Egyptian stock market sees biggest annual return since 2016
On Sunday, most stock markets in the Middle East closed on a positive note, with Egypt's index achieving its most significant annual gain since 2016. Investors, seeking protection against high inflation and a weakened domestic currency, contributed to this positive trend.
Egypt's blue-chip index recorded a 0.8% increase, bringing its total gains for 2023 to an impressive 70.5%. Commercial International Bank, the leading lender, saw a 75% increase, while the tobacco monopoly Eastern Company concluded the year with a 98.5% higher valuation compared to the beginning of 2023.
The backdrop for these gains includes a two-year upward trajectory in Egypt's annual inflation, reaching a record 38% in September. Additionally, the country's currency has experienced significant depreciation in recent months, falling to around 50 pounds to the US dollar on the black market, compared to the official rate of 30.85 pounds.
Key Takeaways
Analysts at HSBC suggest that the Egyptian pound is poised for another devaluation in the first quarter of 2024 with projections indicating an anticipated official exchange rate of 45 pounds. According to a report released by the bank in December, they anticipate rates to range between 40 and 45 pounds against the US dollar. This outlook aligns with recent reports from EFG Hermes and Fitch Solutions' research unit BMI. In November, BMI disclosed its expectation of the pound depreciating to 40-45 pounds by February 2024. EFG Hermes shares a similar sentiment, believing that the Egyptian pound will decline to 40 pounds, identifying this as a potential "eventual area of stability for the EGP when the FX market clears." These forecasts collectively highlight the prevailing concerns and expectations regarding the Egyptian currency's valuation in the coming months, which are likely to further drive up interest in equities.
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