El Sisi signs off on measures to strengthen social safety net: President Abdel Fattah El Sisi announced a handful of measures yesterday designed to strengthen the social safety net and shield the poor from inflation as the government pursues further economic reforms. As sources had predicted last week, food subsidy allowances will rise to a monthly EGP 50 from EGP 21 starting 1 July for Egypt’s c.70 mn subsidy card holders, El Sisi said in a speech (watch, runtime: 26:32). This 140% increase will see the line item cost state coffers EGP 85 bn, up from EGP 45 bn in last year’s budget. El Sisi announced other measures yesterday — some of which were okayed by parliament this week — including:

• The 15% increase in state pensions at a cost of around EGP 190 bn;
• An EGP 100 increase in monthly allowances under the Takaful and Karama cash subsidy programs at a cost of EGP 8.25 bn to the state;
• A three-year tax freeze on property tithes on agricultural land;
• The 7% annual raise and 7% hardship raise for state bureaucrats under the Civil Service Act and the corresponding 10% raise for bureaucrats not covered by the act;
• Progressive income tax breaks for private citizens, particularly those in lower income brackets.

Meanwhile, the ministers of planning, finance, and manpower will be holding meetings to discuss increases to minimum wages for the three months following the start of the new fiscal year, according to a release picked up by AMAY says. And in its latest Nasserist PR stunt, the commie-capitalist oxymoron that is the Union of Egyptian Investors Associations says it is in talks with Manpower Minister Mohamed Saafan on an initiative that would give private sector employees a 10% bump on their base salary, Al Mal reports.

President El Sisi’s speech had started by addressing the two elephants in the room — and in the Red Sea. He said that he respected people’s opposing viewpoints on a treaty that would see Egypt hand Tiran and Sanafir islands over to Saudi Arabia, but that his administration is bound by law to give them back.

El Sisi’s statements came as the Administrative Court issued a ruling on Tuesday stating that the Court of Urgent Matters lacked the jurisdiction to overturn its verdict nullifying the Tiran and Sanafir agreement, according to AMAY. The suit was filed by opposition lawyer Khaled Ali. The House of Representatives ratified the agreement last week, spurring a backlash. Over 100 MPs had signed a request asking El Sisi to wait for the final verdict on the matter from the Supreme Constitutional Court before signing off on the agreement. The State Lawsuits Authority (which represents the government in the case) has reportedly asked the Constitutional Court to use its legal right to strike down both the Administrative and Urgent Matters courts’ contradicting verdicts, sources tell Al Shorouk.

El Sisi then discussed the ongoing blockade of Qatar (without ever saying the country’s name), suggesting that a certain state’s sponsorship of terror had forced Egypt to take drastic action.

EFG Hermes research boss thinks fuel price hikes will come later in 4Q17: The government might very well delay fuel price hikes slated for July until 4Q2017 to allow the market the chance to adjust to its basket of economic reform measures, EFG Hermes Research chief Ahmed Shams El Din told reporters on Tuesday, according to Al Shorouk. The price of petrol at the pumps will rise before the IMF arrives in town once more to progress on review economic reforms ahead of disbursing the third tranche of Egypt’s USD 12 bn extended facility, EFG economist Mohammad Abu Basha adds. MPs and some in government have been pushing avoid having both electricity and fuel prices rise at the same time next month.

Meanwhile the cabinet has also yet to decide on when to hike water prices despite a new pricing scheme being ready, an unnamed source tells Al Borsa. Water price increases have been set at between 29-71% depending on the consumption tier, while a price of EGP 2.25 per cubic meter for factories and residences that consume more than 40 cubic meters of water per day.

CIB, GTH, Elsewedy make Forbes Middle East Top 100 list: Our friends at CIB were the only Egyptian company to place in the top 50 in Forbes Middle East’s Top 100 Companies In The Arab World 2017 list, coming in at 45th. Despite the EGP devaluation, two other Egyptian companies made the list: Global Telecom Holding (the year’s top gainer on the list at 52) and Elsewedy Electric (ranked 92). The list used four metrics: market value, sales, net profits and total assets. Market value and currency conversions are as of 6 April, 2017. The top-ranked company on the list remains Saudi Arabia’s SABIC, with QNB, First Abu Dhabi Bank, National Commercial Bank, and Etisalat rounding out the top five. Saudi Arabia still dominates the list with 36 companies, followed by Qatar and the UAE with 19 and 17 companies respectively.

And speaking of CIB: The bank will seek approval to issue bonus shares to increase its capital by 25% at its next general assembly meeting, Reuters reports. CIB will seek to increase its capital to EGP 14.52 bn from EGP 11.62 bn through the distribution of a bonus share for every four original shares. The general assembly will be held on 18 July.

Oh, for want of an investment banker: Naftogaz Ukrainy is reportedly having a tough time divesting its Egyptian assets after canceling “the second tender to provide investment banking services related to Naftogaz upstream assets in Egypt and search for potential buyers” as only one bid was submitted, Russia’s Interfax says. The news service claims “only E&Y LLC took part in the tender, while at the first tender France's Lazard Frères showed its interest.” Naftogaz first announced intention to sell its Egyptian assets in March. Naftogaz is said to have two concessions in the Eastern Desert. We’re aware that citing a Russian source on anything Ukrainian (or vice versa) is fraught, but perhaps there’s an opportunity for someone enterprising enough to look into this.

EARNINGS WATCH- Beltone Financial Holding reported a consolidated net loss of EGP 14 mn in 1Q2017, down from a net profit of EGP 13.3 mn in 1Q2016. The net loss came despite revenues growing to EGP 95.2 mn in 1Q2017, up from EGP 49.3 mn same period last year. The acquisition of a 60% stake in Auerbach Grayson & Company drove up Beltone’s salary outlay up by EGP 34.5 mn to EGP 59.5 mn in 1Q2017 from EGP 21.2 mn in 1Q2016. Other expenditures that included rent, maintenance, communications, and travel also went up by EGP 23.4 mn to EGP 39.8 mn in 1Q2017 from EGP 10.0 mn a year earlier.

Egyptian developers dominated Facebook’s Middle East and AfricaBots for Messenger Developer Challenge, a contest to recognize and reward developers who are able to create the most innovative new bots on Messenger in the Middle East and Africa. Only two non-Egyptian developers seized either the winner or runner-up positions across the competition’s categories. In the social good category, Egypt’s MathHook was the winner and Adam (9 Months) was the runner up. Mr. Ink won the productivity and utility category and Jordan’s Evii was the runner up. The only non-Egyptian winner was Morocco’s Trivoxx in the category of gaming and entertainment; the runner-up was Egypt’s Mastermind Games Bot. The winning teams got USD 20k and three months of Facebook mentorship.

This is a concern: Seven new websites were reportedly blocked in Egypt on Monday, according to the Association for Freedom of Thought and Expression (AFTE), bringing to 101 the number of sites the group claims is blocked. The report also noted that there was a difference in the number of blocked sites depending on the ISP used, especially as some sites were blocked and unblocked several times on the same network. “Noor Company came as the company with the lowest number of blocked sites. Noor is the only company that did not disconnect the Internet from its users during the events of the Egyptian revolution 2011.” AFTE is asking the government to disclose its decision to block the sites in question and is asking that the Prosecutor General’s Office confirm whether or not the decision to block sites is related to ongoing investigations.

The Administrative Court rejected on Tuesday Juhayna Chairman Safwan Thabet’s appeal against the government's freeze on his assets, which was put in place back in 2014, Al Borsa reports. A Cairo Criminal Court had placed Thabet and hundreds others on a list of designated terrorists in January for their alleged affiliation with or support for the Ikhwan. In the appeal, the veteran business leader denied ever belonging to the now-banned group, claiming that his “familial ties to former Ikhwan leader Hassan El Houdaiby do not mean he belongs to the Ikhwan.”

The Misryoon Al Ahrar Party (FEP) has backed the 2017-18 state budget. That’s the highlight of the shockingly poor (and paltry) coverage of the budget debate at the House of Representatives yesterday. FEP announced yesterday that its bloc in the House will vote in favour of the new budget, according to Ahram Gate. The House was due to kick off its budget debate yesterday, but the only coverage of the story to emerge overnight was a piece in Al Masry Al Youm claiming MPs from the House Health Committee were demanding that the government increase its earmark for health spending.

One thing we can confirm: The House approved yesterday its own EGP 1.1 bn operating budget for the new year, up from EGP 997 mn last year, Al Mal says.

What else did the House get up to yesterday? MPs signed off on a draft bill proposed by the Ismail government that would direct a percentage of ministerial special revenue funds (often described as slush funds) into the state budget process, primarily to help remedy the budget deficit, Al Shorouk reports. The percentage deducted will vary depending on account size and value, according to Finance Minister Amr El Garhy, who said that state coffers will claim 1% of accounts holding EGP 20-30 mn, 5% from accounts holding EGP 30-50 mn, and 15% from accounts holding anything north of EGP 100 mn. The bill excludes a number of funds, including those for research, university hospitals, social welfare, housing, healthcare, and funds from international donors.

Saudi is a winner, Argentina a loser, and Nigeria gets a stay of execution as MSCIannounces results of 2017 classification review. Saudi Arabia could get an upgrade to emerging markets status as soon as next year, MSCI said yesterday, setting it up to attract bns of inflows into listed equities as it placed the kingdom on a watch list for a potential upgrade. “The victory follows a years-long campaign by the country’s capital markets regulator and local stock exchange to carry out investor-friendly rule changes. They included facilitating access to foreigners and implementing T+2 settlement in order to attract funds from abroad, Bloomberg reports. Reuters also has the story. BlackRock welcomed the move, but signalled it thinks 2019 is a more likely upgrade target for Saudi.

While folks in Saudi may be smiling this morning, the mood is glum in Buenos Aires,where MSCI said it is too soon to upgrade Argentina to EM status “despite widespread investor expectations that it would be upgraded because of a host of market-friendly policies [President Mauricio] Macri implemented with the aim of opening up Argentina’s economy. Argentina will now remain relegated to the ranks of frontier markets for at least another year,” the Financial Times writes. That leaves Argentina on a frontier markets list that also includes Romania, Kazakhstan, Nigeria, Kenya, Kuwait, Bangladesh and Vietnam.

Nigeria got a stay of execution, with MSCI writing in a statement that its “decision on the potential removal of the MSCI Nigeria Index from the MSCI Frontier Markets Index has been delayed to November 2017 to allow more time for international institutional investors to better assess the effectiveness of the new FX trading window introduced by the Central Bank of Nigeria.” The news comes as Bloomberg reports that “Nigeria’s Half-Measures on Currency Are Only Half-Working.” Meanwhile, the index provider upgraded China ‘A’ shares to MSCI EM status.

You can read the full MSCI statement on its review here (pdf). And while you’re in afrontier and EM kind of mood this morning: Bloomberg suggests that while “robots are eating fund managers’ lunch” and driving a search for more “esoteric” assets in which humans could have an information advantage, the Financial Times writes that more and more managers are scouring the frontier “in a quest for the holy grail: fast-growing listed companies that remain almost completely unknown to investors.”

Arqaam Capital has “improved its ranking in this year’s Extel survey by one placeclinching the third spot in the Middle East & North Africa ahead of 31 regional and global institutions,” the firm said in a statement (pdf). Arqaam, which bills itself as an emerging markets specialist, also landed a top ten position in both South Africa and in frontier markets. The news comes after it placed in the Africa (excluding South Africa) table in this year’s South Africa’s Financial Mail survey (4.2 MB pdf).

CLARIFICATION- The EBRD’s EUR 290 mn investment in Egypt to finance the Egyptian National Railway’s fleet upgrade announced on Monday is separate from the USD 575 mn supply-and-maintenance contract the Investment and International Cooperation signed with General Electric on Saturday for the supply of 100 locomotives. The EBRD has issued its own press release on its financing, which notes that “As part of ENR’s locomotive renewal programme, the EBRD will finance the acquisition of up to 100 new diesel locomotives under a supply-and-maintenance contract outsourced to the private sector in accordance with the EBRD’s procurement policy.”