Good morning, friends. The EGX30 may be down, but we hope that all of your spirits are up with a long weekend just two days away. In case no one told you, the public and private sectors and all banks will be off on Sunday and Monday next week in observance of Labor Day and Sham El Nessim.

In today’s issue, we’ve got news that auto sales have slumped to their lowest in at least five years, another Chinese manufacturing project in the works (no surprise here), the prospect of increased trade and investment cooperation with Belarus, and much, much more for you today.

** DID YOU KNOW that we now cover Saudi Arabia and the UAE?

PSA-

WEATHER- It’s another warm and sunny day in Cairo today, with a high of 30°C and a low of 18°C, according to our favorite weather app.

It’s a little cooler and breezier in Alexandria, with a high of 25°C and a low of 16°C.

EGX WATCH-

The EGX30 dropped 6.0% at yesterday’s close, with each of the index’s components — bar E-finance with a modest 0.4% gain — ending in the red, after the index jumped 5.6% and reached a four-year intraday high the day before. The index now sits at 24,449 — its lowest level in four months — and is down 1.8% YTD.

It’s all about figuring out the value of the EGP, say EGX insiders: Sharp fluctuations on the bourse have been on the back of traders trying to figure out the value of stocks as the EGP settles following the float of the national currency in March, Former EGX board member Ehab Saied told Enterprise.

The why: The EGX reached historic highs in the run up to the float — hitting 35k points when the EGP exchange rate against the greenback on the parallel market was in and around the EGP 70 mark — as investors looked to the bourse to hedge against currency volatility, Saied explained. Now we’ve said goodbye to the unpredictability of the parallel markers and investors are no longer looking towards the EGX as a way to hedge, investors are trying to figure out the actual value of stocks.

But there’s also other drivers of market instability: Rumors about capital gain taxes on EGX transactions have been circulating in the local media have affected the market, Horizon Security Brokerage’s Moatasem Al Shahidy told Al Ain. Heightened tensions in the region have also added to the unpredictability of the market, he added.

WATCH THIS SPACE-

A more optimistic primary surplus forecast: Finance Minister Mohamed Maait now expects the country’s primary surplus to come in at 5.75% by the end of the current fiscal year on the back of the arrival of around USD 12 bn from the landmark Ras El Hekma agreement, he told Morgan Stanley’s head of EMEA Clare Woodman, according to a statement from the ministry. The government’s last forecast penciled in a primary surplus of 2.5% for the current fiscal year.

And a more positive budget deficit to boot: Maait also sees the budget deficit finishing the fiscal year at 3.95%, down from the government’s forecast of 7.0%.

More Morgan Stanley news to come? “We look forward to benefiting from the capabilities of Morgan Stanley and enhancing cooperation in hedging arrangements against rising prices for the most popular commodities... and in non-traditional financing,” Maait said.

HAPPENING TODAY-

#1- The Immigration Ministry has opened the door for Egyptians living abroad to settle unfulfilled military service obligations for two months starting today, according to a ministry statement. The settlement cost has changed to USD 7k / EUR 7k from USD 5k / EUR 5k in the first iteration of the initiative.

#2- Attention, investors: Supply Minister Ali El Moselhi will offer investors the chance to invest in several internal trade projects today, MENA reports, without diving deeper into the details. We will be keeping our ears to the ground today to find out more.

#3- Early signs of Egypt-EU strategic partnership bearing fruit? A technical mission from the EU is in town to meet with various ministries and national authorities in Egypt to discuss ways of offering macroeconomic and budget support as part of a two-day trip that started yesterday, according to a statement from the International Cooperation Ministry.

On the agenda: During its trip, the delegation has penciled in meetings with the ministries of finance, planning, international cooperation, trade, environment, electricity, labor, and the Central Bank of Egypt.

NEWS TRIGGERS-

It’s the first day of May — here are the key news triggers to keep your eyes on in this month:

  • Inflation: Capmas and the CBE are expected to publish the inflation data for April next week. The likelihood that we’re on a deflationary path seems good, with annual urban inflation cooling 2.4 percentage points to 33.3% in March on the back of a softer increase in food prices as traders priced in a lower exchange rate following the fall of the parallel market.
  • Interest rates: The central bank’s Monetary Policy Committee will meet on 23 May to review rates. Most analysts are yet to unveil their forecasts, but Goldman Sachsexpects the CBE to cut rates by 200 bps at its next policy meeting to bring rates down after its 600 bps rate hike in March alongside the EGP float.
  • Foreign reserves: Economists and analysts will be awaiting the release of April’s foreign reserves data from the central bank over the coming few days to see how fresh inflows coming our way following the float of the EGP will continue to affect our net foreign reserve position after our net foreign reserves rose in March to their highest level since Russia’s war on Ukraine and the global rise of interest rates triggered the flight of hot money from EMs.
  • PMI figures: S&P Global will publish Egypt’s PMI figures for April on Wednesday 8 May measuring the country’s non-oil private sector activity, which has been in contraction for the last 40 months. We’re still yet to see the hoped for uptick in business activity following the float of the EGP with March’s data showing “ softer but still-solid deterioration ” on the back of persistent currency challenges and elevated inflationary pressures.

ATTENTION, EGYPT INVESTORS-

Foreign investors are falling in love with Egypt again… Foreign investors we speak with (debt, equity, and strategic alike) have a growing appetite for Egypt. They’re buying into local debt, eyeing promising shares, and committing bns of USD to both new ventures here and the growth of their existing businesses. They like the Egypt story that’s taking shape after the float of the EGP, and its competitive advantages are clear to many of them: It’s a massive consumer opportunity and a regional export hub of tomorrow.

The Enterprise Optimism Forum 2024 will do exactly what it says on the tin: Spark conversations about a future that we think is much brighter than so many in our community feel right now. Think of it as much-needed shock therapy combined with an early, actionable roadmap for those of us who are “long Egypt.”

We’ll be talking with you about the agenda over the coming couple of weeks.It features speakers from Egypt and abroad who are future-proofing their businesses and angling to capture tomorrow’s opportunities — and who aren’t afraid to answer some tough questions.

*** Interested in attending? Tap or click here to let us know. Seating is limited.

DATA POINT-

The end of the Egyptian gold rush? Local sales of gold bullions and coins were down 36% y-o-y to record 5.2 tons in 1Q 2024 — its lowest figure since 2Q 2022 — according to the World Gold Council’s Gold Demand Trends quarterly report and data set. “Egypt’s improved economic circumstances diluted the safe-haven motive of gold investors,” the report said, pointing to the country’s expanded package from the IMF and the central bank floating the EGP.

But Egyptians are as fond of jewelry as ever: Local sales of gold jewelry rose 3% y-o-y in the same period to 8.0 tons.

CIRCLE YOUR CALENDAR-

Aqarmap is bringing Egyptian and Saudi developers together: Real estate marketplace Aqarmap will organize a developers-get-together platform on Sunday 12 May in Cairo, bringing together Egyptian and Saudi real estate developers and property investors, according to a press release (pdf) from the company.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

THE BIG STORY ABROAD-

Just a couple of stories are getting very wide play in the global business press on an otherwise very quiet Wednesday morning. It’s a national holiday today from much of Europe (France, Germany, Italy, Spain, Sweden) to India, Korea, and Latin America in observance of labor day.

Here’s the rundown on what’s making headlines:

#1- BlackRock has landed a USD 5 bn commitment from Saudi Arabia’s Public Investment Fund and will open a “multi-class investment firm” in Riyadh. A unit of the world’s largest asset manager will target investments in the Kingdom as well as across the Middle East and North Africa. EnterpriseAM Saudi has more, as do the Financial Times, Retuers, Bloomberg, and Wall Street Journal.

#2- Benjamin Netanyahu is signaling he will push ahead with a ground assault on Rafah “with or without a deal.” Speaking as Cairo-brokered ceasefire talks continued, Netanyahu said, “The idea that we will stop the war before achieving all of its goals is out of the question. We will enter Rafah and we will eliminate Hamas’ battalions there — with or without a deal,”

We’ll know more tonight: Hamas is expected to reply later today to Israel’s latest proposal and Israel says it’s not talking until it does.

Netanyahu’s statement got a lot of attention on foreign press: Associated Press | Washington Post | Reuters | Politico | The Guardian | CNN.

#3- Demand for artificial intelligence drove sales growth at Amazon’s cloud division in 1Q — a fact you now know because every single news outlet from the FT and Wall Street Journal to Bloomberg is leading with that story at the top of their homepages as we head to dispatch this morning. Germany’s Handelsblatt notes that both Google and Microsoft Azure (both admittedly smaller players) grew their AI cloud businesses twice as fast in the fourth quarter. Amazon’s income more than tripled, comfortably ahead of analyst expectations.

#4- Pro-Palestinian protests on US college campuses — and heavy-handed responses to them — are also getting plenty of ink. Columbia President Minouche Shafik is still under fire from both sides, New York City is massing police next to the campus after protesters “dramatically” took over a building, and those occupying the building have been threatened with expulsion.

#5- Palace intrigue at HSBC: The Financial Times has the best insider take we’ve seen yet on the “shock exit” of Noel Quinn, the CEO of Europe’s biggest bank. “Inside HSBC headquarters, the narrative is that it was impossible for both Quinn and group chair Mark Tucker to continue in their roles.” Each effectively had a “three-year deadline” to leave the organization at around the same time — and Tucker wanted to oversee the selection of the third CEO his board will work with.

ENTERPRISE IS LOOKING FOR SMART, TALENTED PEOPLE of all backgrounds to help us build some very cool new things. Enterprise — the essential morning read on all the important news shaping business and the economy in Egypt and the region — is looking for writers, reporters and editors to help us build out new publications.

NEVER WORKED IN A NEWSROOM BEFORE? We have the Enterprise Business Writing Development Program. Whether you are a recent graduate, an industry vet, or looking to switch careers, the Enterprise Business Writing Development Program will give you the tools you need to tell the most important stories to our audience of C-suite officials, government ministers, diplomats, financiers, investors and entrepreneurs.

Not an internship program — a career: The three-month program will see full-time, paid participants take part in workshops and lectures from veteran business journalists on subject matter knowledge, while also working on constructing and filing Enterprise stories that will run on any of our publications. Those who have successfully completed the program, will then be given long-term job offers.

Apply directly to jobs@enterprisemea.com and mention “writing development program” in your subject line.

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: We take a look at Egypt’s spending plans for infrastructure in the next fiscal year.

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