Portfolio investors warming to Egypt as EGP proves more flexible: There are signs that foreign investors may be warming to Egypt after the EGP eased a bit against the USD, Bloomberg reports, writing that “a stable currency and elevated interest rates have kept Egypt’s bond market humming for months” and suggesting that a more flexible EGP could “keep investors coming back for more.” Over the past month, the currency has returned to where it was seven months ago, easing a little over 2.8% since 17 May after holding steady at around EGP 15.68 / USD through the worst of the covid-inspired market chaos in March.

Signs of recovery: The subscription rate at recent Treasury auctions has seen a “sizeable jump,” indicating renewed investor appetite for local-currency debt, according to Naeem Holdings. Foreign holdings of local-currency bonds had plunged by around 60% to USD 9-10 bn by the end of May as investors pulled an unprecedented amount of capital from emerging markets during the covid-inspired market tumult.

Foreign investors had been looking at “substitutes” to Egypt, which has long held on to its emerging markets darling status, the business information service writes, as the EGP maintained its strength through the covid-19 crisis. Egypt’s local-currency bonds rank among this month’s weakest performers, bettering only Argentina, Colombia and Chile. “Markets that investors view as substitutes to Egypt have more flexible currencies,” Bloomberg quotes Richard Segal, a senior analyst at Manulife Investment Management, as saying.

Where is the EGP heading? Analysts see the currency at anywhere between EGP 16.50 and 17.50 to the greenback by the end of the year, as do 25% of readers who responded to our covid-19 poll. EFG Hermes is calling EGP 16.50–17.00 by year-end after “a clear signal from the central bank that its support to the EGP amidst the unprecedented capital outflows in the past two months is being withdrawn.” Emirates NBD is guiding for 17.00 and HSBC is suggesting we’re looking at 17.50 by year’s end. JP Morgan, meanwhile, says that “external support should prevent disorderly FX movement, but it would not be surprising to see the EGP give up the gains made in 2019.”

DEBT WATCH- Egypt hires UAE banks to arrange USD 1 bn loan: Egypt has tapped Emirates NBD and First Abu Dhabi Bank (FAB) to arrange a loan worth more than USD 1 bn as it tries to plug its financing gap caused by the covid-19 pandemic, Reuters reports, citing two sources familiar with the matter. The two banks are in talks with other lenders to assist with the loan, the sources said.

This would be the third major loan in the pipeline for Egypt after the IMF last month disbursed a USD 2.8 bn rapid financing instrument, while the fund’s executive board is expected to green-light a USD 5.2 bn standby loan in the coming weeks. There are no board meetings scheduled as of dispatch time this morning.

Separately, the World Bank’s board of executive directors signed off yesterday on a USD 400 mn loan to support Egypt’s new universal healthcare program, according to a bank statement. The facility, which the bank recently agreed to increase from USD 250 mn, will be used to “help Egypt increase its coverage of the Universal Health Insurance System (UHIS) in six governorates, strengthen UHIS-related governance and institutions, and also provide temporary financial protection against high out of pocket health expenditures for vulnerable populations across the country,” says Marina Wes, World Bank Country Director for Egypt, Yemen, and Djibouti. The healthcare system is currently up and running in Port Said, where it was piloted in September.

Meanwhile, the French Development Agency AFD will allocate EUR 151 mn to support Egypt’s electricity and clean energy sectors, according to a statement from the international cooperation ministry.

DEBT WATCH- CIB sees international appetite as it prepares Egypt’s first green bond offering: The International Finance Corporation (IFC) is looking to take a position in CIB’s upcoming USD 100 mn green bond program, according to a project proposal disclosed by the international institution. The financial institution would invest USD 65 mn in the first tranche of the five-year bonds, which will take place through a private placement, and will work with stakeholders on future bond issuances. The IFC said it plans to share its expertise in climate finance to further build CIB’s capacity on climate finance’s eligibility criteria, greenhouse gas emission savings calculation, green bond reporting, and green building financing. It could also invest up to USD 1.5 mn from blended concessional finance that could spur the construction of green buildings in Egypt.

CIB’s bond offering would be the first of its kind in Egypt and would serve as the bank’s first foray into a product that it thinks could prove a regular feature of the debt market going forward, Heba Abdellatif, head of debt capital markets at CIB, said in an emailed statement.

CBE approves soft loans to small farms under SME initiative: The Central Bank of Egypt (CBE) has greenlit a request from the agriculture minister to allow small-scale growers and livestock breeders access to the SMEs lending initiative, cabinet said in a statement. The approval allows commercial banks to receive loan applications from small farms, who are now eligible to receive loans at a subsidized 5% interest rate. Banks are required under a CBE initiative first launched in 2015 to dedicate a portion of their loan portfolios to extend soft loans to SMEs.

This is different from a larger-scale industry stimulus initiative the CBE launched last year. The separate EGP 100 bn package first targeted factories with annual sales of less than EGP 1 bn. The package was later extended to cover companies of all sizes — including agriculture and agricultural production, fish, poultry, and livestock companies — who can access soft loans carrying interest rates between 5-8%.

In related SME news: The Trade Ministry’s Industrial Development Authority (IDA) and state-owned Export Development Bank (EDB) signed an MoU to help small and youth investors acquire pre-licensed workshops being built under an initiative to support SMEs, the IDA said in a statement. Interested entrepreneurs will be eligible for 10-year loans from the EDB at a declining 5% interest rate.

Background: When it first launched the initiative in 2018, the government said it aims to tender workshops and small factories in 22 industrial clusters across 14 governorates by the end of 2020. Those factories are offered to entrepreneurs at their actual construction and fitting cost, with no added margin from the government, the IDA says on its website.

INVESTMENT WATCH- MIH says it’s partnering with Malaysia’s Proton for El Nasr car assembly plan: Malaysian auto outfit Proton will partner with the Metallurgical Industries Holding Company (MIH) to assemble cars at El Nasr Automotive and Eamco, MIH board chairman Medhat Nafea was quoted as saying by Al Mal. Proton and MIH will assemble 20k cars a year, with production set to begin within three years, under the terms of an MoU recently signed between the two companies, he said, adding that both companies will soon begin a six-month feasibility study into the project. Nafea had announced the agreement earlier this week, without identifying the foreign partner at the time. Nafea confirmed to Enterprise that these are the same agreements and clarified that 20k is the correct figure.

Background: The MoU has been in the making since last year, and comes as part of plans to develop the automotive industry and increase exports to African countries. The government last March approved a strategy for the industry that aims to encourage car assemblers and feeder industries. A cornerstone of this new plan would be to provide customs discounts to manufacturers on a sliding scale linked to the percentage of locally-produced content they use. It will comprise legislative provisions, incentives, infrastructure improvements, and trade agreements with countries in the region and elsewhere, cabinet said at the time.

Correction (20/06/2020): A previous version of this article incorrectly stated that MIH had signed an agreement with Malaysian auto firm Perodua. 

INVESTMENT WATCH- CIRA eyes expansion in Assiut: Cairo for Investment and Real Estate Development (CIRA) confirmed reports that it is negotiating to buy an 11k sqm land plot in Assiut to build an international school, according to a regulatory disclosure (pdf). Reports this week indicated that CIRA is seeking to purchase land in West Assiut (Nasser City) after Porto Group and Madinet Nasr for Housing recently obtained land in the area. It is now waiting for the New Urban Communities Authority to approve the project.

BUDGET WATCH- House committee recommends bumping up education funding by EGP 22 bn in FY2020-2021: The House Education and Scientific Research Committee has recommended providing an additional EGP 22 bn in funding for the Education Ministry under the state FY2020-2021 budget, a portion of which will be earmarked for e-learning initiatives, according to Al Shorouk. EGP 950 mn of the funds would be earmarked for disinfecting secondary and technical examination facilities while the remainder would go towards supporting the ministry’s e-learning infrastructure, university hospitals and setting aside emergency funds. The government’s proposed FY2020-2021 budget had increased education spending by 70% from the previous year to EGP 132 bn.

LEGISLATION WATCH- House committee approves waiving late fees on handful of taxes: The House Planning Committee has greenlit a draft law that would waive interest and late fee payments on state dues including income, value-added and real estate taxes, according to Al Mal. The bill, which should now make its way for a final vote, would waive 90% of the fees if the taxes are paid within two months after it becomes law, 70% if paid within four months, and 50% within six months. Late taxpayers that clear their dues before the temporary law passes will be exempt from 100% of the fees, cabinet said last month.

STARTUP WATCH- Dawi Clinics opens its first clinic outside the Greater Cairo area: Primary healthcare clinic chain Dawi Clinics has opened a new branch in Tanta, which is its first foray outside of the Greater Cairo area, according to an emailed statement (pdf). The new branch is the tenth Dawi has set up since it was founded in 2016. Dawi’s nine other branches are spread across Giza, Cairo, and 6 October City. The healthcare startup had secured a USD 3 mn investment from the Egyptian American Enterprise Fund in November 2018.

EARNINGS WATCH- Fawry reports 82% growth in profits in 1Q2020: Profits at e-payment service provider Fawry surged by 82% in 1Q2020 to EGP 38 mn from EGP 21 mn in the same period last year, according to its quarterly financial statement (pdf). Revenues rose to EGP 258 mn during the three-month period from EGP 174 mn in 1Q2019.

Fawry CEO Ashraf Sabry projected (pdf) that the strong performance should continue through the second quarter, as segments hit by covid-19 (travel, entertainment) are outweighed by increasing use of essential services as well as e-commerce and wallets.

Porto Group turns losses of EGP 16.3 mn in 1Q2020: Porto Group registered losses of EGP 16.3 mn in 1Q2020 against net profits of EGP 59.6 mn in 1Q2019, according to its regulatory disclosure (pdf). Revenues took a hit during the first months of the year, falling more than 50% to EGP 206 mn from EGP 417.8 mn in 1Q2019.