THIS MORNING: It’s interest rate day; US stocks have worst day since June 2020
Well, friends, we’ve made it through another workweek together. One long, hard push and the end of the workday will be here before you know it. But first:
It’s interest rate day: The Central Bank of Egypt will likely raise interest rates when it meets today, according to a near consensus of analysts and economists we surveyed last week. Six of the seven respondents said they expect the Monetary Policy Committee to go ahead with a rate hike in a bid to tamp-down inflation and stem portfolio outflows. Five of them expect to see rates rise as much as 200 bps. You can expect to hear about the decision late in the afternoon.
Banque Misr has no plans to issue fresh CDs at a higher rate should the central bank raise rates today, Banque Misr Chairman Mohamed El Etreby told Sky News Arabia. Banque Misr and the National Bank of Egypt are paying an “extremely high cost” for the 18% CDs launched in the aftermath of March’s devaluation and 100-bps rate hike. Savers have so far plowed c. EGP 662 bn into the high-interest certificates since they were launched on 22 March, according to recent figures.
What’s next with the government’s plan to get out of as many as 79 industries, opening the door to greater private sector involvement in the economy? Reaction in the business community was broadly positive among the senior folks with whom we spoke yesterday, with the primary concern (at this very early stage) being the pace of implementation. While the Madbouly cabinet has yet to release its strategy, the AMAY report we picked up yesterday has been followed by a report from Hapi Journal that includes what appears to be a full draft of the position paper. Have a read for yourself here (pdf) and keep your eyes peeled for more on this in the coming weeks.
And policymakers at the highest level will need to remember: Business doesn’t just want a roadmap of where it is “welcome” to invest — we need red tape to simply fade away. Speed and consistency in the implementation of policy (from the issuance of permits of all forms to regulatory approvals for M&As, listings and other transactions) are absolutely key for businesses deciding where, when and how to invest and create jobs.
WHAT’S HAPPENING TODAY-
The Consumer Protection Agency will today decide whether to raise the price cap on cars by 5-10% after distributors and dealers made an official request in light of rising operating costs, Al Mal reports. As of last month, individual car dealers are no longer able to set prices above those listed by official agents, a rule that was introduced in response to large price hikes that occurred following the EGP devaluation in March. Dealers that sell at higher rates face fines of up to EGP 2 mn.
The auto industry hasn’t been happy with the cap: Some dealers have been forced to close showrooms to stem losses caused by the price cap, industry figures have said. Others have been using loopholes to sell at higher prices or refusing to sell their stock at all.
REMEMBER- Dual-fuel vehicles sold through the government’s swap scheme just got a lot more expensive: The government is allowing companies to hike prices by 19-45% in response to rising inflation. This means that people who applied to the state-subsidized scheme after 24 April will pay up to EGP 75k extra for their new vehicles.
Green finance and COP27 is the theme of the British Egyptian Business Association’s (BEBA) annual business mission to the UK, which started Tuesday and wraps up tomorrow. Headlined Road to COP27: bridging the implementation and financing gap, the mission includes a series of roundtable discussions, private meetings and seminars featuring business leaders, cabinet ministers and policymakers. You can check out the agenda here (pdf).
EGX launches IR training program: The EGX today wraps up a three-day workshop for investor relations officers at EGX-listed companies, according to a statement (pdf), marking the launch of a training program for IR officers meant to help them communicate better with shareholders and boost the performance of their companies’ shares. Need some practical help building your IR program? Contact Moustafa Taalab at InktankIR, our parent company.
ON THE HORIZON-
Households are set to see their electricity bills rise from July — and you’ll find out exactly how much in the next two weeks: The Electricity Ministry will decide on electricity tariffs for the coming fiscal year within two weeks, Al Borsa reported. The newspaper reports that proposals would see low voltage prices paid by households, stores, and small and micro businesses rise as much as 40% to EGP 1.37 per KWh from EGP 0.98/KWh currently.
Prices will remain the same for everyone else: Prices for medium, high, and ultra-high voltages — used by industry and other businesses — will remain frozen at the current price until 2025, sources told the newspaper. This will mean the average price would rise 2% to EGP 1.94 per KWh from EGP 1.69/KWh currently.
Another sign of warming relations with Turkey? Turkish Finance Minister Nureddin Nebati will visit Egypt on 1 June to attend the annual meeting of the Islamic Development Bank, state broadcaster TRT Haber reported yesterday. This would be the first time a Turkish minister has traveled to Egypt since President Abdel Fattah El Sisi came into office in 2013.
Over the past year the two countries have been trying to normalize ties, but progress has been slow despite several rounds of face-to-face talks. Diplomatic relations were severed after the Muslim Brotherhood was removed from office nine years ago.
THE BIG STORIES ABROAD-
US stocks saw yesterday their biggest single-day drop since June 2020 after poor earnings from retailers reignited investors’ fears about the impact of surging inflation on the economy. The sell-off wiped out three days of gains, resuming the downward trend that has seen the Nasdaq fall into bear territory and the S&P 500 enter a correction. The S&P tumbled 4% during trading, with retailer Target posting its biggest loss since 1987 (-24.9%) after it warned that inflation would hit profits. The tech-heavy Nasdaq was the hardest hit, falling 5.1% as the rally in growth stocks came to an abrupt halt.
More recession talk — this time from Goldman’s Blankfein: The risk of the US entering a recession is “very, very high,” and US consumers and businesses should be prepared, former Goldman Sachs Group Senior Chairman Lloyd Blankfein told CBS News. His warning comes as the US Federal Reserve tightens policy to try to curb soaring inflation, triggered by pandemic-era government stimulus, supply chain issues, ongoing lockdowns in China, and the Russia-Ukraine conflict.
The news is everywhere in the financial press this morning: Reuters | AP | Bloomberg | FT | WSJ | CNBC.
Turkey blocks Finland, Sweden Nato bids: Hopes in Stockholm and Helsinki of a swift entry into Nato were dashed yesterday after Turkey blocked a vote on opening accession talks with the two countries, the Financial Times reports, citing a person familiar with the matter. Ankara’s move came during a meeting of Nato ambassadors yesterday aiming to start talks after the two countries formally applied to join the military alliance.
No doesn’t mean no: A Turkish official confirmed the news to the salmon-colored paper, but stressed that his country “is not ruling out the prospect of Sweden and Finland joining.” Turkey has accused the Scandinavian nations of supporting Kurdish militants and President Recep Tayyip Erdogan is demanding they extradite 30 “terrorists.”
CIRCLE YOUR CALENDAR-
PSA: Tourism registration for Hajj has been extended: You can now register for this year’s Hajj through tourism companies until next Monday, 23 May, after the deadline was pushed from this Friday, 20 May, the Tourism Ministry said in a statement.
The Islamic Development Bank will hold its 2022 annual meetings in Sharm El Sheikh from 1-4 June under the slogan “post-pandemic recovery: resilience and sustainability,” according to a statement from the Planning Ministry. Several Egyptian ministries and representatives from the bank’s 57 member countries and other financial institutions are set to attend the meetings.
Venture capital 101: The Egyptian Private Equity Association (EPEA) is hosting a paid crash course in all things venture capital at the Zamalek Marriott on 21-23 May. Led by Avanz Capital Egypt MD Hany Assaad, the three-day course will cover everything you need to know about Planet VC, from fund structures and portfolio-building to due diligence and valuations.
Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.