Egypt, June 9th 2025,
Higher inflation, Net Foreign Assets fall back, PMI higher but still below 50 !
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Projects - Arab Urban Development Institute .
Higher inflation, Net Foreign Assets fall back, PMI higher but still below 50 !
First,
Media, investigative journalists, bloggers .. We hear a lot those days about the death of traditional media, networks, newspapers. Mainstream in the eyes of many has lost all credibility. Like experts of all kinds. Now info channel is X! There are still a few though who make it a mission to dig deep and report.
One of them is Christo Grosev, a Bulgarian investigative journalist and author. Through hardwork and following invisible digital trails, immigration records, black market phone records, passenger manifests and more , he put the pieces together for the downing of the Malaysian jet over Ukraine 10 years ago, the assassination attempt in Salisbury of Russian defector Serguei Skripal, in the air of Alexander Navalny. All leading to the same place .
But now he has a target in his back : several spies were sentenced in UK for attempting to murder him. The cost for him , living now under police protection, always on his guard with disastrous effects on his family. Other countries have also been targeting the home family of exiled bloggers. But what can you say when in the land of the Free, reporting the “wrong “ story can land you a court case with punitive damages .
Now,
June 4th , the Central Agency for Public Mobilization and Statistics ( CAPMAS) released the latest inflation data.
· On an annual basis, the urban headline CPI rose by 16.8 % in May 2025 compared to 13.9 % in April. On a monthly basis, May saw a 1.9 % increase from -0.7 % in May 2024 and +1.3 % in April 2025.
· The core CPI as computed by the Central Bank was up 1.6 % in May on a m/m basis , an acceleration from +1.2 % in April and 13.1 % on annual basis from 10.4 %.
· The jump was higher than consensus, Reuters had it at +14.9 % y/y.
· The bulk of the increase came from Food & Beverages , rising at 11.2 % y/y . F&B represent a third of the CPI basket.
· The second largest item in the inflation basket , housing ( rents, utilities) at close to 20 % rose by 19.3 % y/y.
· As long as those surprises don’t repeat themselves, the CBE should not be too concerned as they still see a negative output gap due to weak growth.
Net International Reserves rose again in May at the same snail pace, 48.526 bn $ from 48.143 bn in April.
While the NFA’s, Net Foreign Assets’ position of the banking system, declined in April to 13.4 bn $ from 15.08 bn $. To put in context, March saw a steep increase of 4.9 bn $ and April was agitated by “ Liberation Day “ ! In April, offshore investors sold over 1.7 bn $ worth of bills and bonds on the secondary market.
Remittances jumped 82.7 % for the July-March 2025 period compared to same period a year ago to 26.4 bn $. March 2025 reached 3.4 bn $ from 2.1 bn in 2024.
March 2025 trade deficit came in narrower by 38 % to 2.5 bn $ from 4.1 bn $ a year ago on higher exports, +20.7 % , ( mostly a rise in value ) and lower imports , -10.7 %.
PMI , the non-oil PMI rose to 49.5 from 48.5, still in contraction territory. Firms report staffing levels contracting and volume of purchases declining at the fastest pace in 7 months. But softer contractions in output and new orders. Concerns though with input price pressure which could impact inflation coming. Cost of energy and raw materials which businesses increasingly pass to customers.
Positive although not quantified yet : reports that traffic through the Suez Canal is improving. Last year, Suez Canal receipts dropped by 60 % to 4 bn $..
Also positive, tourism’s revenues increasing.
Last week, Egypt’s President was visiting the UAE : strengthening bilateral relations, restoring regional stability on the agenda among other topics. A friend of mine was checking on Google map what was happening if anything was happening at Ras El Hekma. So far all looks quiet ; if anyone has more info, please share !
Market wise,
Statistics : maybe I was heard. The CBE released last week the Monthly Statistical Bulletins 336 and 337 ; so we have data until end of March.
· Offshore investors have increase their share of the total and their absolute exposure , still shy though of the peak of July 2024. As end of March, offshore holds 16.16 bn $.
· The amount of “collateral” is above the peak of November ( using 50.5 as spot reference for March and February) with 21.75 bn $.
I have been digging as well Egypt’s exposure on the local bond side as a few bond auctions have captured our attention lately ; the vast majority is made of fixed coupon bonds, the rest 8 to 12 % is variable and a sliver of Zero coupons.
· The peak is 2027 with 23.7 bn $ equivalent maturing ; 17 bn $ for 2026 and 7 bn $ for the rest of 2025. All local debt !
· One word on the 5 year bond after the two big auctions : although the report from the CBE indicates only one taker, we can guess it is the same account but no guarantee. After the first auction, the bonds quickly passed hands ( to foreign investors ? ) as indicated by EGX and secondary market reporting. No such thing for the second auction, only 700 mio EGP have changed ownership in the secondary market. So 19.3 bn are sill in the hands of the primary dealer.
Treasury bill auctions . They were held early last week and in quick succession due to Eid holidays. Wednesday for the 357 and 182 days’ bills and the 2-3-5 year bonds and Thursday for the 91 and 273 days .
· Not a great deal of enthusiasm on the bill side. Except the 3 month with a good cover ratio and slightly lower yield, the rest is sub- par with higher yields.
· On the bond side, only the 3 year found grace . The 5 year’s previous interest is absent for now. And seems to have moved to the 3 year although we see more bidders. Yields are also a bit higher.
· One precision, the 2-3-5 year bonds are constant re-issuances : so they bear the same coupons : since early May : the coupons are 22.262 for the 2 year, 21.333 for the 3 year and 19.98 for the 5 year.
A comparison : we often mentioned that the yields on the bills are not greatly attractive for locals . At the CBE’s weekly rate auctions ( adjudicated at the mid corridor rate, now 24.5 % ), 552.5 bn EGP were accepted on the 27th of May and 188.45 bn of the 3rd of June. Compared to the 92.5 bn accepted for auction settlement June 10th and 128 bn for June 3rd.
· FX, the spot continues to grind lower but a slower pace, from 49.70 last Sunday to 49.6417 on Wednesday but it was a shorter week ahead of holidays.
· The NDF curve also drifts lower, 1 year at 58.00 mid and 3month 51.80. The implied yield on the 3month NDF is going down a bit faster , now 21.7 % , than the 1year 21.75 %. There isn’t much room to wiggle on the 1 year between implied NDF and the 364 day yield ( taking into account the withholding tax ) . While there is a spread of almost 2 % on the 3mth still taking into account the tax. Best guess as was recommended by that same top US name : go long , unhedged ! So more interest on the shorter end and more selling interest on shorter NDF.
So as the adage says, the trend is your friend !
But a few disappointing numbers , PMI, inflation and most likely among other things, the IMF will highlight the lack of progress on the divestment side and the energy sector. It’s not going fast enough !
Thank you
DC