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THE WEEKLY Thursday 17th Nov. 2016 Issue # 45 EGYPT RECEIVES IMF LOAN The Executive Board of the International Monetary Fund (IMF) approved, on 11th November, the three-year USD12 billion loan agreement to Egypt, to support the country’s reform program. The first tranche of the loan, worth USD2.75 billion, has been received by the Central Bank of Egypt (CBE) following the board’s approval. The remaining amount will be disbursed over the duration of the program, subject to five reviews. It’s worth noting that Egypt was able to secure the USD6 billion in bilateral financing required to obtain the loan. Egypt’s reform program focuses on the following main pillars: liberalization of the foreign exchange system, Inflation-targeted monetary policy, strong fiscal consolidation to ensure public debt sustainability, strengthening social safety nets, structural reforms to promote inclusive growth and create jobs, and securing fresh external financing to close the financing gaps. “The loan will help the country’s foreign reserves jump to more than USD23 billion from the current USD19.04 billion registered at the end of October” Tarek Amer Central Bank of Egypt’s Governor Ahram Online 13th November 2016 “The economic reform program is by the Egyptian government for the Egyptian people to help the Egyptian economy” Christine Lagarde Managing Director of the IMF Daily News Egypt 12th November 2016 IN THIS ISSUE... S&P Revises Egypt’s Outlook To Stable Egypt’s Debt Instruments Become More Attractive Banque Du Caire In The Local Stock Market In Q2 2017 Moody’s Affirms Floatation As Credit Positive BP To Invest USD13 Billion By 2020 A WORLD OF REAL POSSIBILITIES 1 www.alexbank.com S&P Revises Egypt’s Outlook Standard and Poor’s Rating agency (S&P) revised, on 11th November, its outlook on Egypt’s sovereign credit rating to “stable” from “negative”, affirming the ‘B-’ credit rating on Egypt. The “stable” outlook is based on the IMF’s support to the government’s economic reform program. The agency stated that Egypt’s economy is expected to start recovering in 2018 and 2019 due to foreign direct investment inflows and domestic consumption. “We revised the outlook to stable to reflect the balance between Egypt’s long-standing external and fiscal vulnerabilities and our expectation that the IMF’s EFF program will provide external financing to Egypt to meet its foreign exchange requirements over the coming 12 months” S&P Press Release CPI Financial 13th November 2016 Egypt’s Debt Instruments Become More Attractive International investments banks and hedge funds expressed their interest in buying Egypt’s debt instruments to benefit from their high yields, especially after floating the Egyptian Pound and eliminating exchange rate risk. Merrill Lynch, affiliated to Bank of America, one of the largest investment banks in the world, advised international investors and financial institutions to invest in Egyptian Treasury Bills, citing a promising outlook for it. Bank of America also recommended investors to purchase Egyptian Treasury Bills for the term of six months. This move raises the prospect of recapturing the USD10 billion that were diluted from the local Treasury Bill market in the aftermath of the 2011 uprising. On Thursday, the 10th of November of 2016, demand for 12-month debt was the highest in more than a year, helping the government reduce yields to 18.90%, compared with 20.52% applied in the aftermath of EGP floating. “This is a story which potentially should improve. You had a huge foreign-exchange adjustment, rates have gone up and now you have IMF money coming in. Country risk is heading in the right direction” Kevin Daly Money Manager Bloomberg 15th November 2016 Misr Financial Investments Company, Banque Misr’s investment arm and the owner of Banque du Caire, targets to offer 45% of its stake in the state-run Banque du Caire on the local stock market in Q2 2017, aiming to increase the bank’s capital. Moody’s investors services stated that the increased availability of foreign currency in Egyptian banks after floating the Egyptian Pound is credit positive as it will help banks fulfill their customers need for foreign currency and reduce their net foreign liability position. Meeting demand on foreign currency is expected to support economic growth and boost banking activities. “Banks have acquired USD3 billion in two weeks post floating the Egyptian Pound” Tarek Amer CBE Governor Youm 7 17th November 2016 2 www.alexbank.com The UK Embassy in Cairo stated that British oil company (BP) has plans to invest about USD13 billion in Egypt before 2020. According to the embassy, British inflows to Egypt recorded USD30.5 billion since 2011, with three major British companies (Vodafone, Unilever and GlaxoSmithKline) investing EGP3.785 billion in Egypt last month. The statement also indicated some pillars of Egypt’s economic reform program that include allocating an additional 1%t of GDP for protecting the poor, increasing female labor force participation and clearing outstanding arrears to international oil companies. It’s worth noting that Egypt’s debts to international oil and gas companies reached USD3.58 billion by the end of September 2016. “We congratulate the government on setting out such a clear vision for economic reform and taking the first steps on this difficult but necessary road. The UK experience is that while challenging for citizens, seeing these reforms through to completion will lead to a more solid economy in the future” UK Embassy Statement Ahram Online 14th November 2016 23 www.alexbank.com www.alexbank.com EGYPT AT GLANCE EXCHANGE RATES 17th November 2016 W/W M/M Y/Y YTD USD 15.87 -3% 79% 103% 103.3% EURO 16.98 -4.7% 74.8% 104.1% 99.9% Sterling Pound 19.76 -2.8% 83.4% 66.7% 71.1% 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 Nov-15 19.76 16.98 15.87 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 EGP per USD May-16 Jun-16 EGP per Euro Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 EGP per Pound Sterling * Average Buy & Sell Prices For ALEXBANK 11,221.56 12000 11000 STOCK MARKET 10000 EGX 9000 8,687 7,895 8000 7000 6000 17 November 2016 th EGX 30 11,221.56 W/W M/M Y/Y YTD 5% 36.1% 75.1% 58.3% TB’S AUCTION Auction Date 5000 4000 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 EGX 30 Apr-16 May-16 EGX 70 (Rel.) Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 EGX 100 (Rel.) INTEREST RATES Current* Previous** Maturity Average Yield % 13 November 2016 91 Days 18.028 Overnight Deposit Rate 17 November 2016 182 Days 17.716 13 November 2016 273 Days 17 November 2016 357 Days Overnight Lending Rate 14.75% 15.75% 11.75% 12.75% +300 bp +300 bp 18.715 Corridor Rate 15.25% 12.25% +300 bp 17.606 * at November 2016 4 ** at June 2016 www.alexbank.com Sahl Hashish, Hurghada, Egypt T : +2 02 2399 2000 E : [email protected] Head of Research Emil Eskander [email protected] Research Manager Hemat El Masry [email protected] Research: Mirna Mohsen Senior Associate: Sahar Ezz El Arab [email protected] [email protected] Nahla Abdel Azim [email protected] © Copyright Notice. The Weekly is a publication of ALEXBANK. No part of this publication may be reproduced or duplicated without the prior consent of ALEXBANK.This publication constitutes a summary of published news, quotes and economic indicators. This material does not constitute analytical economic research nor should be treated as such. All charts and graphs are from publicly available sources or proprietary data. Any views expressed in this publication do not necessarily reflect the opinion of ALEXBANK. The news, views and quotes within this publication are gathered from sources deemed to be reliable but which have not been independently verified. ALEXBANK does not make any guarantee to the accuracy or reliability of such information. AlexBank shall not be liable for any losses or damages incurred or suffered as a result of using its publications in part or in their entirety. 5 www.alexbank.com