**#2 Foreign investors exited some EGP 29.9 bn worth of Egyptian treasuries in June as the Emerging Markets Zombie Apocalypse deepened, according to central bank data (pdf). Foreign holdings of treasuries stood at EGP 269.1 bn at the end of FY2017-18, down EGP 29.9 bn from the previous month. International fund managers’ appetite for Egyptian T-bills has eased since April, impacted by the wider emerging markets sell-off, the CBE’s data also shows, falling from a high of EGP 380.0 bn in March.

Don’t be confused by the two sets of figures out there: The Finance Ministry shows foreign holdings today at about USD 17.1 to USD 17.5 bn, compared with the USD 15.06 bn (EGP 269.1 bn) figure recorded by the central bank. As we understand it, the CBE figure includes only short-term instruments, while the Finance Ministry tracks short- and longer-term maturities. The Finance Ministry was out with a statement, carried by Al Mal, deferring to the central bank on this to mitigate any confusion.

FinMin downplays impact of EM crisis on EGP: Egypt’s currency is handling the emerging markets sell-off much better than other EM currencies, with the EGP having slid just 0.5% since January 2018, Vice Minister of Finance Ahmed Kouchouk said in an interview with Al Masdar. Compare that with a 41% drop in the TRY, the 36% slide in the ARS, and the 15% drop in the RUB. The results show that Egypt has lowest risk of market contagion as its economic reforms and fundamentals have largely shielded it from the impact of the EM Zombie Apocalypse, Kouchouk said.

But is the central bank propping up the currency? Capital Economics has areport out last week alleging that the EGP’s stability can only have come from the CBE propping up the currency, despite previous pledges by CBE Governor Tarek Amer that those days were over. The report warns that the impact of the EM crisis, including stock and bond outflows, would force the CBE to abandon the policy, projecting that the EGP could lose up to 10% of its value against the USD by 2020 — still, a fairly modest dip.

**#3 Eastern Company to pilot government’s privatization program, EFG to manage sale: EFG Hermes was tapped to manage the first transaction in the state’s reborn privation program, which will see the sale of additional 4.5% stake in cigarette maker Eastern Company on the EGX, Finance Minister Mohamed Maait said in a statement on Thursday. State-owned investment bank NI Capital said EFG presented the best financial and technical offer for the transaction, which is expected to yield around EGP 2 bn in proceeds. Pharos Holding, Beltone, and HSBC were among the bidders.

When is the share sale taking place? The short answer: The Finance Ministry is saying one thing, the Public Enterprises Ministry another. Maait said in the statement that EFG is looking into timing of the sale, while Public Enterprises Minister Hisham Tawfik is adamant that the transaction will take place in October, according to statements he made to Masrawy. Maait had previously said that the program was on track to kick off in October.

Look for the sale to be an accelerated book build. EFG has a rock-solid track record in quickly placing stakes with quality domestic and international investors (cf: the USD 226 mn Humansoft sale this past summer). Our friend Mohamed Ebeid, co-CEO of the investment bank at EFG, told us earlier this year that this was the route the government would take: “They’ve chosen the best route, which is is an accelerated book building program for some of the government stakes in listed equities and trim down the ownership, rather than owning it through multiple vehicles. These state companies are known by investors and covered by research, which is facilitating an accelerated book-building program over a 24-hour window. That would bring a lot of volume to the market.”

Other firms on track for share sale in 4Q2018: Tawfik was also adamant that a share sale in Alexandria Container and Cargo Handling (ACCH) would take place in October, joining Eastern and Heliopolis Housing and Development. ACCH’s share sale was originally slated to take place in November. Other state-owned companies are still on track to sell more shares on the EGX in 4Q2018,according to Maait. NI Capital is reportedly set to review this week offers from investment banks looking to manage the sale of shares from the Alexandria Minerals and Oils Company, sources close to the matter told Al Mal. EFG is also in the running for the tender, alongside Pharos, HC Securities, and four other investment banks.

On a related note, Abu Qir Fertilizers, which is also in line to sell shares this year, is after an EUR 80 mn loan to upgrade its production lines, said Managing Director Saad Abou El Maaty. The company has already secured a preliminary approval for the loan from a consortium that includes the National Bank of Egypt and QNB-Egypt, he said.

**#4 EXCLUSIVE- Enppi IPO “likely” to take place in 1Q2019: As for the second phase of the program, it appears that the IPO of state energy contractor Enppi is “likely” to take place in 1Q2019, a Finance Ministry source told Enterprise. While Enppi is also likely to be the first state company to IPO under the privatization program, the source was quick to stress that no final decision on the IPO has been taken. Enppi’s fate will largely be determined by the success of the first wave of share sales, with the shot being called early in the new year. We’re also told that a decision on the size of the listing, initially set at 24%, has yet to made. The source expects that a maximum two state companies will list shares in FY2018-19.

Egypt signs agreement to unlock USD 3 bn of financing from Islamic Trade Finance Corp. for essential commodities: Egypt signed on Thursday two agreements to unlock a total of USD 3 bn in financing from the International Islamic Trade Finance Corporation, a subsidiary of the Islamic Development Bank. The financing includes USD 1 bn to finance the purchase of basic goods and foodstuffs, according to an Investment Ministry statement (pdf), and another USD 2 bn tranche for the purchase of petroleum and other energy commodities, the ministry said (pdf). The USD 1 bn tranche is expected to support the purchase of food commodities for some 67 mn citizens. Egypt and the ITFC had reached a provisional agreement on the funding back in January. To date, the ITFC has provided a total USD 9.2 bn in financing to Egypt over the years, according to the ministry statement, which Reuters notes does not include details on the financing terms.

**#6 GB Auto is planning to start building a motorcycle plant in Ain Sokhna next year, Chairman and CEO Raouf Ghabbour told Bloomberg in an interview. Production from the new plant is expected to start in 2020, with much of the output earmarked for export, according to Ghabbour, who adds that East Africa will be a key market. The project’s investment value was not disclosed, but the company had announced in December 2016 that it was investing USD 60 mn in a new motorcycle factory in the Suez Canal Economic Zone and was in the final stages of acquiring land permits for it.

A turnaround in the cards for the auto market in 2019: GB Auto will also be resuming sales of the Chinese Geely vehicle this month, a move that is expected to push sales up by 40% this year to 140k units, and up to 180k units by 2019, Ghabbour said. GB Auto had incurred losses in 2016 and 2017 but began to recover in the first half of 2018, posting a 45.8% y-o-y growth in its top line in 2Q2018 to EGP 6.1 bn. The company expects auto sales to double in 2019 compared to 2017 — when the car market shrunk to nearly half its average size as inflation levels soared following the EGP float — as demand recovers and the market adjusts to new realities.

**#7 M&A WATCH- Pharos said to be advising on Spinney’s sale: Our friends at Pharos Holdings are reportedly the advisers on the sale of Spinney’s by majority owner Abraaj, according to Al Mal. Al Mal’s piece suggests that Pharos is the sell-side adviser on the sale. Spinney’s CEO Mohanad Adly confirmed on Saturday that it had received expressions of interest from five private equity firms looking to buy the company, but gave no further detail.

This came as global private equity firm Actis reportedly made a USD 1 offer to acquire some of Abraaj’s assets, sources close to the matter told Bloomberg last week. We had heard earlier this month that Actis made a bid to acquire “the bulk” of Abraaj Group’s emerging market funds. Actis is up against Abu Dhabi Financial Group as well as a consortium formed by Kuwait’s Agility and New York-based Centerbridge Partners. Rohatyn Group and the Chicago-based middle-market PE firm Vistria Group are also in the running, alongside Colony Capital, which is now looking to acquire Abraaj’s Latin American assets (after its initial offer to acquire all of the firm’s assets was rejected). Helios Capital has reportedly made an offer for the company’s African assets.

INVESTMENT WATCH- UAE’s Alcazar Energy looking to snag USD 500 mn in wind projects: UAE-based renewables energy firm Alcazar Energy is currently bidding on USD 500 mn-worth of wind projects with a combined generating capacity of 500 MW, Electricity Ministry sources tell Al Masdar. According to the offer presented to the ministry, the wind farms appear to be exclusively in the Gulf of Suez region. The projects would all be under a build-own-operate (BOO) framework, the source added.

This comes as the Madbouly Cabinet’s economic group has signed off on an offer by ACWA Power to build wind projects with a combined generation capacity of 500 MW, the source said. He added that the contracts for the offer are expected to be signed at the end of the year, without revealing the size of the investments involved. As for its solar projects, ACWA Power intends to begin operating its three solar power plants with a combined capacity of 120 MW at the Benban Solar Park sometime during 1H2019, regional director Hassan Amin told the local press. ACWA reached financial close for the plants earlier this year after signing off an agreement with the Egyptian Electricity Transmission Company. The plants were supposed to be operational by 4Q2018. Amin did not give reasons for the delay.

**#8 REGULATION WATCH- GAFI issues new guidelines for voluntary liquidation of companies: The General Authority for Freezones and Investment (GAFI) issued on Thursday new guidelines for companies looking to voluntarily liquidate, Al Mal reports. Companies looking to liquidate must present GAFI with an official memo indicating the liquidation has been approved by its owner, partners, or EGM in order to receive GAFI’s legal approval. Government bodies, including the tax and customs authorities will be required to indicate whether the company has any outstanding dues within 120 days of receiving its paperwork. Liquidating companies will also be required to publish in a “widely circulated” newspaper an announcement of its plans and timeline for the process and liquidating distribution within a week of receiving approval to begin the process. Liquidated companies will be required to submit a report on their final balance sheet at the end of the process. The Bankruptcy Act, which the House of Representatives had approved in January, aims to cut the liquidation period for companies to nine months, instead of a previous average of more than two years.

LEGISLATION WATCH- CBE completes draft of new e-payments act: The CBE has completed a draft of a new e-payments act and presented it at a meeting of the National Payments Council on Saturday, according to a statement from Ittihadiya. No details were provided on the specifics of the bill. The Council will send the draft to the Madbouly Cabinet for review before introducing the law in the House of Representatives when it convenes next month for its fall legislative term.

**#9 US signs off on USD 1.2 bn military assistance package to Egypt: US State Secretary Mike Pompeo signed off on the release of a USD 1.2 bn military aid package to Egypt on Friday, the Associated Press reports. Pompeo signed “national security waivers allowing the money known as foreign military financing, or FMF, to be spent.” USD 1 bn will are meant to be allocated to the 2018 budget and USD 195 mn are from 2017. Congress has 15 days to make a decision about the waivers, which were signed last month but only made public on Friday. The reason for the delay remains unclear, the newswire notes.

War games: News of the military assistance package came as President Abdel Fattah El Sisi met yesterday with US Central Command boss Gen. Joseph Votel. The two met as Egyptian, US and allied military personnel kicked off Bright Star wargames for the second year in a row, according to an Ittihadiya statement. The exercices, set to wrap up on 20 September, also see forces from Saudi Arabia, Greece, Britain, Jordan, the UAE, Italy and France participating, according to Al Arabiya.

Background: Pompeo’s promise last month to disburse aid that was withheld from Egypt last year over human rights concerns was met backlash from rights groups and activists, as it had also come weeks after the US unfroze another USD 195 mn in military aid to Egypt. The State Department said it still had “serious concerns about the human rights situation in Egypt” — an issue it will continue to monitor closely, but noted as well that “strengthened security cooperation with Egypt is important to US national security.” VOA also has the story.

Egypt is region’s fastest-growing tourism destination –UN World Tourism Organization. Tourist arrivals to Egypt rose 51.1% y-o-y in 2017 reaching 8.5 mn, up from 5.2 mn a year earlier to make Omm El Donia the Middle East’s fastest-growing tourist destination, according to the United Nations World Tourism Organization (UNWTO) 2018 Tourism Highlights Report. “Visitor numbers rebounded from both traditional markets in Western Europe and emerging markets in Central and Eastern Europe, the Middle East and Asia. Promotional efforts and a return of confidence contributed to this recovery,” the reports says.

EARNINGS WATCH- Oil services outfit Maridive Group reported a net profit of USD 17.09 mn in 1H2018, up from USD 11.02 mn in 1H2017, according to a filing to the EGX.

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