Capital Investment, alongside a second unnamed financial leasing company, and is currently eyeing two more acquisitions.

FOR TOMORROW-

It’s Fed day tomorrow: The US Federal Reserve begins its two-day meeting tomorrow, in which it is widely expected to announce the winding down of its USD 120 bn a month asset purchase program instituted at the start of the pandemic to stimulate the economy. All eyes will be on the Fed’s Open Market Committee’s decision on whether it will pull the trigger on scaling back its program, which Fed chief Jay Powell has previously said could happen in November.

The Fed has mostly been saying that inflation in the US is “transitory,” but warned in September that the unexpected persistence of supply-side disruptions amid strong demand across several sectors is driving up prices.

Inflation who? The Fed meets a week after fears of sustained inflation took a back seat in the European Central Bank and the Central Bank of Egypt’s decisions to keep rates on hold. The CBE’s move to leave rates unchanged was partially grounded in the importance of protecting Egypt’s portfolio inflows by maintaining Egypt’s position as the provider of one of the world’s highest real interest rates. Portfolio inflows will be all the more important should the Fed decide to raise rates or if local inflation rises again — each of which could translate into volatility here at home. Rising US rates could spell challenges for emerging markets as investors are tempted to sell-down riskier assets in favor of higher-yielding US treasuries.

That said, investors appear to not be buying policymakers’ “transitory inflation” narrative anymore, with many banking on an earlier than anticipated hike in interest rates as energy prices and supply bottlenecks continue to keep the economy in a chokehold, the Financial Times reports. As a result, bond buyers are positioning themselves for a potential earlier tapering and a rise in borrowing costs, ramping up their purchases of short-dated debt. Short-dated bonds have already seen their yields rising, with yields on the US two-year benchmark hitting 0.55% over the weekend, up from 0.21% last month.

But penciling in a sooner hike could end up acting as a self-fulfilling prophecy, with one analyst telling the Financial Times that “investors are testing central banks’ resolve that all this is temporary and forcing their hands.” This comes as the US Federal Reserve and the Reserve Bank of Australia are both expected to announce a dial-back of their quantitative easing programs when they meet this week, while the Bank of England is expected to hike rates from record lows.


THE BIG STORY ABROAD- The COP26 climate summit in Glasgow opened with a sober warning from the UK’s Boris Johnson, that drastic action would need to be taken by world leaders “if we are going to prevent COP26 from being a failure.” His statements come after a disappointing G20 summit in Rome directly preceding the conference, in which the world’s 20 largest economies were unable to reach a consensus about how to limit global warming to 1.5°C — one of the goals set out in the landmark 2015 Paris Climate conference.

So far the US has already pointed the finger at China, the world’s largest emitter of greenhouse gases, with US National Security Advisor Jake Sullivan telling reporters the country must commit to more drastic cuts in its emissions. China’s Xi Jinping will not be attending the summit, and is due to send a written message instead, while Russia’s Vladimir Putin is also sitting out the conference, and will send a recorded video message.

President Abdel Fattah El Sisi is among the world leaders in Glasgow today, where he is expected to highlight Egypt’s readiness to host the COP27 in 2022, according to an official statement. Egypt was officially selected as the nominee to host next year’s climate conference — which must be hosted by an African country in 2022 based on a regional rotation system — earlier this year.

COP26 coverage is leading the front pages of all the major outlets: BBC | The Financial Times | Bloomberg | CNBC | The Washington Post | Reuters.

🗓 CIRCLE YOUR CALENDAR-

The Egypt Energy exhibition on power and renewable energy kicked off today. The three-day event will include speeches and discussions on the global energy outlook, the future of clean energy, financing green economy projects, and the future of connectivity with network management capabilities.

☀️ TOMORROW’S WEATHER- Expect an afternoon high of 29°C tomorrow with the mercury falling to 19°C at night, according to our favorite weather app.

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