Egypt debt transactions during the past week showed a collective average rate of return increases on government T-bills

Newsletter

13 Jul 2021

First of all, for our macro news, Egypt debt transactions during the past week showed a collective average rate of return increases on government T-bills except for 182-day 10-year treasury bonds. Here we need to mention the inflation; we believe that Egypt inflation could be the key factor that drives this increase in the rate of return. In Egypt, inflation rose to 4.9% compared to 4.8% in the prior month. The central bank of Egypt is keeping existing interest rates at 8.25% for deposit rate and 9.25% for lending rate. The central bank will hold a meeting in August to decide future interest rates. Thus far, Egypt’s economy has seen a substantial economic recovery amid the vaccine rollout. Therefore, there are pressures for the central bank to increase the interest rates to prevent the economy from overheating.

Moving to Egypt real estate sector, there are new implemented regulations! for the real estate sector in Egypt.
The House Housing Committee will implement a bill that creates a state-backed real estate federation. The bill introduces a consumer protection program that fines companies up to EGP 10mn that breach their contracts. In addition, the bill also allows them to be charged with issuing licenses, monitoring companies’ performances, and issuing fines. Officials say that this will prevent real estate companies from entering financial difficulties. The real estate sector is currently booming in Egypt, this bill helps to regulate the real estate sector by reducing its financial risks.
It is worthy to mention that we strongly believe that there are 5 listed real estate developers who will outperform in 2021. We anticipate robust bottom lines of five of the listed real estate companies Talaat Moustafa Group (TMG), Emaar Misr for Development, Six of October Development and Investment (SODIC), Palm Hills Developments, and Orascom Development Egypt (ODE).
The performance will be supported by the rise in collection values and sales as well as new project. Noting that sales of TMG's Noor project hit the highest level ever, recording EGP 15 bn in three weeks. While Emaar achieved a net profit of EGP 529.120 mn in Q1-2021, representing a 114 % Y-o-Y increase.
And regards the Education sector, Egypt Education Platform (EEP) signed a memorandum of understanding (MoU) with Somabay to develop and operate the first international school in Somabay under GEMS International Schools stream-EEP.
Somabay’s school project is the third accomplishment in a row for EEP, following a major partnership with The Sovereign Fund of Egypt (TSFE) to develop and operate two schools in West Cairo with a total capacity of 5,000 students. We believe that the new school’s aim is to create a long-term value through conveniently-located quality education provision, which contributes to Somabay turning into a permanent residential destination rather than just being a seasonal touristic attraction.
Equally important, we need to mention Egypt petrochemicals industry! The US-based Bechtel and Egyptian Petrochemicals Holding Company (ECHEM) will partner to develop a mega petrochemicals complex at a cost of USD 7.5 bn and will be located in the Suez Canal Economic Zone.
The complex would make polyethene, polypropylene, polyester, bunker fuel, and other petroleum and chemical products. Petrochemicals play a dynamic role in the Egyptian oil and gas sector which has a direct impact on supporting the national economy.
In other news, the Egyptian Financial Regulatory Authority (FRA) has licensed a micro-funding company to provide funding to small- and medium-sized enterprises (SMEs), the first licence given to a non-banking financial company (NBFC).
SMEs have contributed about 80% to the country's GDP, according to the latest data in early 2021. At the end of May 2021, the micro-funding portfolio reached EGP 21.7 bn provided to 3.3 million beneficiaries. Women made up about 62% of the portfolio and the youth accounted for 63% of the micro-funding services.
Regards, Egypt's political talks, we need to mention the GERD filling. Ethiopia has been avoiding legal binding deals with Egypt and Sudan for the past decade. The security council is now taking the issue more seriously after Egypt’s efforts for the UN to take responsibility.
Ethiopia will more likely disregard UN security council and support African Union talks instead. However, Egypt is on its last legs for peaceful talks and have exhausted all their diplomatic efforts for the past decade.
In other talks abroad, Oil prices rise again as U.S. inventories decline. Brent crude oil future settled for USD 1.45 higher at USD 75. 55. The only way to ease oil prices is to contain OPEC threats.
The dispute between the UAE and Saudi Arabia which last week blocked a proposal to increase production has thrown the market into uncertainty. The prices rising rapidly as the absence of new supply causes the market to tighten further. We think that a dispute between two of OPEC’s largest producers could pose an existential threat to the alliance, potentially resulting in a new price war and plunging prices.