CBE temporarily sets daily limit on bank, ATM cash withdrawals and deposits: The Central Bank of Egypt (CBE) decided yesterday to impose a temporary cap on daily cash withdrawals and deposits from banks and ATMs, according to an official statement (pdf). The CBE said the measure is designed to force citizens to move away from cash and so reduce footfall at banks. The move comes as pensioners nationwide prepare to line up at bank branches to collect their monthly stipend starting 1 April. Reuters also has the story.

The measures include:

• Companies can withdraw EGP 50k per day, but face no cap on deposits, according to a CBE circular (pdf) issued later in the day yesterday. Companies can also make whatever cash withdrawals they need to “satisfy obligations to employees.”
• In-branch cash withdrawals and deposits are now limited to EGP 10k per day for individuals;
• ATM withdrawals and deposits are now capped at EGP 5k per day for individuals and companies alike;
• Transactions related to letters of credit and of guarantee are exempt as are transactions by individuals “whose line of work includes depositing large sums of money regularly” are also reportedly exempt.
• Deposits to satisfy credit card payments are also exempt.

There are no new limits on electronic transfers between accounts, whether they’re held by individuals or companies. The central bank earlier ordered banks to slash to zero all fees for e-payments and transfers. Military-affiliated companies are entirely exempt from the new cash deposit and withdrawal caps.

Checks will also be subject to the cap. Take in an EGP 40k cheque, for example, and you can get EGP 10k in cash on the spot and the balance of EGP 30k in either (a) your bank account or (b) in three daily EGP 10k chunks.

The Egyptian Businessmen’s Association wants exemptions from the decision, arguing in a letter to the CBE that limiting withdrawals will have a negative impact on businesses with high volumes of daily cash transactions.

The key word here is “temporary,” we’re told by a source familiar with the central bank’s thinking. The source added that the measures are specifically designed to help stem the transmission of the virus that causes covid-19.

Separately, the CBE will cover the cost of interbank ATM cash withdrawal fees for six mn pensioners for six months, according to Egypt Today.

Amer talks covid-19 and the Egyptian economy: Central Bank of Egypt Governor Tarek Amer yesterday phoned into Sada El Balad for a wide-ranging conversation with talk show host Ahmed Moussa on the current state of the Egyptian economy and how the central bank is responding to the covid-19 pandemic. You can watch the full interview here (watch, runtime: 1:37:51).

Here are the key takeaways:

Foreign investors have pulled around EGP 7 bn from the EGX since covid-19 pandemic hit global markets, Amer said. President Abdel Fattah El Sisi last week announced that the CBE would allocate EGP 20 bn to support share prices on the EGX, a measure that has helped to stabilize trading on the exchange, Amer said. It remains unclear how exactly the central bank is entering the market.

The central bank isn’t pencilling in a recession just yet: “There are expectations that foreign economies will contract in the second and third quarters, while in Egypt there will be lower growth, but we will achieve growth,” Amer said, suggesting Egypt will escape the deep recession now forecast in many countries around the world.

Greenback to fall against the EGP: Amer expects the USD to reverse some of its recent gains against the EGP in the coming weeks. The greenback has been on a tear this month as investors have dumped risk assets in search of safety, but retreated last week after the Federal Reserve pledged to pump as much money as was needed into the economy.

Another rate cut on the way? Unlike many other countries that are operating at or close to zero interest rates, the CBE has more room to cut rates if additional stimulus is needed to support business activity, Amer said. The central bank made an emergency 300 bps rate cut earlier this month taking the overnight deposit rate to 9.25%, the lending rate to 10.25% and the main operation and discount rates to 9.75%. The majority of countries in comparison have cut rates below 5%. The central bank will next meet to review interest rates this coming Thursday, 2 April 2020.

Debt relief package delivered: Amer said that debt relief will be offered to struggling companies, from the public sector to private businesses and SMEs, by suspending loan instalments for six months worth EGP 1.8 bn investment, noting that interest will still accumulate and be due once the period ends. Collections on another EGP 40 mn in personal loans will also be postponed for the same period. He said some 20 mn citizens will benefit from the initiative.

Microenterprises shouldn’t expect their debts to be postponed. Amer said that it was difficult to reschedule debt payments for microenterprises because many access finance through NGOs, which use companies to collect repayments. Granting a six-month holiday to microbusinesses, as the CBE did last week with corporate and individual borrowers, will likely cause complications for everyone involved, he said. Instead, micro firms may be able to negotiate more relaxed payment schedules with their NGO or Banque du Caire — the primary bank lender for micro businesses — on a case-by-case basis, he said.

Egypt’s foreign reserves can cover as much as 10 months’ of imports, compared to the global average of just three months, Amer said. Reserves currently stand at USD 45.5 bn as of the end of February.

Petrol prices will likely fall: He said that we will probably see petrol prices drop, given that they are tied to declining oil prices in the global market and the recent strength of the EGP against the USD. The next announcement is expected at the beginning of April.

The EGX30 slipped back into the red yesterday, closing down 1.5% to resume a spell of volatility that has gripped the market over the past few weeks. The benchmark index had inched up 0.5% by the closing bell last Thursday and 1.0% on Wednesday. Index heavyweight CIB drove yesterday’s dip, ending the trading day down 2.4%. Orascom Development Egypt was down 3.6% and CIRA dipped 3.5%. The session’s best performers were Pioneers Holding up 1.7%, Orascom Investment Holding up 1.5%, and SODIC up 1.5%.

Egypt’s bourse was in lockstep with other regional markets which also performed poorly yesterday. Boursa Kuwait ended the trading day 4.7% in the red after S&P downgraded its credit to AA-, spurred by the country’s reliance on exports amid low oil prices globally, according to Bloomberg. Bahrain closed down 1.9%, Oman closed down 1.66%, and Qatar saw losses of 0.57%. Saudi’s Tadawul bucked the trend, inching up 0.8%.

Has the market bottomed out? Renaissance Capital analysts seem to think so, writing in a research note yesterday that “the market [in Egypt] might have found a floor until either we see further strict measures imposed by the government or an exponential growth in new covid-19 cases discovered.” The investment bank notes that the EGX30 index has shed around 25% in USD terms since the beginning of the month, which is around the same level as the MSCI EM index (-22%). RenCap expects healthcare, banks, and other “defensive stocks” to outperform on the EGX in the short term.

Meanwhile, stock buybacks continue: The Egyptian International Pharmaceuticals Industries Company’s (EIPICO) board approved yesterday the purchase of 1.6 mn in treasury stock, worth 1.61% of the company’s shares, according to an EGX filing (pdf). Madinet Nasr for Housing and Development (MNHD) also announced the purchase of some 507k treasury shares, bringing the company’s total stock buybacks to 2.4 mn shares since the beginning of the month, according to an EGX disclosure (pdf).

Emerging markets have done better than European countries to contain covid-19, but will struggle to finance lockdowns -RenCap: Emerging markets have, by and large, outperformed most European countries when it comes to containing the spread of covid-19, Renaissance Capital said on a webinar last week.

EM governments — including Egypt, Turkey, Russia, and South Africa — enacted effective policies including lockdowns faster than their European counterparts, as can be seen in the number of cases per 100k people once the policies went into effect (5 per 100k in Italy and the UK vs. less than 0.01 per 100k in Hubei). Europe is expected to see more deaths per capita by the end of the outbreak, but EMs are likely to keep their death rates from the virus at around the same level as Hubei, says Global Chief Economist Charles Robertson.

The flattening of the curve in Italy on the back of strict measures enacted by the government is “encouraging” and indicates that social distancing and lockdowns do work in curbing the spread of covid-19. Based on the “fairly straightforward” progression of the virus’ spread, the US is expected to see its new cases peak next month.

Bond yields in EMs, which have been rising after already being high, beg the question of how these countries will be able to afford the lockdowns they’re imposing. RenCap flags Pakistan, Turkey, South Africa, Nigeria and Egypt, along with much of Latin America as being in the “not looking so hot corner” when it comes to yields. “Those countries that will likely struggle could and should seek cheaper funding from the IMF and World Bank or look for a G7 or G20 package if there’s one available,” says Daniel Salter, head of equity strategy. Finance Minister Mohamed Maait had told us earlier this week that the government could look at a fresh IMF facility — which Egypt had previously ruled out — to finance state spending in light of the “extenuating circumstances” created by the covid-19 outbreak.

The magnitude of outflows from EM equity funds has been relatively small, but this is the “fastest bear market” we’ve seen so far, according to Salter. The numbers might seem painful in terms of volume but the reality is that this only actually accounts for around 1.1% of EM assets under management.

Is the worst yet to come? This relatively low percentage suggests one of two things, Salter says: Either EMs have already taken so many consecutive blows over the past few years that resulted in heavy outflows so that there just isn’t much fat left to trim — or we still have the worst of the sell-off ahead of us.

The good news: EM currencies (minus China’s yuan) are at the cheapest they’ve been since 1998, meaning it’s a great chance to invest right now. Aside from Turkey, which was already facing currency pressure pre-covid-19, Latin American currencies have taken the biggest beating so far, with each of Columbia, Brazil, and Peru seeing their currencies drop 25%. Mexico’s peso has lost more than 30% of its value, and Russia’s RBL is down 10% mostly because of the oil price war. Frontier markets, on the other hand, have not seen currencies get cheaper as many are pegged. There have so far been very few redemptions in frontier markets because they have been “an unloved asset class” for the past couple of years, Robertson says.

EARNINGS WATCH- B Investment’s consolidated net profits after tax dropped 10.6% y-o-y in 2019 to EGP 173.7 mn, from EGP 194.4 mn in 2018, according to a bourse filing (pdf). The company’s revenues decreased by 6.03% y-o-y to EGP 230.6 mn in 2019 from EGP 245.4 mn.

MOVES- Mohamed Ibrahim (Linkedin) has been tapped as Sidi Kerir Petrochemicals’ (Sidpec) new chairman and managing director, according to the local press. Ibrahim, who succeeds Mosaad Attia, has been with the company for over 20 years.