Urban consumer price inflation dropped to 26% in November, down from 30.8% a year ago. On a monthly basis, the inflation rate dropped to 1% in November, from 1.1% in October, according to state statistics bureau CAPMAS. Finance Minister Amr El Garhy says the inflation rate is set to drop to 20% in January and to reach 13-14% by August, according to Reuters. Annual core inflation fell to 25.54% in November, down from 30.53% in October. On a monthly basis, core inflation recorded 1.3% in November from 0.7 a month earlier, data from the central bank shows (pdf).

Enter the base effect: EFG Hermes’ Mohamed Abu Basha says the deceleration seen in November “officially kicks off a long-awaited period, where a favourable base effect kicks in and leads inflation to decelerate rapidly from its near four-decade highs of +30%.” The headline rate came “generally within expectations. I think it is likely that the central bank will begin cutting rates but not at the next meeting in December, at the one after," Arqaam Capital senior economist Reham El Desoki tells Bloomberg. She expects the central bank to cut rates by about 500 bps throughout 2018. Abu Basha has a similar rate outlook, saying, “While we see chances for a rate cut at the MPC’s next meeting on 28 Dec, we expect CBE to only start cutting rates in 1Q18 in order to ensure the extent of the expected slowdown is, indeed, in line with CBE’s expectations. This is especially the case, given two recent developments which resemble potential upside risks to inflation, namely i) continued acceleration in GDP growth in 1Q17/18, along with recent readings showing the private sector starting to recover; and ii) rise in oil prices.”

More good news a year on from the EGP float as Egypt’s balance of payments recorded a surplus of USD 5.1 bn during 1Q2017-18, an improvement from a surplus of USD 1.9 bn in the same period of the previous fiscal year, according to a CBE report (pdf) out yesterday. This came on the back of a significant improvement in Egypt's current account deficit, which narrowed 65.7% to USD 1.6 bn in 1Q2017-18 from a deficit of USD 4.8 bn during the same period a year earlier.

Egypt’s trade deficit declined 5.0% to USD 8.9 bn for the quarter, down from USD 9.4 bn in 1Q2016-17. This largely came on the back of a 11.0% increase in merchandise exports to USD 5.8 bn from USD 5.3 bn in the same period last year. Egypt’s oil exports grew 16.8% to USD 1.8 bn in 1Q2017-18 from USD 1.5 bn a year earlier.

Non-oil exports rose 8.6% to USD 4.1 bn in the first quarter of the state’s fiscal year, up from USD 3.7 bn in the same period a year ago.

Merchandise imports were basically flat, rising just 0.7% to USD 14.8 bn.

Score another big win for tourism: Tourism receipts for the quarter grew to USD 2.7 bn, up from USD 758 mn in 1Q2016-17, in another sign of how far the sector has come in one year.

Remittances are soaring: Improving nearly 40% USD 6.0 bn, from USD 4.3 bn last year, also thanks to a cheaper local currency.

Net FDI fell slightly to USD 1.6 bn in 1Q2017-18 from USD 1.9 bn in the same period last year despite a 84.2% rise in investment in the oil industry, CBE data showed. N

Finance Minister Amr El Garhy said that foreign investment in Egyptian securities hit USD 19 bn as of 6 December since the EGP float, Reuters reports. Foreign portfolio investment rose to USD 7.5 bn in the CBE’s reporting period, thanks mainly to increased foreign holdings in Egyptian treasuries, which stood at USD 7.4 bn at the end of the period.

Suez Canal revenues also continued to be among the weak links, growing a marginal USD 82 mn to USD 1.4 bn in 1Q2017-18.

Also set to help on the balance of payments front: The Oil Ministry will begin test production from the Zohr natural gas field “in the coming few days,” according to a ministry statement carried by Bloomberg. “Authorities are pumping gas from the national distribution system to test pipelines in preparation for trial production from the offshore field … Output will gradually increase until mid-2018, with the first phase of the project initially yielding about 350 mcf per day,” Minister Tarek El Molla says.

INVESTMENT WATCH- Todo and the gang are going to Morocco: Edita, the nation’s largest producer of packaged snack food, announced (pdf) it will directly enter the Moroccan snack food market through a greenfield investment with Morocco’s Dislog Group, a leading Moroccan distributor for top multinational brands. Edita signed an MoU with Dislog to form a joint venture named Edita Food Industries – Morocco, with Edita owning a 51% stake. “Commercial operations will begin in early 2018 with exports of Edita’s products to Morocco, while the second stage will entail the establishment of a state-of-the-art manufacturing facility in 2019 with an initial investment estimated at around USD 10 mn.” Edita Chairman and Managing Director Hani Berzi says, “Morocco itself is a very attractive market due to its strong domestic demand and significant growth potential in the segments in which we operate… As we enter the Moroccan market, we aim to capitalize on our successful track record and replicate a proven business model of marketing and manufacturing excellence, calling on the same expertise in research and development, production, and distribution that has seen us succeed in Egypt. We will continue to be aggressive in terms of delivering on our long-term strategy to maximize growth.”

IPO WATCH- Ibnsina Pharma retail offering closes, trading to start tomorrow: Shares Ibnsina Pharma, Egypt’s fastest-growing and second-largest distributor of pharmaceutical products, will begin trading on the EGX on Tuesday after the book-building process for its retail offering ended yesterday. The company’s shares will trade under the stock symbol ISPH.CA and not IBNP as previously disclosed. The retail offering — c.15% of the 269,381,625 ordinary shares on offer — was 18.35x oversubscribed, generating an excess of EGP 4.3 bn from some 3,750 retail investors. The company’s institutional offering, which was 17.1x oversubscribed when it closed on 5 December, had drawn interest from over 500 institutional and HNWIs, generating a total EGP 22.4 bn at a price of EGP 5.80 per share. The company’s market capitalization will stand at EGP 3.9 bn at the start of trading tomorrow. Ibnsina plans to allocate EGP 280 mn of its IPO proceeds towards a capital increase in 1Q2018 to cover exits by current shareholders. Beltone Investment Banking is sole global coordinator and bookrunner for the transaction, while Matouk Bassiouny is acting as counsel to the issuer. Inktank Financial is investor relations advisor. Read the full press release here (pdf).

Russian President Vladimir Putin is expected to sign an agreement with President Abdel Fattah El Sisi today that will signal the start of the USD 30 bn Dabaa nuclear power plant project, Ittihadiya Spokesperson Bassam Radi told state television yesterday, according to MENA. Foreign Minister Sameh Shoukry had confirmed as much in a televised interview with RT Arabic, stating that “the project involves many disparate aspects, between technical, legal and financial, and we have reached advanced level of agreements upon these," but shying away from disclosing an exact date for when the contracts would be signed.

You can catch the full RT Arabic interview with Shoukry here (watch, runtime 25:27).

Speculation on the actual date remains rife, with an Electricity Ministry source saying everyone is tight-lipped about the whole affair, while other sources told Reuters separately it would definitely take place during the visit. Still others told Al Shorouk that Tuesday was the anointed date. State-owned outlet Ahram Gate mentions that a delegation from Russian nuclear energy company Rosatom had arrived on Saturday and met on Sunday with International Atomic Energy Agency inspector Yousry Abushady, who tells the newspaper that three “pleasant surprise” announcements were on the way.

Could Russian tourists finally be coming back? Restoring direct air travel between Cairo and Moscow will also be on the agenda, both Shoukry and Radi confirmed. While no official date has been set, talks are ongoing between both government to finalize security protocols, Shoukry said. Ittihadiya has also received a detailed brief from the Tourism Ministry ahead of the summit detailing the latest in negotiations and security inspections, Tourism Ministry sources also tell Al Borsa.

Tour operators speaking to the newspaper expressed their hopes that the issue would be resolved at the summit, especially as Egypt has been complying with Russia’s security demands. The most accolade Egypt’s air travel security came from the US’ Transport Security Administration which had a glowing report of EgyptAir’s security procedures for flights to New York, Al Masry Al Youm reports.

RT Arabic’s online portal also ran an interview with Air Force commander Hisham El Halaby, who expects that we should see military agreements and weapons purchases announced during the trip. Sources at the Suez Canal Economic Zone also told Reuters’ Arabic service that Putin would also be signing an agreement for the establishment of a Russian industrial zone in the area, as Egyptian-European Business Council head Mohamed Aboul Enein had said on Saturday.

LEGISLATION WATCH- “Final” draft of the Automotive Directive coming in January: A final draft of the long-awaited Automotive Directive will be ready next month, said Industry Development Authority head Ahmed Abdel Razek. He tells Al Mal that factoring in input from a German consulting firm hired by the Trade and Industry Ministry was behind the delay in redrafting the bill — a process he blamed on the division within the auto sector on the incentives provided by the law, which is expected to grant local assemblers incentives to move further up the value chain to manufacturing. Trade and Industry Minister Tarek Kabil had said last month that the manufacturers would be eligible for incentives if they are able to meet a minimum local component requirement of 45%, which over the course of eight years would rise to 60% for personal vehicles and smaller of group transport vehicles. Local content requirements for light trucks would peak at 70%. Manufacturers would also receive exemptions from development fees if they produce a certain number of vehicles on an annual basis, or if they export 25-40% of their total output a year.

Not a moment too soon for auto assemblers, who have started eying expansion abroad: GB Auto Chairman Raouf Ghabbour called on the government to speed up the process on getting the law passed, saying that the delay had contributed to the company holding back on any new investments for the past three years. Ghabbour even implied he was considering expanding abroad, saying that Turkey’s Investment Support and Promotion Agency had offered the company incentives including rebates of up to 20% of the capital invested in an assembly plant there, according to Al Mal.

The African Export Import Bank (Afreximbank) is planning to provide Egypt with another USD 500 mn loan, this time geared towards the banking sector, Afreximbank's Executive Vice President for Business Development and Corporate Banking Amr Kamel said at the Business for Africa 2017 conference, Al Mal reports. He added that the bank is currently in talks with the CBE to discuss how this new loan will be disbursed. Afreximbank had signed a USD 500 mn loan agreement with the Export Development Bank of Egypt to fund exports to Africa last weekend at the conference.

Cleopatra Hospital Group’s EGP 700 mn capital increase was 99.81% subscribed, according to an EGX disclosure (pdf). The company had applied for EGX approval to issue 1.4 bn new shares to existing shareholders back in October at a price of EGP 0.5 per share as it looked to raise its issued capital to EGP 800 mn from EGP 100 mn. Proceeds will be used to fund the acquisition of an EGP 600 mn hospital and to repay a EGP 100 mn loan.

Qalaa Holdings Chairman Ahmed Heikal stressed the importance of infrastructure development for Africa in remarks this weekend in Sharm El Sheikh, describing it as the “key” to unlocking the continent’s “significant growth potential” and capitalizing on its wealth of strong growth drivers, such as rapid population growth levels and large consumer markets. Speaking in an on-stage interview at the 2017 Africa and the World conference, Heikal said that “investors are beginning to realize not only the necessity of infrastructure investments, but also the potential for their high returns.” He explained that in Egypt, which is already beginning to reap the fruits of the government’s “bold economic reform program,” Qalaa Holdings has “successfully built 27 businesses from scratch over the past decade by identifying trends in our market and riding them in a way that translates into growth for our companies.” The company has focused on transport and logistical projects, as well as others such as the Egyptian Refining Company. ERC is reportedly set to begin production in September 2018.