Egypt to allocate 20bn Egyptian pounds to support bourse amid virus fears

A member of medical team is seen beside a banner for the Egyptian President Abdel Fattah el-Sisi, as he sprays disinfectant as a precautionary move amid concerns over the coronavirus disease (COVID-19) outbreak at the underground Al Shohadaa "Martyrs" metro station in Cairo, Egypt March 22, 2020. (Reuters)
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Updated 22 March 2020

Egypt to allocate 20bn Egyptian pounds to support bourse amid virus fears

  • El-Sisi had ordered the amount to finance a “comprehensive” state plan for tackling the disease

CAIRO: Egypt will allocate 20 billion Egyptian pounds ($1.27 billion) to support the stock exchange, President Abdel Fattah El-Sisi said on Sunday, after share prices were battered by the economic impact of the spreading coronavirus.
The government had already announced a raft of measures aimed at protecting the economy against the global repercussions of the spread of the coronavirus, including a 3% interest rate cut, reducing energy prices for industrial users and cutting the tax on company dividends.
Egypt’s blue chip index .EGX30 has plunged over 30% since late February, when coronavirus fears escalated, but it rose 5.9% in trading on Sunday, with 25 of the thirty stocks in the index rising.
El-Sisi had ordered the allocation of 100 billion Egyptian pounds ($6.37 billion) to finance a “comprehensive” state plan for tackling the disease.
The outbreak – which is having a crippling impact on the global economy – is set to damage Egypt’s vital tourism sector, which accounts for about 12% of gross domestic product.
“From mid-2019 until today, the pressures faced by the global economy and the Egyptian economy have been huge, and believe me ... if it weren’t for our reform plan we would not have been able to survive the repercussions,” El-Sisi said in televised comments.
In 2016, Egypt agreed a $12 billion IMF loan tied to deep economic reforms including a steep devaluation of the pound, deep cuts to its energy subsidies and the introduction of new taxes.
“Now we wish to come out of this crisis with the least damage. The damage here is not economic, no, no, our people are precious to us,” El-Sisi said.
The country has so far registered 294 cases of the respiratory disease, including 10 fatalities, the health ministry said on Saturday.
El-Sisi also said that Egypt had enough strategic reserves of basic foods such as rice and sugar and that there was no need for people to rush to stock up.
Supply Minister Ali Moselhy had said last week that the country had wheat stocks sufficient for 3.5 months of consumption ahead of the local harvest season, as well as months-long stocks of vegetable oils, sugar and rice. ($1 = 15.7000 Egyptian pounds)

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S&P cuts Australia’s sovereign outlook, affirms AAA rating

Updated 08 April 2020

S&P cuts Australia’s sovereign outlook, affirms AAA rating

  • S&P affirmed Australia’s prized rating but said a downgrade was possible within the next two years
  • Australian long-dated bonds sold off after S&P’s outlook downgrade

SYDNEY: Global ratings agency S&P on Wednesday lowered its outlook on Australia’s coveted ‘AAA’ rating to “negative” from “stable” in anticipation of a “material” weakening in the government’s debt position as it splashes out a large fiscal stimulus package.
S&P affirmed Australia’s prized rating but said a downgrade was possible within the next two years if the economic damage from the COVID-19 outbreak is more severe or prolonged than it currently expects.
Australia is among a handful of countries in the world to boast the best ranking from all three major ratings agencies.
But it has come under a cloud as the pandemic has dealt Australia a severe economic and fiscal shock, with S&P predicting the A$2 trillion ($1.23 trillion) economy would plunge into recession for the first time in nearly 30 years.
This would cause a “substantial deterioration of the government’s fiscal headroom at the ‘AAA’ rating level,” S&P said in a statement.
Treasurer Josh Frydenberg said the outlook downgrade was “a reminder of the importance of maintaining our commitment to medium term fiscal sustainability.”
The government has pledged A$320 billion ($197.73 billion) in fiscal spending, or 16.4 percent of annual economic output, to backstop the economy and prevent a crisis as the pandemic shuts companies and leaves many unemployed.
Some fund managers said Wednesday’s outlook downgrade was unlikely to raise the government’s borrowing costs by much though it could hurt Australian companies whose ratings are dependent on the sovereign rating.
“A large proportion of credit funds are mandated to maintain funds in a specific ratings bucket,” said Asmita Kulkarni, Director Investment Strategy at FIIG.
“With potential widespread downgrades we could see funds being forced to sell-down investment which would result in a widening of credit spreads.”
Australian long-dated bonds sold off after S&P’s outlook downgrade with 10-year yields jumping to 0.967 percent from 0.909 percent at Tuesday’s close.
Economists said they do not expect a rating downgrade prior to the federal budget due on Oct. 6.
It was only in September 2018 that S&P upgraded Australia’s outlook to “stable” from “negative” as the budget came close to balance. The government had even projected a surplus for the current fiscal year and next.
While all those predictions are now under water, Australia’s public debt is still in good shape, S&P noted.
“While fiscal stimulus measures will soften the blow presented by the COVID-19 outbreak and weigh heavily on public finances in the immediate future, they won’t structurally weaken Australia’s fiscal position,” S&P said.
“This expected improvement is a key supporting factor of our ‘AAA’ rating.”