Update-Egypt business digest Nov. 10: Egypt’s newly floated pound strengthens as funds begin to flow
The Egyptian pound - YOUM7 (Archive)
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Egypt’s newly floated pound strengthens as funds begin to flow

(Reuters) – Egypt’s newly floated pound strengthened on Thursday after the central bank announced a $2 billion financing deal with global banks and the International Monetary Fund indicated it would approve the country’s three-year loan program.

The pound was trading at 16.3 to 16.8 against the dollar at 1412 (1212 GMT). Bankers said dollar liquidity was improving and activity pick up after a slow start earlier this week. It traded at 16.5 to 17.25 on Wednesday.

“The U.S. dollar is dropping like a rock,” one banker said. “Now we have the volumes and might close below 16 per dollar.”

Egypt’s central bank floated the pound a week ago, in a dramatic move that was welcomed by the business community.

It devalued the currency by about a third from its former peg of 8.8 against the dollar and has since allowed it to drift lower. A severe shortage of dollar liquidity when markets opened on Sunday for the first time since the float had resulted in low volumes and saw the pound weaken to 18 versus dollar.

It began to recover on Wednesday, after the IMF managing director, Christine Lagarde, said she would recommend that the executive board of the lender approve Egypt’s $12 billion loan agreement when it meets on Friday.

Egypt’s dollar peg had drained the central bank’s foreign reserves, forcing it to impose capital controls and ration dollars, and prompting desperate importers to turn to the black market for their needs.

Since the float, more companies have gone to the bank for their dollars, leaving them scrambling for funds while a lack of liquidity means interbank trading got off to a slow start.

The IMF announcement and the central bank’s $2 billion financing deal gave the markets hope that fresh inflows would be arriving sooner rather than later to stabilize the currency and ease what could be a painful era of austerity.

In a sign that confidence was beginning to return to the market after the float, average yields on six-month and one-year treasury bills dropped significantly at an auction on Thursday.

The 182-day treasury bills dropped to 18.469 percent from 19.521 percent in the previous auction and the yields for 364-day treasury bills dropped to 18.903 percent from 20.519 percent in a similar auction.

“There is strong buying appetite and positive sentiment with rumors of foreign investors entering the market,” another banker said, referring to the T-bill sale.

 

Egypt says still plans Eurobond issue by year-end

(Reuters) Egypt still plans to issue an international Eurobond by the end of the year but will decide on the appropriate timing once it has gauged the impact of Donald Trump’s victory in the U.S. election on global markets, the finance ministry said.

It said in a statement on Thursday that plans for a Eurobond issue were not affected by a separate private placement of $4 billion made on the Irish stock exchange on Wednesday.

 

Cabinet discuss finalizing long-awaited investment bill by end of Nov.

The Egyptian Cabinet, headed by Prime Minister Sherif Ismail reviewed a report on current procedures adopted for preparing the new Investment draft law, Youm7 reported Wednesday.

During the weekly meeting of the cabinet on Wednesday, Ismail called for finalizing the draft law within three months.

Investment Minister Dalia Khourshid said that the ministry is set to finish revising the New Investment Law within three week in order to submit the final draft to the Cabinet by the end of November.

The primary draft of the law was prepared in accordance with an earlier draft made by the state’s Supreme Legislative Reform Committee, she added.

The new law will focus on the diversification of incentives and guarantees for foreign and local investors, she added.

The law, which aims to boost investor confidence and eliminate bureaucracy, was approved by the government in March 2015 before it was amended in December.

 

Bourse gains 6b EGP at Thursday open

The Egyptian Exchange (EGX) indices went up at the opening of a trading session on Thursday, backed by wide purchases by foreign institutions and investment funds, Youm7 reported.

The main benchmark index EGX30 went up 2.2 percent to reach at 10,447 points, while the small and mid-cap index EGX70 added 1.46 percent to reach 396 points.

The market capitalization gained about 6 billion EGP at the opening of Thursday’s trading session.

 

18b EGP proceeds of new investment certificates: Banque Misr chairman

The proceeds of the new investment certificates, issued on Thursday with 16-20 percent interest rates reached 18 billion EGP so far, Banque Misr chairman Mohamed al Etribi told state news agency MENA on Wednesday.

Last week, several Egyptian state-owned banks provided new 18-month investment certificates with highest yields offered so far reaching 20 percent and distributed every three months. The banks, including the Banque Misr and the National Bank of Egypt (NBE) have also provided a three-year investment certificate with 16 percent yields distributed every month.

 

Egypt’s annual urban consumer price inflation eases to 13.6 pct in Oct-CAPMAS

(Reuters) – Egypt’s annual urban consumer price inflation eased to 13.6 percent in October from 14.1 percent in September, the official statistics agency CAPMAS said on Thursday.

Egypt’s urban consumer price inflation had jumped in August, raising concerns about an upward trend in prices.

The central bank floated the pound on Thursday and raised interest rates by three percent.

 

Egypt c.bank reaches terms for $2 billion repurchase transaction with global banks

(Reuters) – Egypt’s Central Bank has reached terms for $2 billion in financing from international banks, it said in a statement on Thursday.

“The central bank initiated a repurchase transaction with a consortium of international banks for a total amount of funding of $2 billion with a maturity of one-year,” the statement said.

It said the transaction was provided by the banks against the entire amount of newly issued Egyptian dollar-denominated sovereign bonds with maturities of December 2017, November 2024 and November 2028.

 

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