Egypt’s non-oil businesses declined in September – PMI | Zilla Capital

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04 Oct 2023

Egypt’s non-oil businesses declined in September – PMI

Egypt’s non-oil businesses declined in September – PMI. Headline index fell to a four-month low, with high inflation and a weakened pound affecting firms. Egypt’s non-oil business sector further declined in September due to supply chain challenges and a sharp rise in prices. The S&P Global Purchasing Managers’ Index (PMI) fell to a four-month low to 48.7 in September, down from 49.2 in August, indicative of the sector contracting further. The rise in prices, affected by a weak exchange rate against the US dollar, led to an even sharper drop in outputs and new orders, with businesses holding onto inventories amidst high inflation. Data further revealed that new work intakes dropped at the fastest rate since May, although the decline remained soft compared to the beginning of the year. (Zawya)

It’s worth noting that the client spending and confidence took a hit by the end of the third quarter, while businesses reported difficulties acquiring raw materials due to import challenges and rapid price rises.
The resultant pressure on operating capacity led to the sharpest increase in backlogs of work ever recorded by the survey since it began in 2011. With a rise in backlog, businesses continued to boost employee numbers, with wage inflation reaching a seven-month high, as some companies opted to raise staff salaries to help staff facing heightened living costs. (Zawya)
HSBC Egypt customers are now able to only make 1,000 USD in overseas foreign-currency withdrawals per month, down from 1,500 USD previously.
The tighter restriction went into effect at the beginning of the month. This limit includes the amount you withdraw plus any additional fees that HSBC or the ATM imposes on the withdrawal. The transactions include withdrawals using debit and credit cards, as well as cash advances using credit cards at ATMs. (Al Mal)
Morgan Stanley has adopted a negative outlook on our debt on concerns about our financing gap and uncertainty about how we’ll roll out reforms required by our 3 billion USD agreement with the IMF.
The bulge bracket bank has downgraded its rating of our sovereign debt to “dislike” from “neutral” on what it said were “mounting risks” in the coming months, including from December’s presidential election, which it said could delay the reform agenda. The bank’s bearish stance on riskier assets is the result of an increase in US inflation-adjusted yields, Morgan Stanley wrote in a report, leading it to prefer higher-yielding emerging debt. “The prospect of a prolonged period of elevated rates in the US may now keep Egypt locked out of global capital markets for longer,”. (Bloomberg)
It is worth noting that the US Treasury yields hit their highest levels in 16 years yesterday as the global bond sell-off resumed.
The rate on 10-year bonds climbed 0.13 percentage points to 4.70% yesterday after positive manufacturing data hardened traders’ expectations for interest rates to remain high over the long term. Egypt needs 29.2 billion USD of financing to meet debt repayments next year, equal to almost a fifth of our total external debt, according to central bank figures out last week. Morgan Stanley puts the figure at 24 billion USD for the current fiscal year. (Financial Times)
The EGX is in the process of completing procedures with financial regulators and brokerage companies to launch a derivatives market during 2024.
Brokerage companies will now study market and human resources requirements needed to introduce investors to new financial derivatives. The new derivatives market will attract new segments of investors to the EGX. The news follows last week's EGX statement that it has taken responsibility for managing the secondary market for t-bills, allowing them to be traded on the bourse in a move to improve investor accessibility, boost trade volumes, and lower yields. (Asharq Business)
Egypt’s net foreign asset position improved marginally in August to negative 25.9 billion USD from negative 26.3 billion USD the month prior.
This marks the second consecutive month that net foreign liabilities have fallen after reaching a record high of 27.1 billion USD in June. The Central Bank of Egypt’s net foreign liabilities narrowed to 9.4 billion USD from 10.1 billion USD in July. Net liabilities in the banking system widened to a bit over 16.5 billion USD from 16.2 billion USD the previous month. (Economy Plus)
Fitch said last month that Egypt’s net foreign asset position will likely get worse before it gets better, pointing to a combination of outflows of FX, import backlogs, and a managed exchange rate.
It is noteworthy that Egypt remains in the grip of an ongoing hard currency shortage, triggered in part by major foreign portfolio outflows as global economic conditions tightened following the outbreak of the Russia-Ukraine war. This also comes as we face what Goldman Sachs recently warns is a 11 billion USD funding gap in the next five years and a wall of foreign debt repayments coming due over the coming decade. (Al Mal)
IFC eyes providing 175 million USD loan to Suez Canal Container Terminal.
The International Financial Corporation (IFC) is considering providing a loan of up to 175 million USD to back the Suez Canal Container Terminal’s (SCCT) expansion of its existing container terminal at East Port Said port. The IFC’s board is expected to decide upon the loan on October 30th. Moreover, the lender will also provide Risk Management Products in the form of interest rate swaps with a loan equivalent exposure of roughly 2 million USD. It is worth mentioning that the project’s cost is estimated at around 489 million USD, with construction expected to start by the end of 2023 and initial operations anticipated to begin by the second half of 2024. (Al Mal)
Madinet Masr expects contracted sales to hit 20 billion EGP in 2023.
Madinet Masr’s contracted sales have hit a new fresh record during the third quarter (Q3) of this year, with expectations that sales would exceed 20 billion EGP in 2023. Beyond sales volume, Madinet Masr's record-breaking accomplishments included the quick selling of more than 2,400 units across several projects in a short period of time. The first and second phases of the Elan project in Sarai, which included more than 300 units combined, were fully sold out immediately after its launch in May and June, achieving total sales of 1.4 billion EGP. (Al Mal)