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Wednesday, 14 September 2022

THIS MORNING: El Sisi to meet Qatari emir today + US inflation data raises fears of 100-bps Fed rate hike

The Madbouly government has a message for you this morning: “We’re serious about making nice with private business. Begad.” (Okay, we’re paraphrasing. But still…)

EXHIBIT #1- The super-detailed rundown on where things stand with nine companies that pledged to make investments worth a combined USD 1 bn. Government communiques are usually written in bureaucrat-speak and full of vague generalities about “pumping” untold sums of investment and all of the wonderful things policymakers are “ordering.” Instead, the PM and the companies in question (local and international alike) provided a detailed rundown — project by project — of where things stand, what the obstacles are, and the price tag and timeline on each.

EXHIBIT #2- The FRA + EGX presser yesterday. New FRA boss Mohamed Farid got off to a good start a couple of weeks ago with his promise to fast-track M&As (and, we hope, IPOs, too), a perennial sticking point for the private sector. Business doesn’t need a yes-man as regulator of the financial industry — but it craves clarity and speed. Give a clear “Yes” or “No” by a set deadline and everyone walks away happy.

Farid and new EGX chief Ramy El Dokany struck the right notes yesterday with a series of measures designed to make local investors a bit happier. More significantly, Farid is signaling that he plans to make it much less bureaucratically onerous to list your company on the EGX in a move that he hopes will build a strong pipeline of IPOs for when market sentiment improves (on EM in general and Egypt in specific). We’re looking forward to more details on all of the changes and initiatives in the coming weeks.

^^ We have chapter and verse on both stories in this morning's news well, below.


WATCH THIS SPACE #1- What will President Abdel Fattah El Sisi bring home from Doha? It’s the final day of the president’s landmark two-day visit to Qatar, and he’s slated to sit down with Qatari Emir Tamim bin Hamad Al Thani, Ittihadiya spokesman Bassam Rady said in a televised interview last night (watch, runtime: 9:51). El Sisi will meet Qatari business leaders in an expanded meeting later, where renewables, green hydrogen and liquefied natural gas (LNG) will be high up on the agenda, Rady said. We’re also looking for signs that Qatar might pull the trigger on its promise of several USD bn worth of investments here. El Sisi’s visit comes months after Al Thani visited Egypt in June. Egypt and Qatar re-established diplomatic ties in early 2021.

BACKGROUND- Doha committed in March to invest USD 5 bn in Egypt, sparking reports that Qatar’s sovereign wealth fund and some of the country’s biggest companies are considering acquiring stakes in Egyptian companies and investing in various projects. Qatari officials discussed investing USD 2-3 bn in the country during talks with the Madbouly government, Finance Minister Mohamed Maait said in June.

Improving ties started to bear fruit last year: The value of trade exchange between Egypt and Qatar jumped 76% to USD 44.8 mn in 2021, up from USD 25.4 mn a year earlier, data by statistics agency Capmas (pdf) showed. The trade relationship wasn’t particularly balanced, with Qatari exports coming in at USD 40.3 mn.


WATCH THIS SPACE #2- The IMF is considering giving unconditional emergency to countries hit by the war in Ukraine, sources with knowledge of the plans tell Reuters. Under the plans, the Fund would allow countries most susceptible to food price shocks to access finance without having to agree to the stringent conditions that usually accompany a program. Some 50 countries meet the criteria set under the plan, with 20-30 in need “immediately,” IMF Managing Director Kristalina Georgieva told Center for Global Development President Masood Ahmed in a virtual interview, according to Bloomberg.

Egypt won’t be on the list of beneficiaries: Countries that have already received or are negotiating IMF assistance would not be able to apply, former IMF official Masood Ahmed told the newswire.

WHAT’S HAPPENING TODAY-

Today is the last day for shareholders to sell their shares to the consortium of investors led by Expedition Investments, which is bidding to take a 34% stake in the EGX-listed cheesemaker. Expedition sweetened the offer by upping its offer price by 10% last week.

Expedition has more than half of its targeted shares in Domty: Shareholders have reportedly agreed to sell almost 53 mn shares to the consortium, according to Al Borsa. This is roughly 55% of the 96.2 mn shares it is targeting.

FOR TOMORROW-

B Investments is going to have to make up its mind over TotalEnergies Egypt: The private equity player has the right to preempt a bid by Abu Dhabi energy giant Adnoc to acquire a 50% stake in the company, which expires tomorrow.

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

THE BIG STORY ABROAD-

It was a ‘sell everything’ kind of day in the markets yesterday: US stocks suffered the worst day since June 2020 yesterday after August inflation data reminded the markets that the fight against rising prices is nowhere near close to being over. The S&P 500 index tumbled 4.3% and the tech-heavy Nasdaq fell 5.2% after data showed that inflation unexpectedly rose last month, sparking fear that the Federal Reserve will approve another huge rate hike when it meets next week. The greenback was about the only asset that avoided the carnage, as investors dumped commodities and bonds, causing yields on short-dated bonds to hit their highest levels in almost 15 years.

Could we be looking at a previously unthinkable 100-bps hike? While a third successive 75-bps increase is now all but certain, the market is now giving a 1-in-3 chance that the Fed could go even larger and hike by a full 100 bps.

It’s ugly in Asia, too, this morning, where the sell-off has spread to stocks, bonds and currencies in the region. Shares in Japan, Hong Kong and Australia were all more than 2% in the red before dispatch, while the South Korean Kospi and shares in China were down more than 1%. There won’t be any let up in Europe or the US later today, according to stock futures.

The story is front-page news everywhere this morning from the Associated Press and Reuters, to Bloomberg, the Financial Times and the Wall Street Journal.

MEANWHILE- The UN is sounding an exceptionally gloomy note on climate, with UN Secretary General Antonia Guterres saying we’re entering “uncharted territory of destruction” through our collective failure to act on slashing greenhouse gas emissions. This morning’s edition of Enterprise Climate has more on his remarks and the multi-agency report that prompted them.

SPEAKING OF CLIMATE- Saudi hikes oil output by most in two years: Saudi Arabia upped output by 236k barrels per day (bpd) to 11 mn bpd in August, according to OPEC’s monthly oil market report (pdf). This comes after the oil giant agreed to ramp up production for the month in response to falling Russian output. The new influx of oil helped push Brent to its lowest level since January earlier this month, though it has since recovered and is currently sitting at USD 93.55 per barrel. The country’s oil output has “only rarely” reached the 11 mn mark, with the last time being the peak of the pandemic in April 2020, Bloomberg reported.

No cause for celebration: OPEC+ said it will cut supply in October in a surprise move meant to support oil prices.

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*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: Despite a combination of headwinds, including soaring building and raw material prices and FX pressures, EGX-listed infrastructure players managed to weather the storm to a large degree in 2Q 2022. We look at the strategies they relied on to shield their bottom lines — and the outlook for the sector.

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