KEY THEMES
Yesterday’s market performance started off with a positive aura as investors bid petrochemicals and fertilizers stocks higher as key beneficiaries of new amendments to the investment law (please read on). Later on, the market sentiment was probably dampened on fears of possible imposition of measures to fend off COVID-19 cases recently rising in the country. On Sunday, Egypt’s House of Representatives greenlighted amendments to the investment law, which will see operators in natural gas-intensive industries able to apply for licenses to work in free zones. Those industries include refining, liquefaction, and transportation of natural gas, and fertilizers and petrochemicals production. Meanwhile, here are our takeaways. First off, this is not fresh news; these amendments have already been proposed by the Egyptian government back in May. The only news was the Parliament’s approval to make these amendments part of the Investment Law. That said, the new amendments have not specified whether the free-zone status will be applicable to all existing companies or exclusive to new ventures only. We tend to believe that if the amendments are meant to attract new investments into Egypt, it makes more sense for the free-zone status to be offered only to new ventures. That said, if the amendments do apply to existing companies, they would prop up the valuation of petrochemical and fertilizers quite swiftly. In this case, Abu Qir Fertilizers [ABUK], MOPCO [MFPC], Egypt Kuwait Holding Co. [EKHO], Kima [EGCH], and Sidi Kerir Petrochemicals [SKPC] are strong prospects to bear the fruit. On the other hand, if the amendments are only applicable to new projects, we think ABUK will be the more apparent beneficiary, given its plans to inaugurate a new methanol factory. Meanwhile, it is rather doubtful for SKPC to see a significant progress in setting up its polypropylene plant. We note that MFPC had been operating under a free zone status before its license was withdrawn in accordance to law No. 114/2008.