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Tuesday, 6 Aug 2024

What We're Tracking Today
Economy
Economy
Social Welfare
Manufacturing
Last Night’s Talk Shows
Egypt In The News
Also On Our Radar
Planet Finance
Going Green
Calendar

Global markets meltdown hits Egypt — pushing the EGP to six-month lows

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Today at a glance

1

Economy

Global markets meltdown hit home — the EGP hit six-month lows.
2

What We're Tracking Today

Equity markets have endured after a “brutal” sell-off.
3

Economy

Non-oil private sector activity remains near growth territory despite dipping in July.
4

SOCIAL WELFARE

Gov’t could announce its biggest social support package to date in September.
5

Manufacturing

Could the private sector help revive state-owned tire maker Trenco?
6

LAST NIGHT’S TALK SHOWS

El Sisi discusses regional developments during meeting with Turkish Foreign Minister.
7

ALSO ON OUR RADAR

OCI sells blue ammonia project for USD 2.4 bn.
8

PLANET FINANCE

Optimism over cryptocurrencies sours as BTC, ETH plummet amid stock market slump.
9

Going Green

Steps toward launching Africa’s first voluntary carbon market are gaining traction.

Tuesday, 6 Aug 2024

What We're Tracking Today
Economy
Economy
Social Welfare
Manufacturing
Last Night’s Talk Shows
Egypt In The News
Also On Our Radar
Planet Finance
Going Green
Calendar
1

What We're Tracking Today

Global markets meltdown: Wall Street suffers worst day in almost two years

Good morning, friends. It has been a crazy 24 hours after a global sell-off triggered a market meltdown, pushing most major indices to close in the red — Egypt wasn’t spared, with the sell-off echoing through our local debt market and the EGP, which fell to its lowest level since March.

THE BIG STORY ABROAD-

Equity markets have endured after a “brutal” sell-off that wiped USD 6.4 tn from global stock markets, triggered by concerns about the US economy potentially slowing faster than expected while the Fed keeps policy rates unchanged.

REMEMBER- Last Friday, the US released its July payroll data, showing slower job growth and unemployment rising to 4.3%. The news caused a big selloff, with stocks and bonds taking a hit. Earlier reports about weak manufacturing and construction only made things worse.

Where the day ended: US markets all ended in the red, despite paring back some of their losses during the day as “encouraging” US services data helped to steady markets. Treasury yields also clawed back some losses following the fresh data. Still, all three major US indexes were down more than 2.5%:

  • S&P 500: -3.0%
  • Dow: .2.6%
  • Nasdaq Composite: -3.4%

Tech shares were among the worst performers, with Nvidia closing down 6.4%, Apple falling 4.8%, and Tesla dropping 4.2%.

Our part of the world wasn’t spared: It was also a sea of red in Middle Eastern markets, with the DFM closing down 4.5%, the ADX falling 3.4%, the EGX falling 2.3%, and Tadawul closing down 2.1%.

Panic mode on: Wall Street’s “fear gauge” — Cboe Volatility Index (VIX) — settled around 38, after peaking at 65, its highest point since the early days of the pandemic. A VIX level above 30 is considered high, indicating significant market fear or uncertainty. While a level below 20 is typically considered low.

Over in the forex and crypto markets:

  • JPY: Rose to a seven-month high against the USD.
  • Malaysia's MYR: Hit its highest level against the greenback since April 2023.
  • BTC dropped to USD 54k on Monday, down from USD 62k on Friday.

WHERE THINGS STAND TODAY- The Nikkei is up in early trading, rising more than 8% within minutes of trading opening this morning to pare back some of its losses from yesterday. The index was down 12.4% yesterday, marking its worst crash since 1987, which added to worries about global market instability.

The story is single-handedly leading the conversation everywhere this morning: FinancialTimes | Bloomberg | Reuters | WSJ | CNBC

MEANWHILE- Bangladeshi Prime Minister Sheikh Hasina fled to India yesterday after stepping down following weeks of violent anti-government demonstrations.

Do you want to attend our 2024 Enterprise Finance Forum on 24 September? Seating is strictly limited at our flagship, invitation-only forum for C-suite executives and other senior leaders.

Why attend? We’re in the early days of a generational realignment of power in our industry — in our region and beyond — and on the cusp of the biggest intergenerational transfer of wealth that the world has ever seen. With that as the backdrop, we’re going to take stock of where we stand six months after the float of the EGP and ask what’s next for finance in our country and the wider region. Among the questions we’ll be asking:

  • What’s Egypt’s role in the regional industry?
  • What are foreign investors looking for right now?
  • Is real estate the only asset class in Egypt?
  • What does the next generation of leaders think as they take over established family businesses?

Do you want to request an invitation? Tap or click the image above.

WATCH THIS SPACE-

No more funding for fertilizer companies? Several local banks have temporarily halted providing new financing for fertilizer companies due to potential default risks, Asharq Business reports, citing five unnamed bankers. A private bank deputy chairman said his bank has placed the sector “at the top of the most risky sectors in the market, due to major borrowers defaulting,” with another source saying that fertilizer companies’ checks have been bouncing.

Remember: Fertilizer manufacturers have had a rough couple of months as a squeeze on gas supplies, high temperatures, and increasing electricity consumption prices temporarily pushed their factoriesoffline. Following the production shutdowns, some fertilizer companies looked to defer loan payments, with early indications pointing toward potential flexibility from bankers.

DATA POINT-

Foreign currency deposits in Egyptian banks on the rise: Non-governmental foreign currency deposits in Egyptian banks rose USD 2.4 bn in the first half of 2024, reaching USD 53.0 bn by the end of June, Al Arabiya reports, citing data from the central bank.

PSA-

WEATHER- It’s another sunny day in Cairo, with a high of 37°C and a low of 27°C, according to our favorite weather app.

It’s a little cooler in Alexandria, with a high of 33°C and a low of 24°C.

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

** Were you forwarded this email? Tap or click here to get your own copy delivered every weekday before 7am Cairo time — without charge.

CIRCLE YOUR CALENDAR-

#1- Egypt is hosting WUF in November: The biennial World Urban Forum is taking place in Cairo from 4-8 November. Egypt will be the first African country to host the forum since its inaugural session in Kenya and the second Arab country to do so following the UAE. Convened by the UN-Habitat, the forum is the second largest event on the United Nations' agenda following the UN Climate Change Conference, according to a statement. You can register to attend the event here.

#2- Looking to do your master’s in the UK? Applications for the British government’s Chevening scholarship open today at 11 am GMT. The scholarship offers full financial support for students to pursue an eligible master’s degree at a number of UK universities. Applicants will have until 5 November to submit their applications here.

#3- Also up for grabs: The Yousriya Loza-Sawiris Scholarship — which is offered by the Sawiris Foundation for Social Development — aims to fully fund two Egyptian students to pursue a Masters in Development Practice at the University of Minnesota’s Hubert Humphrey School of Public Affairs. Interested applicants have until 10 October to apply here.

Piqued your interest? An online information session with a live Q&A will be held tomorrow at 7 pm. Sign up to attend here.

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

OLYMPICS-

Day 10 was nowhere near as eventful as day 9, but here are some of the highlights.

Swedish pole vaulter Armand Duplantis — aka Mondo — was the star of the Paris Olympics yesterday. Mondo secured the pole vault gold and broke his own record suspending the bar 6.25m.

TEAM EGYPT- The Pharaohs lost 3-1 to host France in the semifinal of the men’s Olympic football tournament last night. Team Egypt scored the match’s first goal, before France scored in the last 8 minutes of the match and pushed the match into extra-time.

We could still get a spot on the podium: Egypt will face Morocco on Thursday, where they will play for the bronze.

It’s another packed day for team Egypt, here are some of the matches you should keep your eyes peeled for:

  • Diving: Mohamed Farouk will be representing the country in the men’s 3m springboard preliminary at 11:00 am.
  • Wrestling: Moamen Mohamed will face Venezuela's Raiber Jose Orozco in the men’s Greco-Roman 60kg repechage and Mahmoud Abdelrahman will face Uzbekistan’s Aram Vardanyan in the event’s 77kg weight group — both matches are scheduled for 12:00 pm. Nada Mohamed will take on China’s Feng Ziqi in the women’s freestyle 50kg. Abdellatif Mohamed will face Bulgaria’s Kiril Milov in the men’s Greco-Roman 120kg repechage.
  • Athletics: Esraa Owis will be taking part in the women’s long jump qualification at 12:15 pm.
  • Artistic swimming: The country’s artistic swimming team will be taking to the pool for the team free routine at 8:30 pm.

You can follow Team Egypt through this schedule or by heading over to our Paris 2024Guide.

Want to see when your favorite sport is on? Check out the official schedule here.

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: We take a look at the latest steps toward launching Africa’s first voluntary carbon market.

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2

Economy

Global markets meltdown hit Egypt — the EGP hit six-month lows

We’re feeling the global markets meltdown at home: Between the EGP hitting an almost six-month low and the EGX falling, Egypt was not spared from the global equity sell-off.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

By the numbers: The EGP was changing hands at an average of 49.2 to the greenback — its lowest level since March — while the benchmark EGX30 dropped 2.3% to close at 27.8k yesterday, according to market data.

Evidence of a flexible exchange rate: The EGP weakening against the USD serves as a healthy indicator of exchange rate flexibility and puts an end to claims that authorities are manipulating the exchange rate by limiting demand, EGBank board member Mohamed Abdel Aal told Enterprise.

The global sell-off may have something to do with it: Recession fears in the US after “alarming” US economy data — including a jump in unemployment rates to 4.3% — have in recent days thrown equity markets into a tailspin, triggering a global sell-off that pushed Wall Street to its worst day in nearly two years. We have the full story in the news well, above.

You can also blame it on regional tension: Geopolitical risks across the region are the biggest contributor to the weakness of the EGP, Al Ahly Pharos analyst Esraa Ahmed told Enterprise, adding that the USD index has dipped almost 2%, signaling the greenback’s weakening against major currencies. Other emerging market currencies, like Mexico and Nigeria, did not witness any noticeable movements against the USD, she added.

MONEY OUT-

More foreign investors are exiting the local debt market: Foreign investors sold some USD 600 mn worth of local debt instruments over the past two days as they poured their capital into safe-haven assets, Economist Hany Abou El Fotouh told Enterprise, explaining that this played a part in the EGP’s slide against the greenback.

Behind the scenes: Interbank trading activity is healthy, with local banks having bought and sold an average of USD 800 mn over the past couple of days, a substantial increase from the previous average of USD 250 mn, our banking source said. Banks exchanged over USD 1 bn (over an undisclosed period) as banks scrambled to meet the surging demand for USD from investors seeking to withdraw their funds from the country, one banker told Reuters.

Not all gloomy: While markets saw foreign investors selling their EGP-dominated t-bills and converting the proceeds to USD, outflows from Egyptian treasuries amounted to no more than 10%, another banker told Reuters. “Frontier markets like Egypt are showing relative resilience, despite being somewhat affected," Goldman Sachs’ Farouk Soussa told Reuters.

Reserves remain strong: The flight of hot money over the past three days has not depleted banks’ USD reserves, seeing as a dedicated account covers these outflows as part of precautionary measures aimed at safeguarding against potential disruptions to cash reserves or USD liquidity, a high-ranking banking source told us.

Last month went differently: Foreign investors bought USD 900 mn worth of government debt instruments last month, unnamed sources tell Al Mal, adding that July did not see any foreign investors exiting government debt instruments.

Remember: June witnessed the exit of some USD 4 bn of foreign investments in government debts on the back of concerns about an impending cycle of rate cuts both in Egypt and the US. Foreign investments in Egypt’s t-bills stood at USD 35.2 bn by the end of April, up from USD 32.0 bn in March, according to central bank data.

Money in: The central bank is looking to raise EGP 115 bn from auctioning off EGP-denominated treasury bills over the coming few days, according to its website. Investors can submit bids for six and 12-month t-bills until Thursday at 11:00 am and they have until next Sunday to submit their bids for three and nine-month bills.

THE BIGGER PICTURE-

Markets across the Middle East also took a hit: The Saudi Tadawul Index fell 2.1% during yesterday’s trading, while Turkey’s Borsa Istanbul 100 Index was the hardest hit, dropping over 5.5%. Israel’s benchmark TA-35 Index fell 0.9% — at some point falling as much as 3.1% to hit its lowest level since February.

Adding fuel to the fire: There are reports that US Secretary of State Antony Blinken had told his G7 counterparts that Iran and Hezbollah could attack Israel as early as today, three sources in the know told Axios.

The most vulnerable: “There remains much greater risk to asset prices in Israel, Lebanon, and Iran, with the latter fully sanctioned for foreign investors anyway, than anywhere else in the region,” Hasnain Malik, head of equity strategy research at global data provider Tellimer, told Bloomberg.

US rate cuts approaching? The Federal Reserve could hold a surprise meeting to cut interest rates before September, Abdel Aal said, adding that he expects Chairman Jerome Powell to issue a reassuring statement tonight to calm markets. Powell had said on Wednesday that interest rates could be cut as soon as September if inflation, growth, and the labor market move in line with expectations.

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3

Economy

Egypt's non-oil private sector activity remains near growth territory despite dipping in July

Non-oil private sector activity was at its second highest level since August 2021, despite dipping in July, S&P Global’s Egypt Purchasing Managers’ Index (PMI) (pdf) report showed. Egypt’s non-oil activity held near the growth threshold at the start of 3Q 2024, with companies seeing only marginal declines in output and new orders, resulting in businesses reducing their purchases, according to the report. Despite the dip in activity, “the Egyptian non-oil economy still appears to be on the cusp of expansion,” said S&P Global Market Intelligence Senior Economist David Owen.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

We were hoping that this would be the month that we would finally be in the green: The index dipped slightly to 49.7 in July, down from an almost three-year peak of 49.9 in June — marking the 44th straight month that the country’s non-oil private sector has been in contraction. Last month the index showed us only 0.1 point away from the 50.0 mark that separates growth from contraction, giving some hope that July would show the private sector finally entering growth territory.

Orders were down again after having been up for the first time in 34 months the month before: After new orders rose in June for the first time since August 2021, July witnessed a fall in new orders with 9% of businesses surveyed reporting a decline in sales, while 7% reported an increase. Input purchases fell their fastest in four months, as companies adjusted their purchases to reflect a dip in orders.

Despite the dip in new orders overall, export orders were up: An uptick in demand from abroad led to new export orders increasing for the third consecutive month. There was also encouraging news on the employment front, as employment inched back up after falling the month before on the back of a belief that sales will soon pick up.

Inflation was once again putting pressure on the non-oil private sector: Input prices spiked for the second month in a row, hitting their steepest pace since March, with 14% of firms reporting a rise in prices. However, the overall rate of input price inflation remained softer than the broader trend of the past two years and led to only a modest rise in selling prices.

Business sentiment improves slightly, but remains subdued: Non-oil firms forecast a boost in activity over the next 12 months as market optimism grows. Inflationary pressures were “subdued compared to heightened rates in recent years,” according to Owen, but a “slight pick-up in input cost inflation in July” could leave firms uncertain about prices picking up again. He added that “while some firms pointed to a turning of the tide in economic conditions, particularly through rising export demand, market conditions were stated as weak elsewhere.”

ELSEWHERE IN THE REGION-

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4

SOCIAL WELFARE

Egypt’s gov’t could announce its biggest social support package to date in September

A new social support package in the works: The Madbouly government is gearing up to announce a new package of social protection measures in September, with plans to implement it starting October, two government sources told Enterprise.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

What to expect: The package will include wage and pension increases, alongside other forms of support for low-income households to mitigate the impact of inflationary pressures. This is part of a wider plan to restructure subsidies and increase electricity price hikes. Sources previously told us that the government decided to postpone any hikes to electricity prices until September.

Why now? The move could offset some of the impact of recent government price increases, including a 10-15% fuel-price hike at the end of July, an increase in Metro and train fare introduced last Thursday, and a 300% hike to subsidized bread prices at the end of May, which piled price pressure on some of Egypt’s most vulnerable.

Softening the blow: “We're facing a significant increase in the cost of securing and providing strategic commodities,” one government source told Enterprise, adding that the government is “currently examining the feasibility of raising salaries to help cushion the inflationary effects on wages and pensions.”

This would be the second such package to come in 2024: The government delivered a package of public-sector wage hikes, income tax breaks, pension increases, and a 50% increase in the public-sector minimum wage, all as part of an EGP 180 bn package that came into effect in March.

…and could be the biggest social protection package to date: The package — which has not yet been finalized — could be the biggest such package to date, another government source told Enterprise.

A new task force: The government has put together a committee with representatives from the finance, supply, and social solidarity ministries that is working to ensure availability of strategic commodities, secure the financial needs for their import, and pricing them, among other decisions aimed at reducing inflation in the short term.

Remember: Annual headline inflation cooled for the fourth consecutive month in June, hitting a17-month low of 27.5% in urban areas, down from 28.1% in May.

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5

Manufacturing

Could the private sector help revive the Egyptian government-owned tire maker Trenco?

Trenco set for a USD 160 mn overhaul with private sector investment: The government is reportedly looking to team up with the private sector to revive and develop state-owned tire manufacturer Trenco, with estimated investments of USD 160 mn, Al Mal reports, citing a government document. Trenco — which previously covered 30% of the internal market — shut down operations in 2022.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

The project at a glance: The project aims to see Trenco produce 1.5 mn truck and bus radial (TBR) tires locally, removing the need to import them. The project also entails adding production lines for heavy duty tires.

Things could go in a different direction: Trenco parent firm Chemical Industries Holding Company (CIHC) previously said that it is in talks with foreign companies that have showed interest in setting up a tire factory that would manufacture Trenco’s Nisr brand of tires on CIHC-owned land in Alexandria’s Amreya, according to Al Mal.

In line with our localization push: The government is looking into increasing the required localcomponent percentage in car manufacturing in an effort to boost feeder industries as more global players look to assemble their units locally.

REFRESHER- Egypt consumed around 10 mn tires in 2022, of which only 15% (1.5 mn) tires were produced domestically, with the remainder coming from imports. As of last year, Pirelli and Pyramid Tires stand as the only tire manufacturers in Egypt, covering around 8.2% of domestic demand, after Trenco closed its doors.

Want more? We published an Inside Industry last year diving into Egypt’s plans to localize tire manufacturing.

Remember: The previous government first laid out the Egyptian Automotive IndustryDevelopment Program (AIDP) — a comprehensive strategy to localize automotive industries — in 2022.

PROGRESS ON THE SINAI MANGANESE STAKE SALE-

Gov’t to offload a stake in Sinai Manganese: The same document also revealed that the government is planning to offer a minority stake in CIHC’s manganese producer Sinai Manganese.

Why now? The move comes as the government looks to fund two new projects with total investments of USD 11 mn — one for producing and processing kaolin (a clay used in the production of paper, rubber, and paint), with a production capacity of 40k tons a year, and the other for gypsum board calcination, with an annual production capacity of 6 mn cubic meters.

Remember: The company is on the government’s list of 35 companies up for stake sales to strategic investors, via the EGX, or a mix of both. The state-owned National Investment Bank currently owns 59% of the company and CIHC owns the remaining 41%.

Investors have been lining up for a slice of Sinai Manganese since last year: Al Mal reported last year that several local and international investors were looking to grab a stake in the state-owned company, which was being shopped around by the Sovereign Fund of Egypt ahead of the sale.

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6

LAST NIGHT’S TALK SHOWS

Egypt’s El Sisi discusses regional developments during meeting with Turkish Foreign Minister

It was a diplomacy-heavy night on the airwaves as the nation’s talking heads zeroed in on President Abdel Fattah El Sisi’s meeting with Turkish Foreign Minister Hakan Fidan in Cairo yesterday.

Discussions between the pair were focused on the latest regional developments and threats of an escalation in regional hostilities, according to an Ittihadiya statement. “The Middle East is at a very delicate and dangerous juncture that requires exercising the highest levels of self-restraint and upholding the voice of reason and wisdom,” El Sisi said. De-escalating tensions requires coordinated efforts by key stakeholders and the international community to immediately implement a ceasefire in Gaza, he said. Both parties acknowledged the gravity of the regional situation and condemned Israel's escalatory policies. The meeting got airtime on Ala Mas’ouleety (watch, runtime: 6:21) and Salet El Tahrir (watch, runtime: 5:43).

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7

EGYPT IN THE NEWS

Western brands continue to suffer the consequences of Egyptians’ boycott

Egypt among the countries where multinationals are feeling boycott’s pinch: Sales of Western food and drink franchises in Muslim-majority countries have taken a hit due to widespread boycotts in countries like Egypt, Saudi Arabia, Malaysia, Indonesia, and Pakistan amid the ongoing boycott movement, the Financial Times reports. Franchise operators of Coca-Cola, KFC, Starbucks, Mondelez, Pizza Hut, and L’Oreal are among those that have faced boycotts, given “their perceived support for Israel in the war in Gaza,” the salmon-colored paper writes.

Marketing campaigns are down too: Many global companies are toning down their marketing to avoid more backlash, co-chair of the American Chamber of Commerce industry and trade commission in Egypt Alaa Hashim tells the FT. “I think a lot of international companies have lowered their profile, and have toned down a lot of communications to avoid provoking counter campaigns.”

There may be another factor at play: With big brands losing favor, local products are experiencing a surge in popularity. In Egypt, this comes amid high inflation that has necessarily tightened consumers’ wallets, Hashim noted.

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8

ALSO ON OUR RADAR

OCI sells blue ammonia project for USD 2.4 bn

RENEWABLES-

OCI to offload US blue ammonia project for USD 2.35 bn: Nassef Sawiris-backed, Netherlands-headquartered chemicals company OCI Global has agreed to sell its low-carbon ammonia project in Texas to Australia’s largest oil and gas developer Woodside Energy for USD 2.35 bn, according to a statement. OCI’s Texas facility is “the world’s first large-scale, low-carbon intensity hydrogen-based greenfield ammonia facility.” It will have a production capacity of 1.1 mn tons of blue ammonia per year during its first phase — it is set to begin production next year.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

REMEMBER- Sawiris has big restructuring plans for OCI: Nassef Sawiris — who owns a 38.8% stake in the firm — said he was considering overhauling OCIGlobaI in February, with one of the options being turning the empire into a cash-shell company pursuing acquisitions in new industries. Most recently, the company sold its 50% +1 stake in Fertiglobe — its JV with Abu Dhabi National Oil Company — to Adnoc for USD 3.62 bn.

CAPITAL MARKETS-

Acumen eyes robo-advisor, carbon trading, and bond trading licenses: Acumen Securities Brokerage plans to secure a robo-advisor license from the Financial Regulatory Authority (FRA) before the end of the year, Al Borsa reports, citing Managing Director Rania El Gendy. The firm also aims to secure the necessary licenses to offer a comprehensive suite of services to its clients, bond trading and carbon trading, she said.

ICYMI- The FRA issued controls for licensing robo-advisors back in May, setting the minimum capital for companies seeking licensing at EGP 15 mn and requiring the submission of quarterly performance reports.

Robo-advisors? They are AI-powered virtual financial advisors that manage investment portfolios by assessing customers' risk appetite and making stock recommendations accordingly.

EV-

EV charging is coming to District 5: Leading fintech player Valu and solar energy company KarmSolar are setting up an EV charging network in New Cairo’s District 5, the companies said in a joint statement (pdf). The project will be carried out through KarmSolar’s new subsidiary Karm, while Valu will provide “hassle-free” payment solutions for EV charging using the Karm. application.

BANKING-

I-Score unveils market analytics platform: The Egyptian Credit Bureau (I-Score) has launched a market analytics platform for banks operating in the local banking system, Al Mal reports. The platform allows banks to evaluate, monitor, and analyze loan portfolio performance in comparison to the banking sector in general and with competitors over a 12-month period.

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9

PLANET FINANCE

Optimism over cryptocurrencies sours as BTC, ETH plummet amid stock market slump

Bad news for crypto bros: Cryptocurrencies are the latest victims of plummeting stock markets, as investors flee risky assets for safer harbors. BTC had tumbled by 8.9% over the last 24 hours as of midnight yesterday, while the second largest cryptocurrency ETH fell 11.9% in the same period, marking some of the largest single-day drops seen in years.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

This souring of sentiment marks a sharp reversal of the optimism that had recently permeated crypto markets following the US Securities and Exchange Commission in January approving ETFs that track the spot prices of BTC and ETH. Crypto also got a boost last month as US presidential candidates Donald Trump and Kamala Harris jockeyed to position themselves as the “pro-crypto” candidate. Trump’s appearance at the BTC 2024 convention even pushed BTC above USD 70k for the first time in over a month — despite his one-time branding of the cryptocurrency as a “scam.”

Your reminder that crypto is not a safe haven: While crypto’s fall is largely the result of thesame pressures that are impacting assets everywhere, its risk profile makes it particularly susceptible to market downturn. “It's a big reminder that BTC and crypto in general are risk assets and sit at the pointy end of the risk spectrum,” market analyst at IG Tony Sycamore tells Reuters.

EGX30

27,841

-2.3% (YTD: +11.8%)

USD (CBE)

Buy 49.19

Sell 49.33

USD (CIB)

Buy 49.2

Sell 49.3

Interest rates (CBE)

27.25% deposit

28.25% lending

Tadawul

11,504

-2.1% (YTD: -3.9%)

ADX

8,975

-3.4% (YTD: -6.3%)

DFM

4,046

-4.5% (YTD: -0.3%)

S&P 500

5,186

-3.0% (YTD: +8.7%)

FTSE 100

8,008

-2.0% (YTD: +3.6%)

Euro Stoxx 50

4,572

-1.5% (YTD: +1.1%)

Brent crude

USD 76.30

-0.7%

Natural gas (Nymex)

USD 1.96

+1.0%

Gold

USD 2,452

+0.3%

BTC

USD 53,920

-8.9% (YTD: +27.3%)

THE CLOSING BELL-

The EGX30 fell 2.3% at yesterday’s close on turnover of EGP 4.1 bn (14.4% above the 90-day average). Foreign investors were net buyers. The index is up 11.8% YTD.

In the green: Oriental Weavers (+1.3%), Telecom Egypt (+1.3%), and ADIB (+1.0%).

In the red: Elsewedy Electric (-6.4%), Eastern Company (-5.8%), and Amoc (-5.8%).

CORPORATE ACTIONS-

#1- ESAC welcomes new shareholders: The Egyptian Soda Ash Company (ESAC) approved the entry of new state-owned shareholders Misr Ins. and the Egyptian Company for Mineral Resources into the company’s ownership structure. This came during the company’s first ordinary and extraordinary general assembly, according to an Oil Ministry statement.

Remember: The company was set up in early 2023 to lead the project to build a soda ashcomplex. It is primarily state-led with Egyptian Petrochemical Holding Company, Chemical Industries Holding Company, and the military’s Arab Organization for Industrialization among its shareholders. A 45% stake in the firm is held between private-sector firms Polyserve, AMN Industrial Investment, and Life Chemicals Group .

#2- Sidi Kerir Petrochemicals wants to increase its capital: The petrochemicals producer wants to hike its issued and paid-up capital to EGP 1.8 bn from EGP 1.5 bn, according to an EGX disclosure (pdf). The extraordinary general assembly will meet on 29 August to vote on the increase.

#3- Eastern Company’s ordinary general assembly approved the sale of one of its factories in 6 of October, according to an EGX disclosure (pdf). The move, which is still pending approval from the Industrial Development Authority, will see United Tobacco acquire Eastern’s Factory 9 for EGP 1.6 bn.

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Our weekly deep dive into the green economy and ESG issue in Egypt.

Published every Tuesday in EnterpriseAM.

Read going Green
10

Going Green

Steps toward launching Africa’s first voluntary carbon market are gaining traction

Whither Egypt’s voluntary carbon market? The Financial Regulatory Authority (FRA) and EGX are hastening steps to launch Africa’s first voluntary carbon market, most recently with the mid-July issuance of rules and mechanisms for trading carbon certificates and futures contracts.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

This step reflects a real maturing of FRA policy toward the voluntary carbon market, says Reham Elgizy, CEO of Riyadh-based Voluntary Carbon Market, one that will help the market grow locally and in Africa. According to Elgizy, carbon trading offers a means for mitigating the impacts of climate change — such as desertification — alongside an avenue for expanding green projects in Egypt.

Assuring the liquidity of carbon certificates is crucial to activate the market, CIB board member and former FRA head Sherif Samy tells Enterprise, noting the increasing awareness of the importance of greening the economy and the potential profitability of the carbon trading market for green project owners. Samy added that the challenges facing the carbon market are similar to those facing the EGX, including its attractiveness to investors and its competitiveness with regional markets. Yet, Samy affirms that the market is a significant addition that can be built upon going forward.

While it’s still too early to make predictions about the level of market demand, there are several indications that the market has significant momentum, says Samy. There is increasing interest among public and private entities in issuing sustainable debt, alongside interest from banks and EGX-listed companies in sustainability, according to Samy. In addition, significant numbers of private institutions are now receiving green financing from international institutions, he adds.

There are already players on the verge of entering the market: The EGX has entered discussions with Go Green for Agricultural Investment and Development to issue carbon certificates in parallel with the company's efforts to list on the EGX. The bourse also plans to approach four listed entities to issue carbon certificates, head of the EGX Ahmed El Sheikh told Hapi Journal. El Sheikh adds that companies may take up to 18 months to complete the project authorization procedures and certify the issuance of carbon certificates, while other companies have already issued certificates but have thus far only offered them in foreign markets.

Just days until the market’s first transaction: The voluntary carbon market will witness its first issuance and trading of carbon certificates between seller Egyptian Biodynamic Agriculture Association and buyer ISIS Organic, with Beltone Financial Holding executing the transaction, according to unnamed sources cited by Hapi Journal.

The incoming European carbon tax is a major driver of demand for carbon certificates and their futures contracts among Egyptian exporters in energy-intensive and high carbon-emitting sectors as they prepare for the implementation of the EU’s Carbon Border Adjustment Mechanism by 2026, says Samy. The law is expected to have a significant impact on Egyptian exports, especially those that consume significant energy, including steel, aluminum, cement, and fertilizers. Goods such as chemicals, polymers, mineral oils, pulp and paper, and others may also face pressure to decarbonize in the face of this legislation by the end of the decade.

Demand is already quite strong: Officials from seven companies have expressed their intention to apply for the FRA’s approval to trade in carbon emissions reduction certificates and futures contracts in the voluntary carbon market, including CI Capital’s CIBC, Mubasher Financial Services, Arab African International Securities, Bank Audi’s Arabeya Online brokerage, Pioneers Brokerage, Cairo Financial Holding’s brokerage arm Cairo Capital Securities, Osool ESB, and Beltone Securities Brokerage, according to Al Mal.cod

HOW WILL THE NEW CARBON TRADING MARKET WORK?

The new market aims to incentivize carbon reduction projects: Like carbon trading markets the world over, this market will allow companies in Egypt and Africa that work on emission reduction projects to sell certified carbon credits to companies seeking to offset their emissions. The hope is that the market will encourage companies to up their engagement in activities that reduce carbon emissions while achieving financial returns, according to the FRA.

What are carbon certificates? Carbon certificates are tradable financial instruments representing units of greenhouse gas emissions reductions, with each unit representing one ton of CO2 emissions in this case. In Egypt, they will be issued to the developer of the emissions reduction project after being verified according to international standards by FRA-registered local or international entities.

And the futures contracts? These are ownership contracts for carbon emissions reduction certificates that will be issued in the future, to be delivered to the buyer at a time determined by both parties. These contracts will be traded on the exchange according to the listing and delisting rules for carbon emissions reduction certificates issued by the FRA in March.

New rules restrict issuers to a single market: The rules for trading carbon certificates require the applicant to transfer the certificates to the account of the settlement company, abide by the legal controls governing their handling, and not offer the listed certificates on any other market database during the listing period. The applicant must also continuously and immediately update all project and certificate data on the new market’s website.

Setting trading sessions: Trading session dates will be determined by the exchange, and will be announced on the exchange’s website, including the date and time of the session, the name of the project issuing the carbon certificates, a link to the project on the voluntary carbon registry site, the number of certificates available for trading, the trading mechanism, and transaction data for the certificates and their futures contracts.

The EGX has specified three mechanisms for trading carbon certificates and futures contracts, including trading through a pre-agreed trading mechanism, through an auction, or through a continuous auction. Trading will be conducted through a pre-agreed transaction mechanism if the the brokerage companies involved request it, while the trade will occur via an auction mechanism — English or Dutch — if there is one party selling or buying facing multiple parties on the opposite side. In the case of multiple parties on both the buy and sell sides, trading will be conducted through a continuous auction.

Trading of unlisted certificates: The regulations also allow trading of unlisted certificates and their futures contracts, but only through the pre-agreed transaction mechanism, provided that the trading parties adhere to the cash and paper settlement of the transaction.

Price priority determines the execution of registered buy and sell orders, and if orders are equal in price, execution is carried out according to order registration time in the trading systems.

The FRA has set conditions for brokerage firms: Brokerage firms’ issued and paid-up capital must be no less than EGP 15 mn with equity not lower than their paid-up capital at the time of applying for the authority's approval to trade in these certificates and contracts, among other conditions.

A carbon pricing law might be next: The government is in the final stages of preparing the country’s first draft law for carbon pricing, a government official in the renewable energy sector told Enterprise last month. The draft law is expected to be completed by the end of this year and will be presented for discussion with key players in high-emissions industries before a comprehensive bill is submitted to the House.

Your top green economy stories for the week:

  • Poultry farms could be getting access to solar: The electricity and agriculture ministries are studying an initiative to provide financing for solar cell installation on poultry farms. (Statement)
  • AfDB may help fund our USD 1.5 bn wind farm: The African Development Bank (AfDB) is considering financing the USD 1.5 bn 1.1 GW wind farm in the Gulf of Suez being carried out by Saudi Arabia’s ACWA Power and Hassan Allam Holding.
  • Gov’t is looking to ramp up its hydropower capacity: The Electricity Ministry plans to carry out USD 4 bn worth of hydroelectric power projects in partnership with the private sector.
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CALENDAR

2024

SEPTEMBER

3-5 September (Tuesday-Thursday): Egypt International Airshow, El Alamein International Airport.

5 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

15 September (Sunday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

24 September (Tuesday): Enterprise Finance Forum, Cairo, Egypt

25-26 September (Wednesday-Thursday): The Asian Infrastructure Investment Bank’s (AIIB) 2024 annual meeting, Samarkand, Uzbekistan.

25-28 September (Wednesday-Saturday): Cityscape Egypt, Egypt International Exhibition Center, Cairo.

OCTOBER

6 October (Sunday): Armed Forces Day.

17 October (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

13-17 October (Sunday-Thursday): Cairo Water Week, Water and Climate: Building Resilient Communities, Cairo, Egypt.

21-27 October (Monday-Sunday): The World Bank and IMF annual meetings.

30 September (Monday): Ban on sugar exports expiration.

NOVEMBER

4-8 November (Monday-Friday): World Urban Forum, Cairo, Egypt.

12-15 November (Tuesday-Friday): Arab African Investment and International Cooperation Summit, Aswan, Egypt.

21 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

26-28 November (Tuesday-Thursday): Egypt Energy Show, Cairo, Egypt.

DECEMBER

26 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

EVENTS WITH NO SET DATE

2H 2024: Gov’t to launch the Cairo Ring Road BRT buses.

3Q 2024: Egyptian-Armenian Joint Committee.

September 2024: Turkish-Egyptian Business Council meeting in Turkey.

September 2024: US-Egypt Strategic Dialogue, Cairo.

November 2024: Egypt to host the World Urban Forum (WUF12).

End of 2024: The launch of the high-speed train line linking Ain Sokhna with Al Alamein City.

End of 2024: Shalateen Mining Company to launch a gold exploration tender in the Eastern Desert.

2025

July 2025: The first operational trail of Egypt-KSA electricity interconnection line.

EVENTS WITH NO SET DATE

2Q 2025: Safaga Terminal 2 to start operations.

2027

20 January-7 February: Egypt to host the African Games

EVENTS WITH NO SET DATE

End of 2027: Trial operations at the Dabaa nuclear power plant expected to take place.

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