The Central Bank of Egypt is meeting today to review interest rates

Newsletter

30 Mar 2023

The Central Bank of Egypt is meeting today to review interest rates. According to Reuters poll earlier this week, it is expected that the Monetary Policy Committee will hike rates by at least 200 bps as it tries to tamp down on inflation and boost FX liquidity amid continued pressure on the EGP. Widening USD rates in the parallel and derivatives markets suggest the EGP may need to devalue against the greenback, and is expected a move coinciding with the MPC meeting on Thursday. (Reuters)

The USD is currently trading at 35-36 EGP on the parallel market, while 12-month non-deliverable forwards are pointing to 40 EGP.
The official rate has held at 30.96 for almost three weeks. Another devaluation is widely expected, but by itself, we do not see it bringing in much needed capital inflow,” according to Morgan Stanley note published this week. There needs to be meaningful signs of reform progress to help start rebuilding investor confidence, including a truly flexible EGP, tighter monetary policy, and the privatization program, predicting the EGP to fall to 36-38 to the USD. (Morgan Stanley)
The central bank committed to maintaining a “durably flexible” exchange rate under the 3 billion USD loan program agreed with the IMF in October.
Fund officials were due to visit Egypt earlier this month to conduct their first review of the program but are still yet to set a date. The central bank has devalued the currency three times over the past year in a bid. The EGP has lost almost half of its value against the greenback since last March, when Russia’s invasion of Ukraine triggered the flight of hot money from emerging markets including Egypt. (Al Mal)
Eagle Chemicals’ mandatory tender offer (MTO) to acquire at least 75% of state-owned Paint and Chemical Industries (Pachin) will open today and run until market close on 12 April.
Eagle Chemicals is offering 37.00 EGP per share, 1.00 EGP higher than the rival bid submitted by National Paints Holding (NPH) last week. The NPH offer, which had been set to close on 4 April, has been extended and will now wrap on the same date. Compass Capital has reportedly wrapped up due diligence on Pachin and is preparing to submit a rival MTO within days. (Al Mal)
Global energy giant BP and the Abu Dhabi National Oil Company (Adnoc) have submitted a preliminary, non-binding offer to acquire 50% of Israel’s NewMed Energy in a transaction worth some 2 billion USD.
The acquisition would mark the two firms’ first foray into Israel’s energy sector as they angle for a piece of the growing Eastern Mediterranean gas industry. Closing the transaction could help them become key suppliers of gas to Europe. BP and Adnoc would buy the full 45% of NewMed that is in free-float, as well as 5% of the 55% stake currently held by Delek Group, making NewMed a 50-50 partnership between the consortium and Delek. (Al Mal)
EGX ends Wednesday’s session in green.
The Egyptian Exchange (EGX) has ended Wednesday’s trading session in the green zone with market capitalization at 1.053 trillion EGP. The benchmark EGX30 index gained 3.17%, ending the session at 16,411.37 points. The EGX50 equal-weight index (EWI) rose 2.41% to 2,818.4 points, while the small- and mid-cap EGX70 (EWI) went up 1.25% to 2,839.31 points. Trading volume amounted to 402.399 million shares traded through 70,586 transactions at a turnover of 2.051 billion EGP. Retail investors controlled 68.34% of total trading transactions, while institutional investors made up 31.65% of trading. (EGX)
State-owned pharma manufacturer HoldiPharma plans to build five new factories in partnership with private-sector firms.
The facilities will require around 2.5 billion EGP of investment and will produce up to 100 different types of raw materials for the pharma industry by 2025. HoldiPharma subsidiary El Nasr Pharma is reportedly in talks with “the largest” Indian pharma raw materials manufacturer to serve as a technical expert on the project. (Bloomberg Asharq)
The new factories could cover around 20% of domestic demand, helping to reduce the sector’s reliance on imports.
Each plant would have an annual production capacity of up to 70 tons. Raw materials produced by the factories could eventually be exported. The government has identified pharma as one of nine sectors to focus on to increase exports to 100 billion USD a year in the next four years. Some 60% of the investment will come from loans and the remainder will be “self-financed,”. (Bloomberg Asharq)
Egypt’s manufacturing, extractive industries index falls 2.66% MoM in January.
Egypt’s index of manufacturing and extractive industries, excluding crude oil and petroleum products, fell by 2.66% month-on-month (MoM) to 105.69 points in January 2023 from 108.58 points. The index of food industries rose by 19.03% MoM to 155.21 points in January from 130.40 points in December 2022. The index of electronics, optical instruments, and medical devices production increased by 9.39% to 92.51 points last January, compared to 84.57 points in December. On the other hand, the index of pharmaceuticals and chemical industries fell by 28.89% to 90.99 points in January 2023 from 127.96 points in December 2022. (Arab Finance)
The Sovereign Fund of Egypt has signed an agreement with a newly-founded local real estate firm to redevelop the Interior Ministry’s former headquarters in the downtown area of Lazoghly.
A Developments will invest 800 million EGP in the project, which will repurpose the historic buildings into a tech and business hub that will include a university campus and hotel. The developer was awarded a 25-year lease for the seven-building complex in return for paying a fixed rent and an unspecified share of the development’s eventual revenues following a bidding process launched by the SFE in April last year. (Al Mal)
The complex will include a tech hub and incubators, Paris business school IPAG’s first campus in the country, and a three-star hotel and serviced apartments to be operated by an unnamed international hotel operator.
It will also host an outsourcing center and retail and office space. A Developments has hired the UK’s BDP as master planner and architect for the project. Cairo-based firm Chrome will act as the project manager and Wassef Design Office will provide engineering consultancy services. The SFE thinks the project could raise annual revenues from IT exports to 10 billion USD from 4.9 billion USD in FY 2021-2022. (Al Mal)