Credit rating shake-up, real estate boom, & low PMI

Egypt Claps

The Clap?

Moody’s downgraded Egypt’s credit rating from B3 to CAA1.?

What?

A CAA1 is 7 levels away from an investment grade rating, which means a high credit rating.?

The downgrade was due to Egypt’s inability to pay its debt, a foreign currency shortage, and an increased foreign debt, according to the American credit rating agency.?

So What

Following the news, Egypt’s USD bonds sharply dropped, reaching 50 cents to the dollar, according to Bloomberg.?

Now What

Moody’s has adjusted Egypt’s outlook to “stable,” signaling its anticipation that Egypt will maintain its CAA grade.?

The decision was based on the International Monetary Fund (IMF) program’s ongoing assistance and Egypt’s ability to make progress in the reform program.?

Some Context

In related news, IMF Head Kristalina Georgieva said that Egypt must consider currency devaluation; otherwise, its foreign currency reserves will “bleed."

The Clap

Madinet Masr and Palm Hills both reported sales figures exceeding expectations.

What

The real estate developers achieved large sales figures since the start of 2023.

Madinet Masr achieved its sales targets for the year by August, recording the highest contractual sales figure in its history.

Palm Hills achieved new sales of EGP 35 billion compared to EGP 17.5 billion for the same period last year.

So What?

The real estate market is exposed to increased raw material and building costs on the back of inflation and import hurdles. Companies are rushing to build their projects as fast as possible to mitigate many risks.

Now What

The companies are yet to issue their Q3-23 earnings release, which would offer more insights.

The Clap

S&P’s Purchasing Managers Index (PMI) for Egypt decreased to 48.7 in September 2023.?

Claps Class

The PMI is a monthly economic indicator measuring the health of the non-oil private sector. Above 50 indicates expansion, and below 50 indicates contraction.

What

The rate was down for many reasons, including:?

• Increased backlog of incomplete work orders?
• Weak exchange rate that led to high input costs?
• All-time-high inflation rate?
• Liquidity issues?

So What?

The rate shrank from 49.2 in August, marking the lowest rate in four months.?

Now What

According to the report, companies decided to retain their inventories and increase their workforce in fear that prices would continue to rise.