MOODY S: AMENDMENTS TO THE CAPITAL MARKETS LAW ARE CREDIT POSITIVE Moody s Credit Rating Agency announced in its recent Credit Outlook report that the recently approved amendments to the Capital Markets Law in Egypt are credit positive for banks. The Law Introduced new financial instruments including Sukuk (bonds comply with Islamic Sharia), the trading of futures contracts and the establishment of an exchange for commodities, which are expected to raise banks income from their debt/equity markets business. Moody s also sees that although banks will likely lose part of corporate loans, as some of the largest corporates will begin to finance their operations through the yet-to-be-developed financial markets, increased banks loans to SMEs will support loan growth and profitability. The report also expects deepening financial markets in Egypt would increase its attractiveness for international investors. The income banks earn from their debt capital markets activity will increase, diversifying their operating income, which is heavily reliant on interest income earned from investment in government bonds Moody s Moody s Credit Outlook Report 19 th February 2018 IN THIS ISSUE A New Gas Deal Value Of Microfinance Activities Rises New Measures From The Petroleum Ministry Egypt Pays Arrears Owed To Oil Companies 1
A NEW GAS DEAL The Egyptian company, Dolphinus Holding, signed a deal worth USD15 billion to buy Israeli natural gas over 10 years. According to the agreement, the Israeli Tamar and Leviathan offshore gas fields would supply Dolphinus Holdings with around 64 billion cubic metres of gas. Egypt will benefit from the deal through the re-operation of the suspended Egyptian gas liquefaction units to export gas again to other countries. Egypt s Petroleum Minister, Tarek El Molla, also announced that disputes with Israel would have to be resolved for the deal to be completed, referring to the ruling issued against Egypt in 2015 to pay USD2 billion in compensation after suspending exporting gas to Israel via a pipeline going through Sinai due to consecutive terrorist attacks. It s worth noting that Egypt has recently amended relevant regulations to allow private sector to import gas for the first time. Any country that has this advantage (having the potential of being a regional energy hub) must meet the basic conditions. The first is to be a gas-producing country in large quantities, which is applicable now to Egypt, the second one is to transport, circulate and distribute gas which is provided by the recent gas agreement. It should also have gas and liquefaction stations. Most countries in the region do not have gas liquefaction stations, while Egypt has two gas stations in Idco and Damietta Presidency Statement State Information Service 22 nd February 2018 The Financial Regulatory Authority (FRA) stated that the value of microfinance activities rose by 58.6 % (Y/Y) in 2017, registering EGP7.12 billion compared to EGP4.49 billion a year earlier. The number of beneficiaries increased to 2.26 million clients in 2017, compared to 1.8 million in 2016. The commercial sector acquired the lion s share with a market share of 61.4% of the microfinance activity, followed by services sector (17.55%), agricultural sector (13.6%) and production and crafts activity (7.45%). Egypt s Petroleum Ministry approved a number of measures and facilities concerning the repayment of accumulated debts from factories that use natural gas in their operations, where factories would be able to repay past dues over a period of up to 5 years. Factories that fully repay arrears will not be charged interest, while factories that complete payments within a year will see an 80% cut in interest, which will be gradually decrease along with the increase in the repayment period. 2
The Egyptian General Petroleum Corporation s (EGPC) CEO, Abed Ezz El-Regal, announced that Egypt will pay off USD250 million in arrears owed to foreign oil companies in March, as the country has already paid USD300 million of these dues in February 2018. Egypt s oil sector is on the right track. We are working on implementing an ambitious plan to meet the demand for oil and gas by reinforcing exploration activities Abed Ezz El-Regal The CEO of EGPC Mubasher 21 st February 2018 3
EGYPT AT GLANCE EXCHANGE RATES USD EUR STERLING POUND 26 TH FEB 18 19 TH FEB 18 28 TH JAN 18 26 TH FEB 17 2 ND JAN 18 17.63 17.65 17.68 15.80 17.72 21.68 21.90 21.96 16.72 21.27 24.65 24.74 25.08 19.75 23.92 26 24 22 20 18 16 14 12 10 8 6 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 EGP per USD EGP per Euro EGP per Pound Sterling 24.65 21.68 17.63 STOCK MARKET 26 TH FEB 18 19 TH FEB 18 28 TH JAN 18 26 TH FEB 17 2 ND JAN 18 EGX30 15,454 15,158 15,311 12,270 15,024 EGX70 EGX100 860 854 854 484 835 2,085 2,035 2,031 1,162 1,982 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 15,454 T-BILLS AUCTION AUCTION DATE 25 TH FEB 18 22 ND FEB 18 25 TH FEB 18 MATURITY (DAYS) AVERAGE YIELD (%) 91 17.989 182 17.710 266 17.035 22 ND FEB 18 357 16.826 INTEREST RATES OVERNIGHT DEPOSIT RATE OVERNIGHT LENDING RATE CORRIDOR RATE CURRENT PREVIOUS 17.75% 18.75% 18.25% 18.75% 19.75% 19.25% CONSUMER PRICE INDEX AND MAJOR COMPONENTS HEADLINE- ALL ITEMS FOOD AND BEVERAGES TOBACCO AND RELATED PRODUCTS CLOTHING AND FOOTWEAR HOUSING, WATER, ELECTRICITY AND GAS FURNISHINGS AND HOUSEHOLD EQUIPMENT MEDICAL CARE TRANSPORTATION COMMUNICATIONS WEIGHT IN BASKET % DEC 2016 DEC 2017 (INDEX) (JANUARY 2010=100) 100% 211.69 258.05 39.92% 2.19% 5.41% 18.37% 3.77% 6.33% 5.68% 3.12% 260.64 400.66 156.93 139.11 182.47 190.51 173.52 98.59 326.23 518.35 198.23 155.52 223.76 209.06 205.11 109.41 Y/Y 21.90% 25.16% 29.37% 26.32% 11.80% 22.63% 9.74% 18.21% 10.97% GLOBAL COMMODITY PRICES BRENT CRUDE* GOLD** 26 TH FEB 18 19 TH FEB 18 26 TH JAN 18 27 TH FEB 17 2 ND JAN 18 67.47 65.67 70.52 55.93 66.89 1,336.92 1,346.46 1,333.92 1,252.73 1,311.8 RECREATION AND CULTURE EDUCATION HOTELS, CAFES AND RESTAURANTS MISCELLANEOUS GOODS AND SERVICES 2.43% 4.63% 4.43% 3.73% 209.83 246.00 251.42 143.24 293.88 294.16 292.51 180.80 40.06% 19.58% 16.34% 26.22% WHEAT*** 468.75 *USD/BARELL **USD/OUNCE +20 TH Feb SOURCE: BLOOMBERG 462.50 + 441.00 ***USD/BU 438.75 433.5 4
ALEXBANK RESEARCH... SHARING KNOWLEDGE 5 Dandara Temple, Egypt www.alexbank.com Copyright Notice. The Weekly is a publication of ALEXBANK. No part of this publication may be reproduced or duplicated without the prior consent of ALEXBANK. This publication constitutes a summary of published news, quotes and economic indicators. This material does not constitute analytical economic research nor should be treated as such. All charts and graphs are from publicly available sources or proprietary data. Any views expressed in this publication do not necessarily reflect the opinion of ALEXBANK. The news, views and quotes within this publication are gathered from sources deemed to be reliable but which have not been independently verified. ALEXBANK does not make any guarantee to the accuracy or reliability of such information. AlexBank shall not be liable for any losses or damages incurred or suffered as a result of using its publications in part or in their entirety.