Egypt's central bank will start foreign-exchange auctions today after appealing to Egyptians to scale back their use of dollars to avert a currency crisis fueled by the country's political turmoil.
The central bank said yesterday it will hold auctions to buy and sell dollars periodically after foreign-currency reserves dropped to the "minimum and critical level that must be preserved." They plunged almost 60 per cent to $15 billion since the revolt that ousted Hosni Mubarak almost two years ago. That covers three months of imports, central bank data show.
The move, announced hours after president Mohammed Morsi called for unity to end more than a month of escalated protests, is the latest attempt by the regulator to curb speculation that Egypt will devalue the Egyptian pound as the unrest delays an IMF loan. The currency, subject to managed float, has weakened 1.2 per cent this month while forward contracts show investors expect a 15 per cent drop in 12 months.
The auctions "are one of the central bank's final defense lines to prevent a disorderly devaluation of the pound as it awaits the resumption of negotiations with the IMF," Mohamed Abu Basha, an economist at investment bank EFG-Hermes in Cairo, wrote in a report. The auctions "will give a clear and transparent level of pricing for the local currency that market participants can monitor," he wrote.
The central bank called on Egyptians to "ration" their foreign currency use and support national industries. Egypt, the world's biggest wheat importer, abandoned a peg to the dollar in 2003 after foreign reserves plunged. The pound weakened 0.3 per cent last week to 6.1858 a US dollar, near the lowest level in eight years.
"It is now time for us to work toward the advancement of the Egyptian people as whole," Mr Morsi said in his first speech before the upper house of parliament, which now serves as the country's only legislative power until parliamentary elections, expected in two months. "There is no room for tyranny, discrimination or the absence of social justice. Regardless of the differences, all citizens are equal before the law and under this constitution."
The political turmoil has prompted Mr Morsi to delay a $4.8 billion IMF loan agreement, which his government says is crucial to lower borrowing costs and restart foreign investments. Egypt's credit worthiness was also lowered at Standard & Poor's last week to the same junk level as Greece and Pakistan, raising the government's borrowing costs.
* Bloomberg News
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Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
The specs: 2018 Ford F-150
Price, base / as tested: Dh173,250 / Dh178,500
Engine: 5.0-litre V8
Power: 395hp @ 5,000rpm
Torque: 555Nm @ 2,750rpm
Transmission: 10-speed automatic
Fuel consumption, combined: 12.4L / 100km
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
The Penguin
Starring: Colin Farrell, Cristin Milioti, Rhenzy Feliz
Creator: Lauren LeFranc
Rating: 4/5
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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The National Editorial: Is there much to celebrate on International Women's Day 2021?
COMPANY PROFILE
Guide to intelligent investing
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
COMPANY PROFILE
Start-up hopes to end Japan's love affair with cash
Across most of Asia, people pay for taxi rides, restaurant meals and merchandise with smartphone-readable barcodes — except in Japan, where cash still rules. Now, as the country’s biggest web companies race to dominate the payments market, one Tokyo-based startup says it has a fighting chance to win with its QR app.
Origami had a head start when it introduced a QR-code payment service in late 2015 and has since signed up fast-food chain KFC, Tokyo’s largest cab company Nihon Kotsu and convenience store operator Lawson. The company raised $66 million in September to expand nationwide and plans to more than double its staff of about 100 employees, says founder Yoshiki Yasui.
Origami is betting that stores, which until now relied on direct mail and email newsletters, will pay for the ability to reach customers on their smartphones. For example, a hair salon using Origami’s payment app would be able to send a message to past customers with a coupon for their next haircut.
Quick Response codes, the dotted squares that can be read by smartphone cameras, were invented in the 1990s by a unit of Toyota Motor to track automotive parts. But when the Japanese pioneered digital payments almost two decades ago with contactless cards for train fares, they chose the so-called near-field communications technology. The high cost of rolling out NFC payments, convenient ATMs and a culture where lost wallets are often returned have all been cited as reasons why cash remains king in the archipelago. In China, however, QR codes dominate.
Cashless payments, which includes credit cards, accounted for just 20 per cent of total consumer spending in Japan during 2016, compared with 60 per cent in China and 89 per cent in South Korea, according to a report by the Bank of Japan.
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Rating: 2.5/5
Planes grounded by coronavirus
British Airways: Cancels all direct flights to and from mainland China
Hong Kong-based Cathay Pacific: Cutting capacity to/from mainland China by 50 per cent from Jan. 30
Chicago-based United Airlines: Reducing flights to Beijing, Shanghai, and Hong Kong
Ai Seoul: Suspended all flights to China
Finnair: Suspending flights to Nanjing and Beijing Daxing until the end of March
Indonesia's Lion Air: Suspending all flights to China from February
South Korea's Asiana Airlines, Jeju Air and Jin Air: Suspend all flights
BABYLON
Nayanthara: Beyond The Fairy Tale
Starring: Nayanthara, Vignesh Shivan, Radhika Sarathkumar, Nagarjuna Akkineni
Director: Amith Krishnan
Rating: 3.5/5
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Other workplace saving schemes
- The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
- Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
- National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
- In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
- Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
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Shubh Mangal Saavdhan
Directed by: RS Prasanna
Starring: Ayushmann Khurrana, Bhumi Pednekar
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Formula Middle East Calendar (Formula Regional and Formula 4)
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Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
MATCH INFO
Uefa Champions League semi-final, second leg result:
Ajax 2-3 Tottenham
Tottenham advance on away goals rule after tie ends 3-3 on aggregate
Final: June 1, Madrid
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KEY DEVELOPMENTS IN MARITIME DISPUTE
2000: Israel withdraws from Lebanon after nearly 30 years without an officially demarcated border. The UN establishes the Blue Line to act as the frontier.
2007: Lebanon and Cyprus define their respective exclusive economic zones to facilitate oil and gas exploration. Israel uses this to define its EEZ with Cyprus
2011: Lebanon disputes Israeli-proposed line and submits documents to UN showing different EEZ. Cyprus offers to mediate without much progress.
2018: Lebanon signs first offshore oil and gas licencing deal with consortium of France’s Total, Italy’s Eni and Russia’s Novatek.
2018-2019: US seeks to mediate between Israel and Lebanon to prevent clashes over oil and gas resources.