Dear followers, welcome to a new live broadcast of the most significant events and reports presented by the Banker Research Unit throughout the day today, Saturday, August 3.
We begin with an important report on the reason behind the recent increase in the dollar’s price…
The report indicated that the price of the US dollar had been calm and stable in the Egyptian banking market since last March. However, it abruptly started to rise, which was explained by data from the Egyptian Stock Exchange showing significant sales of Egyptian treasury bills by foreign investors in recent days. This selling was prompted by increasing geopolitical tensions following the assassination of a Palestinian leader in Iran and subsequent threats from Iran and Hezbollah to retaliate against those responsible for the assassination of Haniyeh.
The report elaborated that these recent events led investors who engage in short-term trading of government debt instruments, such as treasury bills, to withdraw their funds for fear that the conflict in the Middle East might escalate, jeopardizing their investments.
It was noted that foreign investors shifted from the prevailing trend since the last devaluation of the pound in March, opting to sell Egyptian treasury bills over the past week, recording a net sale of 14.46 billion pounds (approximately 297 million dollars), according to the Egyptian Stock Exchange. This serves as a negative indicator that suggests a potential new crisis.
Banker reported that over the past week, the exchange rate of the dollar in Egyptian banks rose to its highest levels since the pound’s flotation in March, reaching EGP 48.72 and nearing EGP 49. Naturally, the dollar’s price movement in the market was a direct consequence of the significant sell-off of Egyptian treasury bills; despite this, net foreign assets remain at reasonable levels compared to the pre-float period, amounting to $14.8 billion against a deficit exceeding $29 billion.
By the end of last June, foreign investments in stock portfolios, commonly referred to as “hot money,” totaled $35.5 billion.
The next report, presented by the Banker Research Unit, shifted focus to the prospect of an upcoming $40 billion deal.
The report noted that, despite rising costs for gasoline, diesel, train tickets, and electricity, as well as increasing prices for goods and transportation, Dr. Mostafa Madbouly addressed the economic situation and acknowledged the existing challenges without denying them. However, during his speech, he made a statement that went unnoticed by many: he suggested that what is forthcoming is better. Some interpreted Dr. Madbouly’s words as merely an attempt to encourage patience in light of recent price hikes for petroleum products, transportation, and electricity. However, the Banker unit continued to investigate the meaning behind this statement and ultimately uncovered an impressive development poised to transform the Egyptian economy.
The report added that certain information indicated a significant deal that will surpass the Ras El Hekma deal, with initial investments reportedly reaching $40 billion. Yes, you heard right—$40 billion. The details reveal that the project will also be located on the North Coast and will encompass entertainment, tourism, industry, commerce, hotels, a duty-free market, global brands, and extensive nightlife.
The sources claim that this deal is about to be announced in collaboration with a Gulf state. We’ll leave it to you to connect the events surrounding the recent visit of an important Gulf guest to Egypt. The deal in question has nearly completed all its details, with only the timing of the announcement remaining, which is expected soon. This development explains Dr. Madbouly’s remark that better times are ahead.
The Banker report noted that, despite the gradual removal of subsidies on gasoline, diesel, electricity, and train tickets, all indicators suggest that a major breakthrough is on the horizon, fueled by a significant influx of Gulf investments. This comes on the heels of Sheikh Mohammed bin Zayed, President of the United Arab Emirates, visiting New Alamein and holding critical discussions with President Sisi. This visit coincided with that of a senior Saudi official who announced upcoming substantial cooperation between Egypt and Saudi Arabia across various projects, including those in the petroleum sector.
Banker emphasized that the upcoming monumental deal and new Saudi investments will likely lead to an overflow of dollars, positively impacting the strength of the pound and the pricing of goods in the market.
Banker platforms presented an important report today addressing the disappearance of $4 billion from Egypt in June.
Banker stated that in recent hours, a senior banking official, specifically the director of the credit sector at a private bank, revealed something unusual: $4 billion in indirect foreign investments, categorized as hot money, has left Egypt. We will clarify what hot money entails, but first, let’s examine why such a substantial amount departed, according to the banking official.
Banker explained that the official attributed the $4 billion outflow primarily to investors’ concerns regarding the Central Bank of Egypt’s potential move to lower interest rates in the near future. The official also noted that recent data showed a withdrawal of foreign investments in government debt instruments or “hot money” amounting to approximately $4 billion in June.
The report highlighted the risks associated with such a massive outflow, indicating that both long- and short-term indirect foreign investments departing will likely have a detrimental effect on the dollar’s price against the pound in the local market. However, banks still express a desire to invest in government debt instruments during the current period, and the Central Bank’s establishment of a fair price for the pound, driven by supply and demand mechanisms, has positively contributed to the potential elimination of the black market over the coming months.
Banker underscored that hot money refers to international capital that circulates globally and is mainly invested in government debt instruments in Egyptian pounds. This indicates that as a foreign investor, one might exchange dollars for pounds due to appealing returns on the pound compared to the dollar. Government debt instruments consist of bonds, bills, or any form of loan and are not involved in real investments, as they do not commit to purchasing assets or engaging in direct investments, though some may enter the stock market.
The final report in today’s analysis discusses new developments regarding the conversion of Saudi deposits in Egyptian banks into investments, linking this action to the potential decrease in the dollar’s price.
Banker pointed out that just hours ago, the Saudi Minister of Investment, Eng. Khalid Al-Falih, concluded his tour in Egypt, where he met with several ministers from the economic group, including Kamel Al-Wazir and Rania Al-Mashat.
The Saudi Minister announced that there is an intention to transform the deposits of Saudi investors in Egypt into investments, meaning that the funds in banks will be allocated to significant projects that can create numerous job opportunities and also contribute to enhancing national income and increasing growth rates.
The report emphasized that this Saudi initiative is considered a highly positive and robust step towards increasing foreign investments in Egypt, whether from Arab countries or the West, and will also bolster the Egyptian economy. However, it is crucial that the Egyptian government provide all necessary facilities for investors and assist them in expediting required investment procedures.
It is well-known that the term investment translates to job opportunities for young individuals and the production of goods from the project. Should we produce domestically, it would save money on imports; moreover, if this product is available locally, it can be utilized and exported, generating foreign currency, which is the dollar. Thus, we can reduce our dependency on foreign currency or, at the very least, ensure we have sufficient reserves.
Furthermore, the anticipated Saudi investments, which will likely result in establishing factories, enterprises, and profit-generating facilities, are expected to inspire the Egyptian government to amplify investments in the forthcoming phase, consequently lowering the import bill and increasing export income.
The Rising Dollar Price and Upcoming Economic Shifts in Egypt
Dear followers everywhere, welcome to a new live broadcast of the most important events and reports presented by the Banker Research Unit. Today, we’ll explore the recent fluctuations in the dollar price in Egypt, new economic opportunities, and what they mean for the country’s future.
Understanding the Recent Dollar Price Surge
The price of the US dollar has seen significant movement in the Egyptian banking market, notably since March. A recent report highlighted that following periods of calm, the dollar began to rise again amid geopolitical uncertainties. Specifically, the assassination of a prominent Palestinian leader in Iran has triggered a wave of foreign selling in Egyptian treasury bills as investors respond to increased risk in the region.
Impact of Geopolitical Events
According to data from the Egyptian Stock Exchange, substantial sales were triggered by concerns over potential conflict in the Middle East, with foreign investors retreating from Egyptian treasury bills. The net foreign assets remain relatively stable at $14.8 billion, but this wave of selling indicates the possibility of a brewing economic crisis.
Dollar Exchange Rate Fluctuations
Over the past week, the exchange rate of the dollar in Egyptian banks reached EGP 48.72, creeping toward EGP 49. This increase is attributed directly to the selling of treasury bills, showcasing the delicate balance of investor confidence in the region.
Upcoming Major Investment Deal Worth $40 Billion
Despite rising prices in essential commodities, Dr. Mostafa Madbouly, Egypt’s Prime Minister, has projected optimism regarding the country’s economic outlook. He hinted at an imminent major deal that could potentially transform the Egyptian economy.
Details of the Investment Deal
Reports indicate that this new deal, which will exceed the value of previous significant investments, could reach up to $40 billion. This deal is expected to focus on a blend of entertainment, tourism, and commercial projects along the North Coast of Egypt.
Key Features of the Investment
- Development of hotels and duty-free markets
- Creation of new job opportunities
- Partnership with a Gulf state, enhancing regional ties
The Disappearance of $4 Billion from Egypt
A concerning report from the Banker indicated that $4 billion in indirect foreign investments recently exited Egypt. This flight of capital was attributed to investor fears surrounding potential interest rate cuts by the Central Bank of Egypt.
Hot Money Explained
“Hot money” refers to international capital that moves swiftly between countries, typically in search of higher returns on government bonds or other instruments. When short- and long-term investments leave abruptly, it negatively impacts the local currency and can lead to increased dollar prices.
Saudi Investments: A Game Changer for Egypt
In a recent development, Saudi Minister of Investment Eng. Khalid Al-Falih announced plans to convert Saudi deposits in Egyptian banks into productive investments. This potential influx could create numerous job opportunities and increase national income.
Importance of Saudi Investment
Utilizing Saudi deposits in this manner signals a robust commitment to fostering economic relationships between Egypt and Gulf nations. The Egyptian government is now tasked with ensuring the necessary infrastructure and benefits for these investments.
Benefits of Increased Foreign Investments in Egypt
Increased foreign investment holds several potential benefits for Egypt:
- Job Creation: Economic projects can provide employment opportunities for the youth.
- Reduced Import Costs: Producing goods locally can lessen reliance on imports.
- Increased Exports: Developing local industries can lead to a rise in export capabilities.
- Strengthening the Local Currency: Increased foreign investment can bolster the Egyptian pound against the dollar.
Practical Tips for Investors
What to Consider When Investing in Egypt
- Stay Informed: Keep abreast of geopolitical events and economic indicators impacting investment sentiment.
- Diverse Portfolio: Spread investments across different sectors to minimize risks.
- Engagement with Local Authorities: Establish strong relationships with government entities to facilitate smoother project execution.
Case Studies: Successful Investments in Egypt
Reviewing previous successful investments can provide insights on trends and potential pitfalls. Notable examples of foreign investments that have flourished in Egypt include:
| Investment Project | Sector | Impact |
|---|---|---|
| Ras El Hekma Deal | Tourism | Boosted local economy and job creation |
| New Alamein City Development | Real Estate | Promoted urban development and investment |
Final Thoughts on Egypt’s Economic Future
The interplay between geopolitical stability, foreign investment, and local economic policies is crucial for Egypt’s economic trajectory. As ongoing developments unfold, stakeholders must navigate these changes wisely to ensure positive outcomes for both investors and the Egyptian populace.
