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Low value of EGP enhances investor appetite - Daily News Egypt

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Low value of EGP enhances investor appetite

Market analysts expect better foreign investor purchases and higher inflation rates

Drop in Egyptian pound encouraged stock purchases. (Photo by Mohamed Omar)
Drop in Egyptian pound encouraged stock purchases.
(Photo by Mohamed Omar)

For the second consecutive day, the Egyptian pound dropped at the Central Bank of Egypt (CBE) sale, to reaching its lowest levels since 2012. The drop, however, raised stock market analysis for bigger purchases on the Egyptian stock market.

Market analyst Moustafa Badra said the Egyptian pound’s decrease is not a recent issue, but has been exacerbated in the last four years. Badra added that this was a reasonable result for the economic recession which usually affects the exchange prices in most sectors.

“Maybe that time, the EGP plumping price attracts attentions because of the decision of the Central Bank to decrease the value of the local currency,” he said.

“On the one hand, it will boost investments by motivating the appetite of the Arab investors especially they use the US dollar currency in their transaction and it became higher now while it will weigh on the Egyptian investors because it will decrease the local investment purchasing force,” he said.

Badra, along with economic expert Magdy Toulba, emphasised that it will have a negative impact on savings rates and, in the long term, will increase inflation rates.

“It has two sides, it is good for the foreign investor, everything seems cheaper, including shares and bonds, but it will increase the appetite of foreign investors to bonds due to their lower prices,” Toulba said.

However, most analysts expect better foreign and Arab market transactions due to the decline in the Egyptian pound’s price versus the US dollar. However, Badra did not expect any positive signs of a stronger market, except if the economy revived.

Echoing Badra’s comments, the chief technical analyst at Belton, Mohab Aguina, explained that when any local currency depressed, it means higher foreign purchases.

Aguina expected better market conditions in the coming period especially the last week’s stock market main index increased and the volume of transaction reached 10,000.

During the last week the stock market achieved good indices reaching almost 8,946 points with daily stock turnover at more than EGP 50m.

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