Post-Arab Spring: Egypt in four charts

By Andrew Bowman and Rob Minto

This weekend sees large protests in Egypt against president Mohamed Morsi on the second anniversary of the revolution which toppled Hosni Mubarak. Two years on, where has Egypt got to? These four charts provide an insight.

Investor sentiment, as reflected in the EGX30 stock market index, shows that the market is still a long way from the 7,000+ level seen in 2011. With trading suspended during the tumult of the revolution, the market fell off a cliff in early 2011. You might have heard that Egypt was one of the best performing stock markets in 2012, but the chart puts that in context – it started 2012 from its lowest point since the revolution.

Source: Bloomberg

Inflation has fallen since the revolution, but as Capital Economics points out, this is in large part down to the government holding down the prices of food staples and fuel via subsidies, which shield citizens from changes in import prices. This may not last: the IMF want the Egyptian government to cut fuel subsidies before it releases the long-awaited $4.8bn aid package, and there is also the matter of Egypt’s deteriorating foreign exchange reserves.

Source: Bloomberg

As the chart below shows, post-revolution, Egypt began burning through its foreign currency reserves as the central bank attempted to manage the value of the Egyptian pound close to 6 to the dollar. An expensive business. The decline bottomed out in late 2012 as reserves reached levels sufficient to cover only three months of imports – a critical level.

Source: Bloomberg

The central bank continued to support the pound after this, helped along by aid from wealthy governments in the gulf. However, with confidence in the Egyptian economy draining as fresh protests erupted over the constitution, the pressure on the pound increased. The Egyptian central bank changed its approach in late December to a managed decline of the pound via regular dollar auctions and the pound began dropping sharply in value against the dollar, as the chart below shows.

Source: Bloomberg

http://blogs.ft.com/beyond-brics/2013/01/25/post-arab-spring-egypt-in-four-charts/#axzz2IaAAxVLj

Davos 2013: tackling corruption the unconventional way | beyondbrics

How do you tackle corruption? To that age-old question, Rahul Bajaj, the Indian billionaire businessman, has some unconventional answers: “Stop prosecuting givers of small bribes, ban criminals from standing for election, and use the e-ID to transfer benefits directly from the government to the receiver.”

Bajaj was addressing a meeting at the World Economic Forum on how to achieve EM growth in a global slowdown. Corruption was the biggest issue singled out – and the Indian subcontinent figured large.

Indicative of the problem was a private aside from an executive at a large European car manufacturer. “We’d be interested in becoming active in Pakistan,” the executive, who preferred to stay anonymous, told beyondbrics. “But there’s no way we’ll do it. Corruption is too widespread.”
Davos 2013: tackling corruption the unconventional way | beyondbrics

Guest post: Vulgaristan prepares debut bond issue | beyondbrics

New issues are finally coming out of the woodwork and pricing very, very aggressively. It’s set to be a feeding frenzy across EM, and any EM issuer worth its salt, or its rating, is likely to want to get some cash (as much as possible) in the bank.

I am tempted to say that almost any issuer, whatever the name and fundamentals, with a bit of carry could tap this overbaked and pretty ridiculous market.

It reminds me of a year or so back when I came very close on April 1 to adding a new country, Vulgaristan, to my regular sovereign weekly. It would no doubt have been AAAA-rated. In the end I chickened out, mindful that the FSA might have taken a somewhat dim view of an analyst (then) in a state-owned bank actually having a sense of humour.
Guest post: Vulgaristan prepares debut bond issue | beyondbrics

Kuwait eyes multi-billion dinar fund to help resolve loans crisis

The government has been considering establishment of a multi-billion dinar fund as a measure to resolve the consumer loans crisis and to end the issue completely, reports Al-Shahed daily quoting an informed source.

He revealed that the government is intending to set up the fund with a capital of about KD 3-5 billion, which will be managed by Central Bank of Kuwait, indicating that it will prioritize payment of the loans of those debtors who were sentenced by the legal courts for their inability to pay off the loans.

He said the fund will afterwards deal with the loan payment of debtors of other categories with intermediate and long-term methods within different phases, depending on the situation.
Kuwait eyes multi-billion dinar fund to help resolve loans crisis