Fears have increased about the continuation of the inflationary wave that swept the world during the past few weeks

Newsletter

26 Oct 2021

Let’s start with the hot topic abroad, fears have increased about the continuation of the inflationary wave that swept the world during the past few weeks, amid warnings by some of entering into a stagflation that might change the situation of the global economy, in light of the continued rise in commodity prices uncharacteristically for decades. The consumer price index is near the highest level in 30 years in the US, and in Egypt, the annual rates of consumer prices rose to 8%, the highest in the last 20 months, and are very close to the targets set by the central bank at 9%. (Al-Mal)

It is worth noting that Mohamed El-Erian, a global economic expert and president of Queen’s College at the University of Cambridge, pointed out that when inflation started to rise earlier this year, many central bankers were quick to call it “transitory,” asserting that it would dissipate soon.
Over the course of 2021, however, neither the quantitative forecasts nor the arguments cited in support of this hypothesis have held up. The longer this persists, the greater the risk of a historic policy error whose negative implications could last for years and extend well beyond the U.S. While Jack Dorsey, founder and CEO of Twitter, warned that things will get much worse, as a result of hyperinflation, explaining that the problem of inflation will escalate around the world. Meanwhile, Federal Reserve Chairman Jerome Powell stressed that inflationary pressures "are likely to continue for a longer period than previously expected," indicating that they may continue until next year. (Reuters)
Turkey’s lira fell to a record as the country’s latest diplomatic spat with the U.S. and other foreign governments gave traders another reason to sell the struggling currency.
The lira retreated as much as 2.5% in early Asian trading amid thin liquidity on Monday, touching a new low for a third day. It was 1.5% weaker at 9.7509 per dollar at 10:48 am. in Istanbul. Already under pressure following a larger-than-expected rate cut last week, the currency encountered fresh selling after President Recep Tayyip Erdogan said on Saturday that the ambassadors of 10 nations were no longer welcome after they demanded the release of a prominent government critic. Investors are watching for the Turkish Foreign Ministry to make the move official. (Reuters)
Turning to Egypt macro watch, first, Engineer Ayman Hossam El-Din, head of the Consumer Protection Agency, confirmed that the car market is facing a shortage in its supply of cars, whether it is inside Egypt or the rest of the world,
as a result of the lack of supply of semiconductors, which are used in the manufacture of cars as a result of the Corona crisis. The lack of supply of cars led to the existence of the over-price phenomenon. He added that added that starting from the middle of next November, a sticker will be applied to every car at its real price, and the consumer will have to request an invoice at the same price, and violators will face deterrent penalties. (Al-Mal)
Second, the average return on government debt instruments continues to rise for the second week in a row during the last central bank auction, bringing the IR money index to its highest level in two months.
For the second week in a row, the average interest on 91-day bills continues to rise, rising by 0.047% to 12.384%, compared to 12.337% in the penultimate tender, coinciding with the increasing demand of investors for the last financial offering, bringing the coverage rate to 4.19 times compared to 2.87 times the week before the past. According to the Central Bank's comment on global markets, he said that the rise in oil prices (+3%) during a trading week was characterized by fluctuations. Prices rose at the beginning of the week to their highest levels in three years as the energy crisis continued as demand for fuel appears to be recovering faster than producers can deliver to the market. (Al-Mal)
Also, Egypt’s economy continues to grow robustly, with a promising outlook. The country is expected to achieve 5.5% gross domestic product (GDP) growth during the fiscal year (FY) 2021/2022.
The pickup will be on the back of a recovery in demand, manufacturing, agriculture and telecommunications and IT under Egypt’s second phase of the National Program for Economic and Social Reforms (NPESR), higher exports (due to high oil prices and an expected recovery in global demand) and higher tourism revenues as travel restrictions are lifted. (Deutsche Bank ‘s recent report)
In addition, Egypt is on track to achieve its target of fuel self-sufficiency by 2023. Large-scale upgrades to oil refineries and new facilities are expected to cost 7 billion USD.
Those projects are expected to add an annual production capacity of 6.2 million tons of refined products, including gasoline and diesel. The plans come as part of the government’s newfound policy of refining crude locally instead of importing refined products. Additionally, a parallel plan involves capitalizing on the recent pick-up in LNG exports, with an eye to negotiate more long-term sales agreements to reduce the country’s reliance on the spot market. Some 60% of LNG exports are currently made through long-term contracts and 40% on a spot basis. Egypt’s strategy to become a regional energy hub is also pertinent due to Europe’s ongoing energy crisis and the global shortage of natural gas. (Bloomberg)
Moreover, Egypt will receive up to 1 billion EUR from the European Union (EU) over the coming six year, or by 2027, mobilizing nearly 9 billion EUR of additional investments in the country.
The EU will work with the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) to “support Egypt’s efforts to combat climate change, protect the environment and ensure sustainable food systems. (Arab Finance)
And for our investments talks, The Sudan-based financial institution, Arab Authority for Agricultural Investment and Development (AAAID), plans to pump around 220 million USD in Egypt’s agriculture sector.
The finance will be allocated to small farmers. This investment would amount to a fifth of the institution’s 2019 capital, which according to its website amounted to 1.1 billion USD. It aims to optimize investment returns for shareholders, diversify its sources of income and support agricultural development in Arab countries. It focuses on the production of basic agricultural goods with a view to bridging the food gap in the Arab world. (Hapi Journal)
Moving to our top EGX & companies talks, Egyptian Financial & Industrial (EFIC) reported a 145% year-on-year surge in standalone net profit after tax for the first nine months of 2021.
The Standalone net profit after tax grew to 91.084 million EGP in the January-September period of 2021 from 37.211 million EGP in the same period of 2020. Earnings per share (EPS) stood at 105 EGP in the nine-month period ended September 30th, 2021, compared to an EPS of 43 EGP in the year-ago period. The company achieved revenues of 745.57 million EGP during the period from January to September 2021, increasing by 88% from 396.348 million EGP in the prior-year period. (EGX)
With this in mind, Edita Food Industries (EFID) has raised the prices of its molto product range. Prices of Molto products previously priced at 2 EGP per pack have been increased to 3 EGP, while products priced at 3 EGP per pack have been increased to 4 EGP.
Meanwhile, the company maintained the prices of Molto products priced at 5 EGP per pack unchanged. The increases in Molto product range’s prices comes as part of the company’s portfolio optimization strategy. This will help Edita to improve its profitability in light of global inflationary pressures and higher commodity prices. (Arab Finance)
Moreover, the Board of Directors of Madinet Nasr for Housing and Development has approved the acquisition of Minak Real Estate Investment Company, owned by the family of businessman Abdullah Salam.
Madinet Nasr Housing stated that the board decided to appoint Abdullah Salam as a managing director, and the family intends to raise its stake to 5% of the Nasr City shares. The company explained that the Salam family will represent the third largest shareholder of Madinet Nasr for Housing, after the PPE partners group, which acquires 29%, and the Holding Company for Construction and Development 15%, after the implementation of the potential deal. (EGX)
And finally, "e-finance" plans to acquire existing companies to support its strategic plan.
Noting that the opportunities being studied create an added value for shareholders and reflect positively on the value of the stock. Adding that the company had contracted a group of partnerships in tourism and transport activities, and some subsidiaries are already in operation. It also launched, in cooperation with the Comprehensive Health Insurance Authority, iHealth, with a contribution of 35% (minus one share). The head of the company confirmed that the infrastructure of the large group - the financial technology arm of the Egyptian government - will acquire the lion's share of the capital proceeds, with a value of approximately 1 billion EGP, in addition to the expansions of subsidiaries, led by "E-CARDS" and "Khalis”. (EGX)