{"id":569693,"date":"2020-03-04T05:57:55","date_gmt":"2020-03-04T05:57:55","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2020\/03\/04\/what-were-tracking-on-4-march-2020-2\/"},"modified":"2020-03-04T05:57:55","modified_gmt":"2020-03-04T05:57:55","slug":"what-were-tracking-on-4-march-2020-2","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2020\/03\/04\/what-were-tracking-on-4-march-2020-2\/","title":{"rendered":"What we\u2019re tracking on 4 March 2020"},"content":{"rendered":"

It was a return to normalcy on the EGX yesterday<\/strong> following Sunday\u2019s tumultuous trading session and Monday\u2019s half-hearted rebound. The same could not be said for the markets across the Atlantic though (more on this below).<\/p>\n

But first, your daily dose of news on El Corona:<\/p>\n

CORONAWATCH- Health Minister Hala Zayed <\/strong>announced<\/a><\/strong> that 1,832 individuals tested for <\/strong>covid-19 had all come back negative.<\/strong> The announcement came during a press conference at the Egyptian embassy in China, Al Masry Al Youm reports<\/a>. The majority of those tested were at Khalda Petroleum, where an oil engineer had tested positive for the virus. She added that no further cases in Egypt have yet come to her ministry\u2019s attention.<\/p>\n

We\u2019ve received 1k covid-19 detection kits as a gift from China<\/strong>, Zayed said<\/a>. Zayed on Sunday flew to China with medical supplies as a gesture of goodwill.<\/p>\n

Keep an eye on the <\/strong>Health Ministry\u2019s Facebook Page<\/a><\/strong>, where Zayed has suggested she and officials on her team will provide video updates on the coronavirus situation in Egypt.<\/p>\n

The cabinet economic committee met yesterday to discuss the impact of the<\/strong> virus on the economy.<\/strong> The statement from the cabinet<\/a> does not go into detail, but notes the government discussed preparedness measures and received reports on how covid-19 is impacting markets and economies the world over.<\/p>\n

The government is kicking off awareness workshops tomorrow for educators<\/strong> to teach them about how to prevent the spread of infection and what to do with a suspected case. The workshops will be organized by the education and health ministries and Al Azhar, according to a cabinet statement.<\/a><\/p>\n

Covid-19 fears have been shrinking exports from Egypt\u2019s freezones<\/strong> and investors are calling on the government to offer incentives for them to enter alternative markets, the local press reports<\/a>, citing remarks by an industry group saying export sales had dipped in the past two months thanks to the virus and that it expects further contraction in the \u201ccoming period.\u201d<\/p>\n

The Trade Ministry will be authenticating certificates of origin for Chinese goods held in <\/strong>Egyptinan ports<\/strong> since the outbreak of covid-19, in place of the Egyprian embassy in China, the local press reports<\/a>.<\/p>\n

Kuwait <\/strong>has not stopped issuing visas to Egyptians<\/a><\/strong>, but it is denying entry<\/strong> to Egyptian nationals who do not have a certificate verified by the Kuwaiti embassy in Cairo <\/strong>certifying that they have tested negative for covid-19 on polymerase chain reaction (PCR) test, Kuwait\u2019s aviation authority said on social media yesterday<\/a>. People travelling from nine other countries \u2014 including India, Turkey and Lebanon \u2014 will also be required to produce the certificate, it said.<\/p>\n

\"enterprise\"<\/p>\n

<\/a> Yields crash, stocks fall as Fed\u2019s emergency rate cut lands with a thud:<\/strong> Yields on US 10-year treasuries crashed through the 1% barrier for the first time ever and the sell-off in the US equity markets resumed yesterday, despite the Federal Reserve announcing an emergency 50 bps interest rate cut \u2014 ironically an effort to stem the bleeding in the markets. The yield on the benchmark 10-year bonds fell as low as 0.9043% before recovering to near 1% at the close of play, and the rate on inflation-linked 30-year notes entered negative territory for the first time ever, Bloomberg says<\/a>. Stocks also gave up most of the gains made yesterday, with all three major indices closing almost 3% in the red.<\/p>\n

This all occurred in the hours after the Fed deployed its bazooka:<\/strong> The Fed made its most dramatic intervention since the 2008 financial crisis yesterday, announcing an emergency 50 bps rate cut in response to what it called the \u201cevolving risks\u201d of covid-19<\/a>. In an effort to assuage investors, the central bank reiterated that the US economic fundamentals \u201cremain strong\u201d and pledged to \u201cuse its tools and act as appropriate to support the economy.\u201d<\/p>\n

To put this in context,<\/strong> this is only the third time in the past 25 years the Fed has made an emergency cut and is the largest since October 2008.<\/p>\n

Nothing says \u2018strong economy\u2019 like an emergency rate cut:<\/strong> Investors ignored the Fed\u2019s \u2018the economy is fine, move along\u2019 messaging and interpreted it more along the lines of \u2018the house is on fire.\u2019 \u201cThe market reaction now is negative because the Fed sent the wrong message to the market,\u201d said Peter Cardillo<\/a>, chief market economist at Spartan Capital Securities in New York. \u201cAll of a sudden the Fed is really worried about the economy and this is the reason why we are having this volatility.\u201d<\/p>\n

No signs that investors are buying the corona dip:<\/strong> \u201cThe worsening economic \/ corporate outlook and direct evidence of the risk of ineffective central bank policies\u201d is challenging investors\u2019 buy-the-dip mentality, Allianz economic advisor Mohamed El Erian wrote on social media<\/a>.<\/p>\n

What ever happened to a coordinated response?<\/strong> A statement released<\/a> following yesterday\u2019s discussion among G7 finance ministers and central bank governors contained little evidence of a coordinated policy response to the crisis by global financial chiefs. Markets had hoped that the talks would produce an agreement for a set of monetary and fiscal stimulus measures aimed at arresting the turbulence in the markets. Instead, the statement contained references to \u201cactions\u201d and \u201cappropriate policy tools\u201d without providing specific policy proposals.<\/p>\n

** THE KEY TAKEAWAY FOR US HERE IN EGYPT from yesterday\u2019s move by the Fed: <\/strong>The Fed just took (some of the) pressure off Egypt to hike interest rates. Central banks in developed economies are under pressure to cut rates to stimulate their economies in the face of slowdowns. In Egypt, we face the opposite pressure: To maintain or even hike interest rates to maintain our attractiveness to the carry trade<\/a> as investors look to safe haven assets instead of emerging markets. From that perspective, the Fed\u2019s cut has, in many ways, the same effect as an interest rate hike in Egypt<\/strong> by widening the differential between rates here and those in the US.<\/p>\n

That\u2019s good news for the Central Bank of Egypt<\/strong> on the carry trade and at least \u2026 neutral news for banks in Egypt, which came into 2020 expecting that rate cuts would stimulate renewed appetite from companies to borrow in support of capex spending. Any further cuts in developed economies (particularly by the Fed \u2014 see below) would similarly be good for Egyptian policymakers.<\/p>\n

Oh, and you may want to brace yourselves for a busy day on the EGX: <\/strong>The Fed\u2019s snap interest rate cut came after the EGX closed, so we may yet feel the impact of the selloff that US markets went through yesterday. That said: Futures point to European markets opening in the green.<\/strong><\/p>\n

Troubling for US policymakers: The Fed just wasted valuable ammunition only to see its credibility take a serious hit. <\/strong>Not only have some interpreted the move as a kowtow to a White House hungry for easing and left others wondering whether Fed officials know something everyone else doesn\u2019t, it reveals the impotence of monetary policymakers when it comes to defending against the impact of a health scare. Added to this, the Fed just used one of the few bullets it has left to guard against an actual recession. With the Fed Funds Rate now at just 1-1.25%, it has even less room for manoeuvre in the event that the crisis tips the economy into recession.<\/p>\n

And what is going to be the likely response to this? More cuts.<\/strong> Goldman Sachs is forecasting the Fed to make another two 25 bps cuts during its meetings in March and April, bringing its benchmark rate down to just 0.5-0.75%, according to a research note picked up Zerohedge<\/a>.<\/p>\n

\"enterprise\"<\/a><\/p>\n

The Finance MInistry is working toward publicizing its final EGX tax plan next week, <\/strong>including whether it will reintroduce the 10% capital gains tax on EGX transactions, the local press reports<\/a>, citing unnamed government sources. The capital gains tax was shelved for three years in 2017 in favor of a provisional stamp tax. The three-year period is officially set to elapse in May 2020.<\/p>\n

The Egyptian Capital Markets Association <\/strong>has been lobbying<\/a><\/strong> for Egyptian and resident foreign investors to be exempted from capital gains tax through May 2023<\/strong>, suggesting that the Finance Ministry postpone the introduction of the tax for another three years as part of a package of measures designed to attract investment and boost trading.<\/p>\n

Gov\u2019t to relax visa rules in bid to encourage tourism:<\/strong> The cabinet\u2019s tourism committee has agreed to relax visa rules from June in an effort to attract more tourists to the country, it said in a statement this week<\/a>. These will include expanding the countries eligible for entry visas, an extension of the duration of the 90-day renewable visas to five years, and a USD 10 discount on visas for those arriving to the country through ports in Luxor and Aswan as part of the \u201cSummer in Upper Egypt\u201d initiative.<\/p>\n

Our friends at AmCham will host Planning and Economic Development Minister Hala El <\/strong>Said for its monthly luncheon<\/strong> on Thursday, 12 March. El Said will discuss the future of Egypt\u2019s economic development agenda. Members can register for the event here<\/a>.<\/p>\n

Other events coming up this month:<\/p>\n