{"id":553632,"date":"2022-10-31T03:45:36","date_gmt":"2022-10-31T03:45:36","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2022\/10\/31\/this-morning-egp-hits-new-record-low-lula-is-back-in-brazil\/"},"modified":"2022-10-31T03:45:36","modified_gmt":"2022-10-31T03:45:36","slug":"this-morning-egp-hits-new-record-low-lula-is-back-in-brazil","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2022\/10\/31\/this-morning-egp-hits-new-record-low-lula-is-back-in-brazil\/","title":{"rendered":"THIS MORNING: EGP hits new record low + Lula is back in Brazil"},"content":{"rendered":"

Good morning, friends, and happy Halloween <\/strong>\u2014 don\u2019t let your sweet tooth get you into too much trouble today.<\/p>\n

THE BIG STORY HERE AT HOME remains the EGP. In parallel, you can practically feel the <\/strong>nation\u2019s center of gravity shift to Sharm El Sheikh from Cairo<\/strong> as more and more email auto-replies declare that our readers are heading to Sinai for COP27, which kicks off in just six days.<\/p>\n

<\/a> EGP WATCH- The EGP notched a new record low yesterday<\/strong> as the currency dipped another 5% in the wake of the central bank\u2019s decision<\/a> to move to a \u201cdurably flexible\u201d exchange rate on Thursday. The currency closed the day at 24.1353 to the greenback, according to central bank figures. The EGP has now tumbled 22.1% since Thursday and is down 53.0% since the start of the year, making it one of the worst-performing emerging-market currencies<\/a> of 2022.<\/p>\n

Have we hit bottom? <\/strong>That\u2019s the question on everyone\u2019s mind right now. JPMorgan expects it to close out 2022 at around 23.50 to the USD \u2014 suggesting we\u2019ve overshot a little bit. \u201cWe expect USD\/EGP to remain under pressure in the coming days as it finds a clearing level, but we view [Thursday's] adjustment as sufficient to close most of the external imbalances,\u201d analysts wrote on Thursday in a note picked up by Reuters<\/a>. Meanwhile, Deutsche Bank thinks the currency will fall closer to 25.00 by the end of December, according to Bloomberg Asharq<\/a>.<\/p>\n

What you think: <\/strong>Enterprise readers told us last month<\/a> they were planning to use an average figure of EGP 22.12 to the greenback in their 2023 budgets, with some 22% of participants in our Fall 2022 Reader Survey saying they expect the USD to be changing hands at EGP 23-24 next year.<\/p>\n

We\u2019ll know a lot more in a couple of hours\u2019 time<\/strong>, so make sure to check in with EnterprisePM this afternoon.<\/p>\n

Fourth-quarter earnings could be rough for companies with big FX costs structures:<\/strong> Ezz Steel yesterday warned in a disclosure (pdf)<\/a> yesterday that it could eat EGP 2.2 bn in currency losses as a result of the float. This would take the company\u2019s full-year FX losses to more than EGP 3.3 bn. Few companies will be as dramatically hit as Ezz<\/strong>, but you can expect to hear a lot of guidance in the coming days about cost pressure everywhere from FMCG companies (who import everything from packaging to key raw materials) to real estate players (we\u2019ll see the effect down the line when deliveries of new build stuff begins).<\/p>\n

The float will be a boon for exporters<\/strong>, whether you\u2019re RayaCX and its competitors selling business process outsourcing, making insulation for sale globally, making food products for regional markets. It\u2019s almost as if a laser-like focus on exports (and FDI) could be key to getting us out of our current situation\u2026<\/a><\/p>\n

And some importers are going to do really well, even if they don\u2019t price gauge: <\/strong>Retailers, automotive and electronics + white goods assemblers, spare parts sellers, car distributors \u2014 name an industry that doesn\u2019t have tons of pent-up demand right now because of what was an effective ban on non-food imports since earlier this year\u2026<\/p>\n

Yesterday\u2019s treasury auctions didn\u2019t quite go to plan:<\/strong> The Finance Ministry raised less than a fifth of its target in a series of bond auctions yesterday after investors demanded yields of up to 25% following the central bank\u2019s decision to hike rates by 200 bps on Thursday. The ministry had hoped to raise EGP 55 bn from auctions of three-month, six-month, nine-month and one-year t-bills on Thursday and Sunday but ended up selling just EGP 11.4 bn worth after rejecting most of the bids thanks to poor offer prices.<\/p>\n

PSA- It\u2019s <\/strong>Nafeza<\/a><\/strong> deadline day tomorrow:<\/strong> Importers, exporters and customs agents have just one day left<\/a> to register to join the Finance Ministry\u2019s digital customs system Nafeza before they can no longer clear goods out of customs at seaports.<\/p>\n

WHAT\u2019S HAPPENING TODAY-<\/strong><\/p>\n

The Senate is back in session today:<\/strong> Senators will discuss amendments to a 2017 law<\/a> that paid out compensation to government contractors who suffered losses in the wake of the economic reforms carried out in 2016. The amendments will \u201cregulate government compensation paid to these contractors,\u201d Senator Ahmed Sabbour said, without getting into specifics.<\/p>\n

The Senate Industrial Committee is discussing a new bill aimed at helping unlicensed <\/strong>manufacturers<\/strong> go legit. <\/strong>The draft legislation would hand the General Authority for Industrial Development (GAID) the power to grant unlicensed projects temporary one-year licenses, giving them time to \u201cadjust their conditions in line with environmental and civil protection procedures,\u201d committee chair Mohamed Halawa said.<\/p>\n

We have the details on yesterday\u2019s Senate session<\/strong> in this morning\u2019s Legislation Watch, below.<\/p>\n

Egypt Energy<\/a><\/strong> continues:<\/strong> The three-day energy conference brings together policymakers and business leaders from the regional energy sector to discuss topics including power generation, clean energy, and PPP and foreign investment. The event is taking place at the Egypt International Exhibition Center and runs through tomorrow.<\/p>\n

Tomorrow marks the start of a new month. <\/strong>The key news triggers as we slide towards November:<\/p>\n