Actis LLP and Edra Power Holdings Eye Egypt's Power Plant in a $2 Billion Boost to Asset-Sale Plan

Traders' Opinions

In a significant development for Egypt's asset-sale plan, Actis LLP and Edra Power Holdings Sdn Bhd are reportedly considering the acquisition of a major power plant in Beni Suef. The power plant, co-built by Siemens AG, could fetch a staggering $2 billion, injecting a substantial boost to Egypt's economy while reducing its debt and attracting foreign investment.

The Beni Suef power plant is part of a trio of power plants that were inaugurated in 2018 by President Abdel-Fattah El-Sisi. Together, these plants possess a remarkable total capacity of 14.4 gigawatts, making them vital components of Egypt's energy infrastructure.

The potential acquisition of the power plant by Actis LLP and Edra Power Holdings signifies a significant stride in Egypt's ongoing efforts to divest state-owned assets. Under the country's broader asset-sale plan, valued at $9 billion this year, Egypt aims to offload shares in various ports and hotels.

The move holds promising implications for Egypt's economy as it seeks to attract foreign investment and stimulate private sector growth. By leveraging the sale of state assets, Egypt can strengthen its financial position, reduce debt burdens, and foster an environment conducive to entrepreneurial initiatives and market competitiveness.

Actis LLP and Edra Power Holdings' interest in the Beni Suef power plant underscores the growing appeal of Egypt's energy sector among global investors. The country's strategic geographical location, coupled with its commitment to sustainable development and energy diversification, makes it an attractive investment destination.

If the deal goes through, Actis LLP and Edra Power Holdings will assume ownership of a significant power generation asset, consolidating their positions in the energy market and fortifying their investment portfolios. At the same time, Egypt will benefit from increased foreign capital inflows and enhanced efficiency in its power infrastructure.

Egypt's asset-sale plan has been met with enthusiasm from investors, highlighting the international confidence in the country's economic trajectory. As Egypt continues to implement reforms, such as enhancing regulatory frameworks and streamlining investment procedures, it positions itself as an emerging market ripe with opportunities.

While the potential acquisition of the Beni Suef power plant still requires further deliberation and regulatory approvals, the mere interest from Actis LLP and Edra Power Holdings sends a positive signal to the global investment community. Egypt's commitment to privatization and attracting foreign investment is set to propel its economic growth and secure a prosperous future.

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Thomas

Economic

While retail trade continued its double-digit growth trend for the first three months of this year, it was in stark contrast to the drop in consumer sentiment recorded in the same period, and the largely disappointing corporate earnings reported by consumer-related companies on Bursa Malaysia.

Indeed, the latest March retail trade data released last month by the Department of Statistics Malaysia marked the 14th straight month of double-digit growth since February 2022, but at a slower pace of 17.7% compared with February's 19.2% and January's 21.7%.

While the double-digit growth is still notable, economists said the latest figure should be considered in the context of the low base in the year-ago quarter when economic activities were still affected by lockdown disruptions and consumer spending had yet to recover.

Meanwhile, consumer sentiment, as measured by the Consumer Sentiments Index (CSI) produced by Malaysian Institute of Economic Research, fell below the 100-point optimism threshold to 99.2 points for the 1Q2023 period, down 9.7 points from 108.9 points in March 2022, and 6.1 points lower than 4Q2022's 105.3 points. The index, compiled by MIER using a quarterly survey conducted to gauge consumer spending trends and sentiments. Malaysia: Consumer Spending Seen Softening in Coming Months as Inflation, Economic Concerns Weigh_1

Malaysia: Consumer Spending Seen Softening in Coming Months as Inflation, Economic Concerns Weigh_1

Malaysia: Consumer Spending Seen Softening in Coming Months as Inflation, Economic Concerns Weigh_2

"MIER's CSI fell because some components of the index did not perform well. Specifically, expected job prospects and income pulled the measure down. Also, households were anxious about inflationary expectations. These factors weighed on the index," Dr Shankaran Nambiar, senior research fellow at the Malaysian Institute of Economic Research or MIER, told The Edge.

The CSI is a gauge of forward-looking expectations that reflect consumers' anticipation or concerns. So, a deterioration in the index means consumers are wary about upcoming risks to the economy, such as recession and rising costs of living. Hence, it indicates consumers may be more mindful of their spending, going forward.

"The MIER CSI has fallen to below 100 points, and notice how DOSM's [retail trade data] dissipating base effects have appeared to take shape. The lack of growth catalyst, unlike Malaysia's post-pandemic economic reopening, is also a factor in why things are moving the way they do now," said Bank Islam chief economist Firdaos Rosli.

Stable job market, tourist arrivals to mitigate slowdown

Economists The Edge spoke to expect growth in consumer spending to moderate in the next six to 12 months amid multiple headwinds ahead that would curb demand, but a stable job market and rising tourist arrivals will mitigate the slowdown.

"Naturally, consumers would be quite guarded in their spending plans as higher cost of living would make them more mindful of their budget. But I do not think consumer spending would decelerate sharply as the labour market condition is still conducive. It's more like a normalisation of the growth trend, since we saw 11.3% growth in private consumption last year — which was way above the [average] growth of 7%. My estimates for private consumption growth this year is around 5.8% and 6%," said Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid.

AHAM Capital said the era of "revenge" spending fuelled by measures such as Employees Provident Fund (EPF) withdrawals, loan moratoriums and government handouts are over. That, coupled with the rise in overnight policy rate to 3% this year, could dampen consumer spending.

"Furthermore, the cost of doing business is on the rise, resulting in higher prices for consumers. Factors such as increased utility costs and higher minimum wages have contributed to this upward pressure. The government's decision to lift subsidies on chicken and eggs in July may also lead to higher prices if commodity prices persist at stubbornly high levels.

"A notable trend among major retailers is the phenomenon of down-trading, wherein consumers are opting for lower-priced and smaller-packaged items. This shift reflects a moderation in consumption. The recent weakening of the ringgit against other currencies has further exacerbated the situation, as imported goods become more expensive," the asset management firm said.

Things could turn out differently if the ringgit strengthens, with a pause in OPR hikes, which may alleviate some of the inflationary pressures on household budgets, AHAM Capital noted.

The factors that could affect the consumers' spending outlook are greater-than-expected inflationary pressure that reduces consumers' spending ability, a higher-than-expected interest rate hike, and weaker-than-expected labour and wages prospects, said MIDF Research analyst Genevieve Ng Pei Fen.

Ng is positive about consumer spending on essential items with competitive pricing. "We think that demand for F&B [food and beverage], poultry, and consumer-staple retailers should remain stable in the near term. The increase in tourist movement should also support out-of-home consumption, benefiting F&B players, poultry players, and convenience stores."

Other headwinds that could affect consumer sentiment are possible escalation in the US and China trade war, and the upcoming state elections in Malaysia, said Bank Islam's Firdaos.

The first, together with the ongoing Ukraine-Russia war, could weigh on global economic growth and disrupt supply chains, while the upcoming state elections could pose domestic political risks and weigh on consumer sentiment, particularly in terms of private investments, Firdaos said.

Source: The Edge Malaysia

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Kevin Du

Cryptocurrency

Other U.S. crypto exchanges are likely to be in the firing line after the Securities and Exchange Commission (SEC) this week sued Coinbase and Binance, two of the world's largest crypto exchanges, for allegedly breaching its rules.

The SEC on Tuesday alleged Coinbase traded at least 13 crypto assets that are securities and which should have been registered, while on Monday it also accused Binance, the world's largest cryptocurrency exchange, of offering 12 cryptocurrency coins without registering them as securities.

The lawsuits expand the overall number of cryptocurrencies that the SEC has explicitly identified as securities. That raises questions about other exchanges that have also allowed U.S. investors to trade those tokens, such as Kraken, Gemini, Crypto.com and Okcoin, and whether they could be at risk of regulatory action, industry executives said. Some exchanges may look to de-list the tokens in question.

"All U.S. exchanges should now be on notice that they may be subject to enforcement action if they permit, or have permitted, these tokens to be traded," said Jason Allegrante, chief legal and compliance officer at Fireblocks, a digital asset infrastructure provider.

A spokesperson for crypto exchange Bitstamp said the company takes "all new regulatory developments very seriously" and is "currently reviewing the new information that has come out this week to determine what actions to take."

Both Coinbase and Binance deny the SEC's allegations and have pledged to vigorously defend themselves in court. The SEC declined to comment.

While crypto companies started out in a regulatory gray area, the SEC under the leadership of Gary Gensler has steadily asserted the agency's jurisdiction over the industry, arguing most tokens meet the definition of a security and should be subject to the same strict disclosure rules.

The agency has brought more than 130 crypto lawsuits and settlements to date, according to data from consultancy Cornerstone Research and the SEC website, and in several of those cases has named specific tokens as securities.

The Coinbase and Binance suits this week expand that list to include some commonly traded tokens, such as Solana, Cardano and Polygon.

"We would not be surprised to see more lawsuits from the U.S. regulators, and possibly the Department of Justice, in the next few weeks," said Scott Freeman, co-founder of JST Digital, a financial services firm focusing on digital assets.

A spokesperson for the Justice Department declined to comment.

Crypto companies, including Coinbase and Binance, dispute the SEC's authority, saying many tokens are more akin to commodities, and have repeatedly called for regulators to create clear rules rather than assert their jurisdiction via enforcement actions.

"We do not list securities. For every asset we list, our teams conduct thorough risk and security evaluations which includes a comprehensive legal and compliance process. We will continue to closely monitor this case and others for precedential rulings," a spokesperson for Kraken said.

Gemini, Crypto.com and Okcoin did not immediately respond to a request for comment.

'Destroy the crypto economy'

The latest lawsuits will play out in court, which could take years. An SEC suit alleging Ripple's XRP token is a security, for example, has been under litigation for more than two years.

But whether the SEC wins or loses, the suits send a strong signal to the industry that the agency is not going to let up, executives said. While big crypto companies can afford to fight the SEC, smaller companies have filed for bankruptcy following SEC enforcement actions, including crypto exchange Beaxy.

"I don't think that this SEC under this leadership necessarily cares whether they win or lose in the courts. I think what they are engaging in is a coordinated campaign to essentially destroy the crypto economy in the United States," Stuart Alderoty, chief legal officer at Ripple, told the Piper Sandler Global Exchange & Fintech Conference in New York on Wednesday.

Gensler has suggested an industry shake-out would be good for investors.

"I disagree with the notion ... that crypto intermediary compliance isn't possible," Gensler said in a speech on Thursday, adding however that "it takes work."

According to analysts at Bernstein, roughly 90% of crypto trading already takes place outside the U.S. Executives said they expected exchanges to continue to expand into international regions that have more favorable regulations.

Coinbase, for example, has previously said it would consider moving its global headquarters outside of the U.S.

"I would imagine that other firms spooked by the prevalent trend for regulation by enforcement will follow suit," said Katharine Wooller, business unit director at Coincover, a provider of insurance for digital assets.

Source: REUTERS

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Warren Takunda

Traders' Opinions

Growing disillusionment among members of the Russian elite regarding President Vladimir Putin's ability to secure victory in the ongoing war against Ukraine has prompted calls for a peaceful resolution to end the conflict. Several anonymous sources within Russia's political and business circles have revealed deepening concerns, reflecting a shift in sentiment among influential figures who previously supported Putin's aggressive stance. Former Russian government advisor Alexander Petrov, now residing in Vienna, has also voiced skepticism regarding the war's outcome.

The war between Russia and Ukraine has been raging for over a year, resulting in significant casualties and humanitarian crises on both sides. Recent events, including a massive flood in Ukraine's Kherson region allegedly caused by Russian sabotage of a dam, have further exacerbated the situation. Attacks on Russian soil, such as drone strikes in Moscow and shelling near the Ukrainian border in Belgorod, have added to the mounting challenges faced by Russia.

The international community has unequivocally condemned Russia's invasion of Ukraine and has been providing military and economic support to Ukraine in response. In a significant move, the United States has announced its decision to permit its allies to supply F-16 fighter jets to Ukraine, bolstering their defense capabilities. China has called for a diplomatic resolution and urged nations to cease arms deliveries to the conflict zone. Furthermore, Sweden has expressed its intention to join NATO, garnering support from US President Joe Biden.

Within Russia, the war has ignited internal divisions, particularly among nationalist groups led by Yevgeny Prigozhin, the founder of the Wagner mercenary group. These factions have vehemently criticized the Russian military leadership, citing incompetence, and are demanding a comprehensive mobilization and the implementation of martial law. Prigozhin has also accused defense officials of planting explosives along the retreat route of Wagner forces, deepening the rift within Russia's power structures.

While the conflict continues to exact a heavy toll on both military personnel and civilians, ordinary people on both sides are enduring immense suffering. In Ukraine, mothers have displayed immense bravery, risking their lives to cross the front lines and rescue children abducted by Russian-backed separatists. Some Ukrainian civilians have returned to their homes near the front line despite the inherent dangers, as they have nowhere else to seek refuge. Simultaneously, a number of Russians have chosen to leave their country during the war, seeking asylum or better opportunities abroad.

The war's complex and tragic nature presents a challenging and uncertain path forward. The waning confidence within the Russian elite and their calls for a peaceful resolution illustrate a growing recognition of the war's costly implications. While the international community intensifies its support for Ukraine, pressure mounts on President Putin to reconsider his strategy and explore diplomatic avenues to bring an end to the protracted conflict.

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Alex

Political

Economic

Mexican President Andres Manuel Lopez Obrador this week intervened in the increasingly fractious race to succeed him, a move party insiders said was aimed at warding off potential division and protecting the commanding political power base he has built.

Under pressure for months from Foreign Minister Marcelo Ebrard to get contenders seeking the presidential nomination of the ruling National Regeneration Movement (MORENA) to step down before campaigning, Lopez Obrador this week finally went along with the idea, according to three party sources familiar with the matter.

In a dinner with party leaders in Mexico City on Monday, Lopez Obrador proposed that MORENA's contenders resign to ensure a level playing field, and that the party this weekend decide on rules for the selection process, the sources said.

"He's closing every loophole to prevent any disagreement," one of the sources said, speaking on condition of anonymity.

The president's office did not reply to a request for comment.

On Thursday morning, Lopez Obrador was asked about what was discussed at the MORENA dinner, and said: "We spoke of the need to remain united to guarantee the transformation of Mexico."

Ebrard, a leading contender to succeed Lopez Obrador, on Tuesday announced that he would step down next week. Ebrard's main rivals are likely to follow suit soon, the president himself suggested on Wednesday.

MORENA is expected to pick a candidate as soon as September. Mexico's next presidential election is in June 2024.

In public, the MORENA hopefuls have largely maintained a veneer of civility. But sniping between the rival camps behind the scenes has begun to erode the image of all-conquering unity the president tries to project for his party.

Under Lopez Obrador, MORENA in less than five years has replaced the Institutional Revolutionary Party (PRI) as the establishment party. On Sunday, it captured Mexico's most populous state after nearly a century of PRI rule.

However, in another election in the northern state of Coahuila that day, MORENA suffered a crushing defeat after infighting split its vote.

Lopez Obrador has been urging MORENA to fight for a two-thirds congressional super-majority next year.

That could allow him to push through contentious constitutional changes to the judiciary, which has persistently impeded his efforts to increase state control over the economy, before he leaves office on Sept. 30, 2024.

If MORENA is roiled by internal dissent, the prospect of such control looks remote.

Unity

MORENA now controls the federal Congress, over two-thirds of Mexico's states, and opinion polls make it the hot favorite to win the 2024 presidential election.

Lopez Obrador's personal popularity has bolstered support for his party. But under Mexican law, presidents may only serve a single six-year term.

Because of MORENA's dominance, the contest to secure the party's candidacy has become a virtual de facto presidential election in the eyes of many analysts.

Most recent polling gives Mexico City Mayor Claudia Sheinbaum a slight edge over Ebrard in the succession battle, and senior aides to the president have told Reuters they believe she is Lopez Obrador's preferred candidate.

He has repeatedly denied this, and insisted that the process be transparent and beyond reproach.

Ebrard, a veteran aide of Lopez Obrador who succeeded him as Mexico City mayor in 2006, has aired concerns that rivals such as Sheinbaum with domestic political mandates have an advantage, and that all contenders should therefore give up their office.

Those concerns have fed the impression that Ebrard might leave MORENA for another party, which the president is eager to avoid, said Andres Rozental, a former deputy foreign minister.

Ebrard has dismissed talk he could leave MORENA.

"The most important thing for Lopez Obrador right now is to keep his movement united and alive," Rozental said.

As recently as Monday, Sheinbaum was saying she had no intention of stepping down before the MORENA selection process had concluded. She was unaware what the president would propose that very evening, according to one of the party sources.

Her office had no immediate comment.

Having to resign would take away Sheinbaum's main platform, working to Ebrard's advantage, Rozental said.

But he still expected her to prevail in the end - and for the president's exhortations for the contenders to play by MORENA's rules, and remain civil, to be obeyed.

Not to do so, he said, would be "almost suicidal."

Source: Reuters

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Warren Takunda

Cryptocurrency

In a stunning revelation that has sent shockwaves through the cryptocurrency community, Binance, one of the world's largest cryptocurrency exchanges, has come under fire for its alleged involvement in a money trail totaling a staggering $70 billion. According to a recent article published by Gulf News, Binance and related entities are believed to have shuttled this vast sum of money through accounts at now-defunct Silvergate Bank and Signature Bank from 2019 until present¹.

The Securities and Exchange Commission (SEC) has filed a lawsuit against Binance, citing "blatant disregard" for US securities laws, which include allegations of mishandling customer funds and misleading investors and regulators¹. These allegations pose a significant threat to the reputation and operations of Binance, a platform that has played a pivotal role in the global cryptocurrency market.

Silvergate Bank, once a prominent financial institution catering to cryptocurrency users, met an unfortunate demise earlier this year. The collapse of Silvergate Bank in March 2023 was precipitated by a sharp decline in cryptocurrency prices and the bankruptcy of FTX, another major player in the digital asset space²⁵. Signature Bank, headquartered in New York, is another institution that has served crypto clients, and it appears to have been involved in facilitating the substantial money transfers connected to Binance¹.

The revelation of this colossal money trail has raised concerns about the transparency and compliance practices within the cryptocurrency industry. With the SEC's lawsuit against Binance, regulatory bodies are likely to intensify their scrutiny of exchanges and platforms, aiming to ensure investor protection and maintain the integrity of the financial markets.

The $70 billion figure underscores the scale and magnitude of Binance's operations, as well as the potential risks associated with the unregulated nature of the cryptocurrency ecosystem. The ease with which such substantial amounts of money were transferred raises questions about the effectiveness of existing anti-money laundering (AML) and Know Your Customer (KYC) protocols within the industry.

While Binance has yet to issue an official statement regarding the allegations made by the SEC, the outcome of this legal battle could have far-reaching implications for the exchange and the broader cryptocurrency market. Investors and users are likely to closely monitor the proceedings, as the outcome may impact their trust in Binance and other similar platforms.

As the cryptocurrency market continues to evolve and gain mainstream recognition, regulatory authorities worldwide face the challenge of striking the right balance between fostering innovation and protecting investors. The Binance case represents a crucial test for regulators to demonstrate their ability to maintain fair and transparent markets within this rapidly expanding industry.

It remains to be seen how Binance will navigate through these troubled waters. However, this latest development serves as a stark reminder of the need for greater regulatory oversight and scrutiny in the cryptocurrency space to safeguard the interests of all stakeholders involved.

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Alex

Economic

Wealth increase led by equity market gains

The value of assets held by U.S. households increased by $3.05tn in the first three months of the year, taking the total assets held by the household sector to $168.5tn. Liabilities rose just $23bn to $19.6tn, leaving net household worth at $148.8tn. Rising equity markets was the main factor leading to the increase, but holdings of debt securities increased $893bn. These factors more than offset the $617bn drop in household wealth in real estate and the $415bn decline in cash, checking and time savings deposits held by U.S. households.

Excess savings are dropping

We have to remember that March saw the collapse of Silicon Valley Bank and Signature Bank with deposit flight hitting many of the small and regional banking groups. We have subsequently seen this situation stabilize although some money that would typically be left in banks has been switched to money market funds. Nonetheless, we do appear to be seeing much of the excess saving built up during the pandemic via stimulus payments and extended and uprated unemployment benefits being eroded – it is now "only" around 1.8tn above where we would expect it to be based on long run trends. This is especially the case now that households have an apparent appetite to spend, particularly on services. U.S. Household Wealth Rose $3tn in the First Quarter_2

U.S. Household Wealth Rose $3tn in the First Quarter_2

Household balance sheets in a good position to help limit the downside from a recession

After the most rapid and aggressive period of interest rate hikes seen in over 40 years plus the tightening of lending conditions currently being experienced in the U.S., recession fears are mounting. Households will play a huge role in how prolonged and deep any downturn will be given consumer spending accounts for more than two-thirds of economic activity in the United States.

U.S. Household Wealth Rose $3tn in the First Quarter_3

Household assets are 860% of disposable income while liabilities are 'just" 100% of disposable incomes. While this is down on the peak seen in 1Q 2022 and there are questions over wealth concentration, this is a much better position than any previous recessionary environment and means that the consumer sector should be better able to withstand intensifying economic headwinds. Consequently, we remain hopeful that a likely 2023 recession will be modest and short-lived assuming a swift easing of monetary policy from the Federal Reserve.