Inflation accelerates again in October: Annual headline inflation rose to 17.5% in October, up from 16% the previous month, CAPMAS data showed (pdf). The state statistics agency attributed the rise to increases in vegetable prices and school fees. Monthly headline inflation also rose last month, coming in at 2.8% against 2.5% in September.

Accelerating inflation means no rate cuts in the near future: The central bank’s monetary policy committee is set to meet this Thursday, 15 November to review interest rates. Analysts had said last month that the central bank is unlikely to cut interest rates, particularly in light of the emerging markets sell-off, rising global oil prices, and impending fuel subsidy cuts here at home. The Institute of International Finance also predicted that monetary easing will not resume before 2019, when it expects headline inflation to decline to below 10%. The CBE had previously said that it expects inflation to come in at c.13% in 4Q2018 before dropping to the single digits over the course of next year “after the temporary effect of fiscal supply shock dissipates.”

Has the EU rejected Egypt’s proposal to delay 0% customs duties on car imports? Egypt will cut tariffs on European cars to zero starting from January 1, 2019, under a trade agreement between Egypt and the European Union, EU Ambassador to Egypt Ivan Surkos reportedly said on Thursday, according to Youm7. The government apparently confirmed at a meeting of European-Egyptian Partnership Committee that tariffs would fall to zero, Surkos said.

Background: The report doesn’t make clear whether the EU rejected a Trade and Industry Ministry proposal — revealed to us by government officials — to delay 0% customs on EU cars for another 1-2 years, or whether the ministry decided to pull the proposal. Sources had told us that there is a strong possibility that the EU would accept the request.

The Finance Ministry hasn’t yet been officially notified that customs are to fall to zero on 1 January, Magdy Abdel Aziz, an advisor to the finance minister on customs affairs, said on Masaa DMC yesterday. The notice may not arrive until one week before the decision comes into effect, he noted (watch, runtime: 13:28). Abdel Aziz neither confirmed nor denied the Youm7 report.

Where do things stand with the automotive directive? The idea of delaying the customs cut came after it was revealed that the government was overhauling the stalled automotive directive law — legislation that would give incentives to local assemblers to move up the value chain to manufacturing in return for tax breaks that would give them an ongoing price edge against EU, Turkish and Moroccan-made imports. Sources had told us that the government was reworking the incentives system in the law from a general, nationwide system to a program of auto freezones.

Is Ghana going to get an automotive directive before us? Ghana pledged to draw up a policy that will govern a future automotive sector as it looks to attract some of the biggest names in the global industry, Bloomberg reports. “The auto policy will be in place before the end of the year,” Trade and Industry Minister Alan Kyerematen said last Tuesday. The pledge was part of an agreement with Nissan Motors to build an assembly and manufacturing plant in Ghana, which has signed agreements with Volkswagen AG and China’s Sinotruk International in the last three months. A number of auto companies had said they would consider opening plants in Egypt should the automotive directive be approved. The Ghana auto industry policy is one of several on the continent, which has helped turn Africa into an auto manufacturing hub, as noted by the Wall Street Journal.

Egypt reform story still in “fairly early” stage, says Exotix Partners' Malik: Egypt’s reform story is still in a fairly early stage as the country looks to capitalize on the strong start of the reform process, said Hasnain Malik, global head of equity research at emerging markets-focused investment bank Exotix Partners. We have a couple of years to go before these reforms — particularly legislative changes — become primary drivers for the performance of Egyptian equities, said Malik. Right now, the Egypt story is all about interest rates, which Malik believes will remain high given ongoing turbulence in global emerging markets. Interest rates have the firm gravitating towards financial stocks, including CIB.

Have we weathered the EM storm? We may have seen the worst of both a much stronger USD and higher oil prices, said Malik. More importantly, however, the market has correctly distinguished over the course of the summer between those few emerging markets that do have extreme external vulnerability — and the bulk of emerging and frontier markets that don’t, he tells Bloomberg TV (watch, runtime: 3:48).

EXCLUSIVE- EGP-denominated int’l bond issuance isn’t happening during the next two fiscal years: The Madbouly Cabinet is not planning to issue EGP-denominated bonds on the international market during the current or next fiscal year, a top government official tells Enterprise. A Bloomberg report from last month had claimed that an EGP-denominated bond issuance on the international market was in the cards to encourage overseas inflows and curb the cost of borrowing. Sources had said at the time that investors would purchase the bonds in USD but the principal and interest would be payable in EGP, “which means the buyer bears the risk of any fluctuation in the exchange rate.” An EGP-denominated issuance could happen at a later, more suitable time, our source said. The Finance Ministry is looking to diversify its funding with an eye to capping borrowing over the next four years at USD 20 bn.

FinMin to seek this month a manager for its upcoming eurobond issuance: The Finance Ministry will hold sometime this month a tender to select the investment bank that will manage a sale of USD 4-7 bn worth of JPY-, RMB-, and USD-denominated eurobonds it plans to issue early next year, according to the source, who did not disclose when the winning bid would be announced. Finance Minister Mohamed Maait has previously suggested the offering could go to market sometime in 1Q2019.

S&P Global Ratings has affirmed Egypt’s sovereign credit rating at B and its outlook at stable on the back of a “more competitive exchange rate, improving macro fundamentals and rising domestic gas production,” the ratings agency said in a statement on Friday. S&P expects fiscal challenges to remain under control and sees government debt gradually declining. “The stable outlook balances our expectation that Egypt's current account deficits will now stay as a smaller percentage of GDP and that growth prospects will remain strong, against risks of fiscal slippages and an increase in the high stock of relatively short-dated government debt issued at high interest rates,” the firm said. S&P said it could raise the rating to positive if the country’s economic growth exceeded its expectations or if Egypt somehow works out a way to reduce its financing needs or government debt.

Egypt’s rating could risk a downwards revision if the plans to reduce the debt-to-GDP ratio are “derailed by fiscal slippages, higher borrowing costs, more pronounced currency depreciation than expected, or if foreign exchange reserve levels were to fall significantly.” A deterioration in the security environment and, by extension, investments and tourism, would also result in negative pressure on Egypt’s rating, it said.

Tourism Ministry to launch private equity fund, introduce legislation to overhaul sector: The government is looking into establishing a private equity fund to upgrade Egypt’s hotels and resorts and make new investments in the sector, Tourism Minister Rania Al Mashat told Bloomberg TV in an interview out Thursday. The move would be part of a comprehensive sector strategy, called “E-Trip” that would include new legislation for the industry that would be introduced to the House of Representatives. The sector reform strategy would also include administrative reforms, and one of its most high-profile planks will include the 2020 launch of the USD 1 bn Grand Egyptian Museum.

Expect more details by the end of the month. That’s when Al Mashat plans to make a statement to the House on the future of the sector.

Expect tourism arrivals to be (nearly) back to 2010 figures by year’s end: The number of tourists arriving to Egypt jumped 40% in 9M2018 from a year earlier, Al Mashat said. “We expect that by the end of 2018 we will not be at the levels that we’ve seen in 2010, but we are approaching that,” she added. “The rebound is quite steep and we’re trying to put the industry on a competitive base compared to our peers.” She noted that 8 mn tourists visited Egypt in 2017. Egypt is looking to diversify its inbound markets by targeting holidaymakers from Asia and Latin America.

You can watch the full interview here (runtime: 5:04).

Thomas Cook says demand for Egypt is rising: Thomas Cook CEO Peter Fankhauser reportedly told Al Mashat that demand for Egypt is rising among Thomas Cook’s global customer base. Al Mashat met Fankhauser to discuss working together on future campaigns with an eye toward the Chinese and Eastern European markets. The two met on the sidelines of the World Travel Market (WTM) in London. Al Mashat also discussed aspects of the ministry's destination branding strategy in Egypt and its charter flights incentives, according to Al Shorouk. The minister had also met with a number of UK members of parliament, travel company executives and other dignitaries at the WTM, the newspaper notes.

“Few” investor complaints to FRA were those who “lost” on Sarwa IPO says Beltone’s El Sahrawy: Beltone Financial Investment Banking head Sobhy El Sahrawy said he was unaware how many investors complained to the Financial Regulatory Authority (FRA) about alleged irregularities in the Sarwa Capital IPO, but said it was unlikely there were more than four investors, whom he described as “having lost on the transaction.” He reiterated that there were no irregularities by Beltone during the IPO, saying that the FRA’s six-month suspension of IPO activity came as a shock. He told Reuters last week that the investment banking arm currently has 10 mandates for IPOs and M&As signed. The FRA had put in place the suspension over what it alleges as “irregularities” during the Sarwa IPO. Sources had said later that the FRA investigation had been prompted by investor complaints and not the 11% dip in price of Sarwa’s shares during its first day of training.

Proposed amendments to Mineral Resources Act get praise from industry: Canada’s Aton Resources has praised the Madbouly government’s approval of long-awaited amendments to the Mineral Resources Act that could be passed by year’s end, it said in a statement. Aton believes the effect that these changes will have on investment in exploration and mining will be significant: “The scrapping of the [production sharing agreement], for a transparent tax, rent and royalty system, along with getting rid of the requirement for a 50:50 joint venture with EMRA, should be of great interest to exploration companies all around the world,” said Aton President and CEO Mark Campbell. The Madbouly cabinet announced the decision on Wednesday, without providing details on the amendments.

INVESTMENT WATCH- Oil Ministry expects USD 10 bn in new oil and gas investment during current fiscal year. Oil Minister Tarek El Molla said on Saturday that his ministry expects some USD 10 bn in new investment in the sector in 2018-19. The figure includes both funding for both exploration and production activities. The minister said high appetite among international oil companies (IOCs) for Egyptian opportunities underscores their confidence in Egypt’s improved investment climate. The minister expects IOCs to bid in an upcoming sale of exploration blocks in the Red Sea region, saying it would be the first time blocks would be on offer in that region.

Government reaches settlement in dispute arising from 2011 unwinding of privatization sale: Al Kholoud for Touristic and Real Estate Development has reached a EGP 600 mn settlement agreement with the government in its 2013 arbitration case against the Egyptian Petrochemical Holding Company and Metallurgical Holding Company. Al Kholoud had filed a case against the two state-owned companies following a dispute caused by the Council of State’s decision in 2011 to reverse several privatization transactions from the 1990s, including one that included the sale of the companies’ steam boilers facility (Al Maragel Al Bokhareya) in 1994. The Madbouly Cabinet signed off on the settlement agreement last week.

Advisers: Youssef & Partners’ arbitration team acted as legal counsel for Al Kholoud and brokered the settlement agreement. The State Lawsuits Authority represented the Egyptian government in the case.

MOVES- Omar Sherif (LinkedIn) has been named partner at Shalakany Law Office, the firm announced (pdf). Sherif, who has been with Shalakany for nine years, is a corporate law specialist with a focus on capital markets and mergers and acquisitions.

Egypt to purchase frigates from Germany in USD 1.14 bn transaction: Egypt has signed a c.USD 1.14 bn order for two Meko 200 frigates with Germany’s ThyssenKrupp Marine Systems , German newspaper Handelsblatt cited sources as saying, according to Reuters. The two sides are still working out equipment details and financing.