{"id":557526,"date":"2021-09-22T03:59:37","date_gmt":"2021-09-22T03:59:37","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2021\/09\/22\/this-morning-egypt-could-be-safer-from-evergrande-than-other-ems-were-officially-off-the-red-list-its-fed-day-markets-still-jittery\/"},"modified":"2021-09-22T03:59:37","modified_gmt":"2021-09-22T03:59:37","slug":"this-morning-egypt-could-be-safer-from-evergrande-than-other-ems-were-officially-off-the-red-list-its-fed-day-markets-still-jittery","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2021\/09\/22\/this-morning-egypt-could-be-safer-from-evergrande-than-other-ems-were-officially-off-the-red-list-its-fed-day-markets-still-jittery\/","title":{"rendered":"THIS MORNING: Egypt could be safer from Evergrande than other EMs; We\u2019re officially off the red list; It\u2019s Fed day; Markets still jittery."},"content":{"rendered":"

Good morning, nice people, and welcome to a reasonably calm morning for news<\/strong>, with some M&A news, the latest from planet startup and word that the country\u2019s critical real estate industry all competing for your attention. All of these stories, though, are playing second fiddle in the mainstream press to coverage of President Abdel Fattah El Sisi\u2019s address to the UN General Assembly as well as the death yesterday of former SCAF leader Mohamed Hussein Tantawi. We have chapter and verse on all of this and more, below.<\/p>\n

We\u2019re no longer on the UK\u2019s red list <\/strong>as of two hours ago<\/a><\/strong>:<\/strong> Egyptians and non-Egyptians alike can now make much more affordable trips to the UK under an only slightly-less-confusing covid testing and quarantine regime. Check out the new rules here<\/a>.<\/p>\n

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

IMF + EBRD webinar:<\/strong> Public Enterprises Minister Hisham Tawfik will speak during a webinar hosted by the IMF and the European Bank for Reconstruction and Development (EBRD) today at 3pm CLT. The gathering is running under title of \u201cState-owned enterprises in the Middle East, North Africa and Central Asia,\u201d with Tawfik set to speak on the role of the state in the economy alongside five other panelists including the IMF\u2019s Middle East and Central Asia head Jihad Azour and the EBRD\u2019s head of external relations Alan Rousso. Check out the agenda here<\/a>.<\/p>\n

The <\/strong>Cityscape real estate investment conference<\/a><\/strong> starts today<\/strong> at the Egypt International Exhibition Center. The event runs through to Saturday.<\/p>\n

And it\u2019s the last day of the Egyptian Ins. Federation\u2019s <\/strong>Rendezvous conference<\/a><\/strong> in Sharm El <\/strong>Sheikh.<\/strong><\/p>\n

THE BIG STORIES ABROAD-<\/strong><\/p>\n

<\/a> It\u2019s Fed day, and markets are trading sideways <\/strong>ahead of chairman Jay Powell\u2019s speech later today \u2014 and as traders around the world keep a wary eye on whether today\u2019s the day that real estate developer China Evergrande \u2014 the \u201cworld\u2019s most-indebted company\u201d \u2014 defaults on its pile of debt. Here\u2019s the state of play right now:<\/p>\n

US stocks went up, then down, then up, then down <\/strong>before closing little changed on Tuesday, as the morning\u2019s optimism gave way to volatility that saw investors whipsawed throughout the day. The S&P 500 closed down 0.1%, the tech-heavy Nasdaq Composite was up 0.1%, and the blue-chip Dow Jones fell 0.2% at close, according to Bloomberg<\/a>.<\/p>\n

The MSCI world index was similarly <\/strong>unchanged<\/a><\/strong>, rising 0.1%, while the European Stoxx 600 rebounded 1% after its biggest drop in two months.<\/p>\n

Middle East markets were mixed:<\/strong> Shares in Saudi and Abu Dhabi were little changed from Monday, though the Dubai index lost another 1.2%.<\/p>\n

Egyptian shares were harder hit:<\/strong> The EGX continued its sell-off yesterday, falling another 2% to leave the index down 3.2% YTD. Basic materials and chemicals companies led the way into the red, with Ezz Steel losing 8.3%, Alexandria Mineral Oils Company falling 7.5% and Sidpec down 6.8%.<\/p>\n

The day ahead:<\/strong> Shares in China and Japan are both in the red again in early trading this morning. European and US shares are all currently forecast to open in the green, according to the futures markets.<\/p>\n

What to look for from Mr. Powell: <\/strong>CNBC\u2019s Patti Domm hit the nail on the head when she writes that the Fed is going to \u201clook to soothe markets<\/a>\u201d at the same time as it \u201cprepares investors for an end to bond buying.\u201d Market watchers will be \u201csquarely [focused] on what the Fed now forecasts for interest rates and inflation.\u201d<\/p>\n

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<\/a> So how should you be thinking about Evergrande and systemic risk?<\/strong> That question is bedeviling analysts this morning.<\/p>\n

There could well be contagion in other emerging markets should China\u2019s largest property <\/strong>developer default<\/strong>, Arqaam Capital\u2019s Zeina Rizk told Bloomberg yesterday (watch runtime: 4:39<\/a>). \u201cThe fear is there, the risk of contagion is there. We haven\u2019t seen it yet. We have seen some weakness in the market but I think this is being driven by China being away and the Fed being on Wednesday \u2026 but I think if we actually have a default then we may well see a contagion in other emerging markets.\u201d<\/p>\n

Strong yields and macro stability mean that Egyptian bonds should hold up better<\/strong> than other local-currency EM bonds in the event of further turbulence<\/strong>, Rizk said. \u201cWe do like Egypt versus the rest of the emerging markets \u2026 Inflation is well behaved. The CBE reserves are stable despite the volatility. We think that the banks will continue to take any shocks and we are still comfortable with Egypt.\u201d<\/p>\n

Evergrande is both (probably) not a contagion in the making \u2014 and maybe worse than <\/strong>we all fear. <\/strong>That\u2019s the emerging consensus among pundits who believe that (a) the Chinese communist party simply won\u2019t allow Evergrande to set fire to banks or other developers<\/strong>. Instead, officials will ensure that \u201cthe most profitable parts of its business are bought up by rivals and the debt underwritten by either the [People\u2019s Bank of China] directly, or by a consortium of Chinese commercial banks with the help of a liquidity injection by the PBOC.\u201d<\/p>\n

But there\u2019s a growing view that (b) the company\u2019s collapse could still have a significant <\/strong>and lasting impact on <\/strong>China\u2019s economy<\/strong>, dragging down consumer optimism if housing prices are seen cratering in a market that has seen home values skyrocket \u2014 on paper, at least. \u201cA prolonged, messy and psychologically costly mop-up could kill growth in the most important part of the Chinese economy\u201d in a worst-case scenario. Go read this piece in the Financial Times<\/a> and this one in the Wall Street Journal<\/a> if you\u2019re in the mood to dive deeper.<\/p>\n

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*** CATCH UP QUICK<\/strong> with the top stories from yesterday\u2019s edition of EnterprisePM<\/strong>:<\/p>\n