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King Abdullah calls for Egypt aid after El-Sisi win

King Abdullah calls for Egypt aid after El-Sisi win
Saudi Arabia’s King Abdullah called for an international effort to raise funds for Egypt after his ally, former army chief Abdel-Fattah El-Sisi, won the country’s presidential election, according to Bloomberg.
Abdullah said friends of Egypt should hold an aid conference to pledge financial support, according to the official Saudi Press Agency, a call backed by his Gulf neighbor, the United Arab Emirates. The king also urged El-Sisi to engage in a national dialogue with those of his opponents who haven’t been involved in violence.
Saudi Arabia and the U.A.E. have led efforts among oil-rich Gulf nations to bolster Egypt’s economy since the military under el-Sisi seized power last year, ousting elected Islamist leader Mohamed Mursi and starting a bloody crackdown on his supporters. Mursi’s Muslim Brotherhood is anathema to many of the Gulf’s absolute monarchies because it seeks to bring political Islam to power via the ballot box.
Egypt “needs us today more than ever,” King Abdullah said. He called for a donor conference “to help Egypt out of its economic crisis,” according to SPA.
Since the army takeover, Saudi Arabia, the U.A.E. and Kuwait have pledged about $15 billion in aid, helping to prop up foreign-exchange reserves and limit declines in the Egyptian pound. Even with that backing, Egypt’s $280 billion economy is still growing at the slowest pace in two decades, as tourists and investors stay away amid political unrest.
The U.A.E. expressed support for King Abdullah’s proposed aid conference, the official WAM news agency reported, citing the crown prince of Abu Dhabi, Sheikh Mohammed Bin Zayed Al Nayhan. The U.A.E.’s foreign minister said last week that its search for partners to support Egypt includes the International Monetary Fund and the World Bank.
Commenting on the news, Hany Genena, Pharos Research, revived a STRONG BUY recommendation on Egypt and reiterate his views on the sequence of events.
“El Sisi or his economic team will announce a large aid package in the short term. The package will be implicitly tied to the execution of energy subsidy reforms. In our view, FY-2014/15 reforms will be the most aggressive in terms of scope and magnitude to ensure front-loaded disbursement of financial aid. These reforms will likely include increases in gasoline and possibly diesel prices, which collectively account for almost 65% of energy subsidies,” the analyst said.
If smoothly absorbed by households and companies, the long-awaited decline in the structural component of the deficit will trigger a steep recovery in the EGP carry trade, which will push treasury yields to new record lows of around 7% after tax and the EGP up towards the 7 mark versus the US$. In fact, the CBE will likely execute sterilized intervention operations to replenish reserves and prevent a steeper appreciation, according to Genena.
He expected EGX30 to rally to the 8,500 level over the coming five sessions and will likely flirt with the 9,500 mark before end of year.