Hot August for Egypt's World-Beating Stocks May Get Even Hotter

(Bloomberg) -- It’s already been a great August for Egyptian stocks and things could be about to get even better should the north African nation cut interest rates as expected on Thursday.

The EGX 30 Index has gained more than 7% so far this month, making it the world’s best performing major gauge of those tracked by Bloomberg. That’s in stark contrast to declines in peers, with the MSCI Emerging Markets Index falling 5% month-to-date on the back of a more general risk-off sentiment.

Optimism for lower rates has been just one of the reasons that the Cairo bourse has been insulated from tensions gripping markets in most other parts of the world. Egypt’s lowest inflation in four years and a successful trading debut for the country’s first initial public offering of 2019 have also aided sentiment.

A decision from the nation’s Monetary Policy Committee is due Thursday, with the benchmark overnight deposit rate expected to be cut by at least 100 basis points to 14.75%, according to 10 of 12 analysts surveyed by Bloomberg. The other two see no change in borrowing costs.

Although insufficient, such a rate reduction would be “good news for the consumer sector,” said Allen Sandeep, director of research at Naeem Brokerage in Egypt. “It will also provide some respite to leveraged stocks, as debt servicing costs would decline.”

To contact the reporter on this story: Abeer Abu Omar in Dubai at aabuomar@bloomberg.net

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Paul Jarvis, Jon Menon

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