Egypt’s outlook for next year is looking good, says Beltone’s Alia Mamdouh: The outlook for Egypt’s GDP growth, EGP performance, and inflation targets is “positive” in 2020, Beltone Financial’s macro and strategy director Alia Mamdouh tells Bloomberg TV (watch, runtime: 3:36). The EGP’s sustained stability will support the deceleration of inflation rates, which will in turn give the Central Bank of Egypt (CBE) ample room to continue its easing cycle. Mamdouh says she expects the CBE to push a total of 300 bps rate cuts throughout 2020.

Look for improved BoP with healthier natgas exports, tourism revenues, foreign holdings: An improving trade balance will help keep the currency strong over the coming months, driven by rising natural gas exports. Egypt’s import bill has also been growing at a much slower pace, says Mamdouh. Other sources of optimism for an improved balance of payments include the rally in tourism revenues and increasing investment in Egyptian treasuries. Mamdouh also pointed to improving real interest rates as the economy’s macro stability is in an “outstanding” position and with GDP growing at a 5+% clip.

Liquidity in the bond market should also get a bump from the agreement Egypt signed with Euroclear last month. The agreement with the Belgium-based clearinghouse should also attract more investments to Egyptian securities, which will lend more support to the currency. Meanwhile, Mamdouh expects a slow and gradual pickup in the state’s spending patterns, suggesting the EGP will not come under pressure and inflation will remain unaffected.

Tharaa receives seven partnership offers: Egypt's sovereign wealth fund Tharaa received seven offers from investors for potential partnerships in healthcare, pharma, and agricultural manufacturing ventures, CEO Ayman Soliman tells Al Mal. Soliman did not provide details on the names or nationalities of these investors.

Separately, the fund boss said that partnership negotiations with the Oman Investment Fund will be concluded within weeks. Tharaa has yet to tap a financial advisor for the final agreement with the Omani fund, Soliman said. Our friends at EFG Hermes has reportedly advised Tharaa on the USD 20 bn investment platform with the Abu Dhabi Development Holding Company (ADDH), which will act as a model for our partnership with Oman.

REGULATION WATCH- Brokerages aren’t happy with how much the short selling electronic system is going to cost them: Brokerage firms have voiced concerns to the Financial Regulatory Authority (FRA) that they will be unable to afford the cost of the electronic system needed to short sell on the EGX, sources tell Al Mal. Brokerages will be required to fork out USD 9,500 (EGP 153k), which they say is too hefty a price tag. Large brokerages already use sophisticated software capable of handling short selling transactions. Medium firms, meanwhile, generally do not have the same capability, and may struggle to afford the upgrade. EGX officials are reportedly working with their software developers to reduce the price.

The system is nearly finalized ahead of the instrument’s launch before the year is out. A meeting between the FRA’s advisory committee, EGX executives, Misr For Central Clearing, Depository & Registry, and the tech companies rolling out the platform, finalized the three options investors will have when deciding who to lend shares to.

• the investor can lend to clients of the same brokerage;
• they can lend to anyone provided they post their shares on the trading platform for other clients to see;
• or, they can lend to clients of specific brokerages.

The advisory committee is coordinating with MCDR to make some final adjustments on settlements, reserving stocks, and returning them after contracts expire, as well as booking shares.

Background: The FRA has been meeting with industry stakeholders to review the system in place to launch short selling on the EGX. The consultations are meant to put the final touches on the electronic system for the financial instrument ahead of its activation next month. EGX Chairman Mohamed Farid said earlier this year that short selling would begin before the year was out, following expectations that it would be launched in the third quarter. 51 brokerage firms have already obtained the license for shorting and are awaiting the regulations to be finalized to begin offering the service.

IPO WATCH- Arabia Holding to offer <25% stake on EGX within two years: Real estate developer Arabia Holding is considering debuting on the EGX sometime over the next two years offering less than 25% of its shares, Chairman Tarek Shoukrytells Al Mal. The company will decide on the exact stake size once it hires a bookrunner for the IPO. Shoukry did not clarify whether the company is already in talks with potential advisors for the offering.

Market conditions will decide when the company pulls the trigger: The real estate developer is keeping an eye on market conditions to determine when would be best to kickstart the process, Shoukry said. The chairman’s comment comes as the EGX has seen only one IPO this year — e-payments platform Fawry — and one secondary offering from Eastern Tobacco. Rameda Pharma also said it intends to float on the EGX before the year is out. However, several other private and state-owned companies have at least temporarily shelved plans to IPO after the emerging market meltdown in the second half of last year.

M&A WATCH- FRA tells Adeptio: Your Americana MTO offer shall not pass: The Financial Regulatory Authority (FRA) has rejected the mandatory tender offer (MTO) from Adeptio to acquire the Egyptian International Tourism Projects Company (Americana), according to a disclosure to the bourse (pdf). The market regulator said that Adeptio’s offer price of EGP 3.9 per share was not in line with the financial evaluation, and cited Adeptio’s "lack of objectivity and reasonableness of assumptions."

FRA obliged Adeptio to hire a new independent financial consultant and present a fresh fair value offer within one month. Fincorp Investment Holding, which prepared the first fair value study, denied the study was unfair, according to Youm7. Americana’s minority shareholders had previously signaled they would only be satisfied with an offer in the range of EGP 24 / share.

Background: Adeptio acquired 67% in Kuwait Food Company (Americana) in June 2016 following a two-year process, giving it indirect ownership of the majority of Americana Egypt. The FRA then ordered Adeptio to submit an MTO to buy the remaining shares in Americana Egypt earlier this year and cover the 9.563% of Americana that Adeptio didn’t already own, but Adeptio had argued that its indirect ownership in the company is less than 90% of its total capital and therefore does not require an MTO submission. Adeptio submitted an appeal against the order, which the FRA promptly rejected. The company then filed a suit with an economic court challenging the FRA’s rejection, but the court also dismissed the appeal.

DP World’s USD 520 mn Ain Sokhna port expansion to be complete by 2Q2020: A USD 520 mn expansion of the Ain Sokhna seaport is due for completion by the second quarter of 2020, UAE-based DP World CEO and managing director for the Middle East and Africa, Suhail Al Banna said, according to Reuters’ Arabic Service. The project involves building a second dock that will double the port’s capacity to 1.75 mn TEU from a current 970k. Its completion will bring DP’s investments in Egypt to USD 1.6 bn. It will make the port the first in the country capable of handling “the largest container vessels in the world,” Al Banna said. DP World owns 49% of the JV executing the project. The rest is owned by the Suez Canal Economic Zone (SCZone).

DP plans new Mediterranean port...: The company is studying a second port that will be located somewhere along the Mediterranean, an anonymous company executive told the press.

...and Tenth of Ramadan logistics hub: DP is planning to set up a logistics zone in the Tenth of Ramadan and in other industrial areas, and is awaiting a Transport Ministry tender to proceed, Al Banna said. Other projects in the pipeline include inland ports to link Alexandria to cities along the Nile River. The company was recently allocated a land plot in the SCZone for another, unspecified project.

House to call for more natgas price cuts for industry: The House Industrial Committee will ask the government to cut natural gas prices by USD 1 to USD 4.5 / mmbtu for steel, aluminum, copper, ceramics, and porcelain factories, parliamentary sources say. The committee is planning to present this recommendation in a meeting with Trade and Industry Minister Amr Nassar in the coming days. The government set up in October a committee to revise every six months the prices at which it sells gas to the industrial sector following repeated calls by manufacturers. Prices were cut by 25% to USD 8 / mmBtu for cement producers, while metallurgy and ceramics manufacturers saw their rates drop to USD 5.5 from USD 7. A new pricing scheme that would lower the price of natural gas sold to petrochemical factories is also on the way.

Industry would like prices even lower: A source at an iron and steel factory said that the government should lower prices to between USD 3.5 and USD 4 /mmBtu, still lower than the committee’s recommendations. Meanwhile, Mohamed Abou El Enein, president of Ceramic Cleopatra, and Farouk Mostafa, chairman of Ceramica Venice, both called for lower prices for ceramics producers.

El Sisi urges investment in Africa at G20 Compact, as Egypt, Germany sign agreements worth EUR 300 mn: Investment Minister Sahar Nasr inked six cooperation agreements worth EUR 300 mn with German Economic Cooperation and Development Minister Gerd Müller on the sidelines of the G20 Compact with Africa in Berlin yesterday, an Investment Ministry statement said.

The first four will move ahead with protocols signed in 2017 and 2018 worth EUR 145.9 mn. These projects will address energy efficiency, technical education, SMEs and labor market participation, infrastructure in rural areas, private sector-led innovation, water supply networks, solid waste management, and social development. The fifth EUR 151.5 mn agreement was signed in 2019, and will help fund projects in more or less the same areas.

EUR 2 mn grant for combating illegal immigration: Nasr also signed a letter of intent which will see the Immigration Ministry receive a EUR 2 mn grant. No further details on this were provided. Illegal immigration has recentely been a typical feature of Egypt-EU cooperation as the bloc is looking to make us the model for its partnership with North Africa on combating illegal migration to Europe from our region.

Other agreements from Berlin yesterday:

• Military signs smart factories agreement: Military Production Minister Mohamed El Assar signed a letter of intent with chairman of machinery manufacturer DMG Mori Christian Thoenes to set up “smart factories” for consumer goods, including factories for medical products;
• AOI seals digitization agreement: The Arab Organization for Industrialization also signed a separate piece of paper with DMG Mori to support digitization in Egyptian factories;
• EUR 2 mn MoU for Antiquities Ministry: Egypt’s ambassador to Berlin signed an MoU worth EUR 2 mn on behalf of the Antiquities Ministry with the head of the Prussian Cultural Heritage Foundation.

El Sisi, Merkel stress importance of investing in Africa for development: In his speech at the G20 Compact with Africa conference, President Abdel Fattah El Sisi called on the international community to ramp up their investments in Africa to help the continent achieve wide-reaching, sustainable development levels, according to an Ittihadiya. El Sisi, who attended the summit as the current president of the African Union, stressed that spurring development in Africa would create a ripple effect for the global economy. German Chancellor Angela Merkel also called for increased investments in the continent, which would improve living standards and reduce the flow of illegal immigration, according to StarTribune.

Also from Berlin: El Sisi discussed Libya and Syria in a meeting with German Defense Minister Annegret Kramp-Karrenbauer, Ittihadiya said. He also sat down with Muller to talk about how Egypt may benefit from Germany’s education system in light of the success of German schools and universities in Egypt, .

DISPUTE WATCH- Nostra Terra to exit East Ghazalat oil concession to settle payments dispute: Nostra Terra Oil & Gas subsidiary Nostra Terra Inc (NTI) has agreed to hand over its 50% non-operating stake in the Egyptian East Ghazalat concession to North Petroleum International Company in order to settle an ongoing arbitration case, the UK-based company announced in a statement. A London court ruled against NTI in August, finding the company in default for failing to pay concession operator North Petroleum USD 1.06 mn in cash calls in November and December 2015, as well as around USD 125k in interest. Rather than pay the cash calls and interest, Nostra opted to hand over its share in the Western Desert asset due to it being a loss-making “non-core” concession, Nostra Terra CEO Matt Lofgran said. The agreement is subject to governmental approvals. If these are not obtained by 31 December 2019, North Petroleum is able to scrap the agreement provided they submit the notice before 1 May 2020.

Background: The case was referred to the London Court of International Arbitration in April, with the court ruling in favor of North Petroleum in August. Nostra Terra subsidiary Sahara Resources has held a 50% interest in the concession since June 2017, when it acquired Echo Energy’s 25% stake for USD 500k.

STARTUP WATCH- Egypt’s Botme raises six figures in seed funding from regional angel investors: Chatbot building platform Botme has secured a six-figure seed funding round from unnamed regional angel investors, the startup’s co-founders told MenaBytes. The exact amount of funding was not disclosed. Founded in 2017, Botme allows businesses and individuals to build chatbots to connect and engage with users through platforms such as Slack and Facebook Messenger.

Egypt ranks eighth globally in Gallup law and order index: Egypt ranked eighth globally in a Gallup Law and Order Report gauging how secure people feel in their countries, rising from 16th last year. Gallup surveyed almost 152k people across 142 countries, asking them about their confidence in the police, how safe they feel walking alone at night, and whether they’ve experienced a mugging or robbery in the past 12 months.