The losses of the Egyptian stock market widened for the third day in a row, less than three days before the upcoming meeting of the Central Bank of Egypt, amid expectations of raising interest rates, in addition to a new floatation of exchange rates.
Market experts expect that the next central meeting will witness an interest rate hike within the limits of 200 points, which will come in conjunction with a new announcement by national banks for new savings vessels with a high return.
Following the decision of the Central Bank of Egypt in March 2022, which witnessed an interest increase by 200 basis points and the liberalization of exchange rates, national banks announced at that time investment certificates with a return of up to 17.5%.
The high-yield and short-term savings vessels are a fierce competitor to the financial markets, as they attract liquidity in the markets in light of the high inflation rates.
With inflation rates in Egypt exceeding the CBE’s targets above 19%, it is expected that new investment certificates will be issued with a return of up to 20%.
market now
During today’s trading, Monday, the Egyptian stock market declined for the third day in a row, down from its highest level in more than 3 years, following it exceeded the levels of 15,000 points in the middle of last week.
The main index of the Egyptian market, EGX30, fell during these moments of Monday’s trading, within the range of 1.9%, or the equivalent of 250 points, down to levels near 14,757 points, while it recorded the highest point today at 14,917 points.
Within 3 days, and before the end of the market session on Monday, the losses of Egyptian stocks worsened, exceeding 800 points in less than 3 sessions, down from levels of 15,380 points on Wednesday to levels of 14,575 points, a decline of 5.2%.
Billion losses
And following the market value of Egyptian stocks approached a new record close to a trillion pounds, following gains that exceeded 300 billion pounds in less than three weeks.
Stock losses exacerbated to more than 35 billion pounds, down from levels of 985 billion pounds (EGX:JUFO) last Wednesday to current levels below 950 billion pounds.
Hc..200 points
The Research Department of HC Securities and Investment Group issued its expectations regarding the possible decision of the Monetary Policy Committee in light of the current situation in Egypt.
It expected the Central Bank of Egypt to raise the interest rate by 200 basis points in order to confront inflation at its next meeting scheduled for Thursday, December 22nd.
And last Friday, the International Monetary Fund announced the approval of its Executive Board for a 46-month cooperation program within the framework of the Extended Fund Facility (EFF) for Egypt at regarding $3 billion (equivalent to 115.4% of Egypt’s share in the fund).
This comes following the Federal Reserve concluded its two-day meeting, in which it decided to increase the interest rate by 50 basis points, bringing the total increase to 425 basis points since the beginning of 2022.
BN Paribas.. 200 points
BNP Paribas (EPA: BNPP) expects the Central Bank of Egypt to hold an extraordinary meeting before the International Monetary Fund discusses a financing agreement for Egypt at its December 16 meeting, according to a research note issued by the bank.
There are two days left until the International Monetary Fund meeting on Egypt, and this means that if BNP Paribas’ expectations are true, the Central Bank of Egypt will meet this week.
The French bank expected the Central Bank of Egypt to move more decisively towards floating the pound, and to raise interest rates by at least 2%.
counter inflation
The HC Securities and Investment report revealed: “It is expected that the Monetary Policy Committee will raise the interest rate by 200 basis points in order to confront inflation and attract inflows that benefit from the price differences.
The report pointed out that inflation accelerated in November, rising by 2.3% on a monthly basis and 18.7% on an annual basis, exceeding the bank’s estimate of 16.5%.
This acceleration, coupled with the current shortage of foreign capital inflows, has led to our expectation of an annual inflation rate of 19.1% in December, the bank said.
previous meeting
It is worth noting that, in a special meeting on October 27, the Monetary Policy Committee of the Central Bank of Egypt decided to raise the interest rate by 200 basis points and move to a permanent flexible exchange rate system.
In the last meeting, the Central Bank of Egypt decided to leave the forces of supply and demand to determine the value of the Egyptian pound once morest a basket of other foreign currencies, which resulted in a 14% decline in the currency price that day.
Accordingly, this led to a total rise in interest rates in Egypt in 2022 amounting to 500 basis points, while the value of the local currency fell by regarding 60% from levels of 15.7 pounds to the dollar on March 20 to current levels.
The markets are waiting
The Egyptian markets are awaiting the Central Bank’s decision on December 22nd, which comes following the IMF’s approval of Egypt’s obtaining a $3 billion loan with the receipt of the first installment of the loan.
The decision comes amid a state of concern regarding an extraordinary meeting similar to previous meetings that may witness a new depreciation of the Egyptian pound, especially following the Fund approved the loan with the condition of obtaining a permanent flexible exchange rate.
It is noteworthy that the official price of the Egyptian pound is currently near levels of 24.7 pounds to the dollar, while Archyde.com and CNBC reported, according to sources in the exchange market, that the price of the dollar in the parallel market approached 40 pounds to the dollar.
