Egypt Stocks Rise as Rate Cut Trumps Political Unrest: Inside EM

(Bloomberg) -- Egyptian equities jumped the most since December 2016, as the market continued to recover from deep losses early last week in the wake of anti-government protests.

The EGX30 Index rose as much as 3.8%, before paring its gain to 3.3% at close in Cairo. It’s risen 8.7% in the past three trading days.

The nation’s central bank cut interest rates by 100 basis points on Thursday, which was largely in line with estimates from analysts in a Bloomberg survey.

The rise in stocks is down to the lack of new demonstrations over the weekend and the rate reduction, according to Allen Sandeep, the director of research at Naeem Brokerage in Egypt. Investors “miscalculated” the seriousness of the protests, which led to a selloff across Egyptian assets, he said.

Egyptian equities fell 6% last week, making them the world’s worst performers, according to data compiled by Bloomberg.

“The repricing of near-term political risk through a sell-off in Egyptian assets has already happened and investors should continue to look for confirmation that the good macro story is intact before taking any more aggressive positions in the country,” said Raffaele Bertoni, the head of debt capital markets at Gulf Investment Corp. in Kuwait.

Egypt Stocks Rise as Rate Cut Trumps Political Unrest: Inside EM
HIGHLIGHTS
  • MSCI Emerging Markets Index dropped 1.9% last week, while an index tracking currencies from developing markets fell 0.3%
  • EM Review: Riskier Assets Battered by Trade War, Political Drama
  • READ: Saudi Rating Affirmed by S&P After Oil Attack That Jolted Market
  • MORE: Crackdown Leaves Egypt’s Streets for Sisi Rallies, Not Protests

MIDDLE EASTERN MARKETS:

  • Egypt’s EGX30 Index leads Middle Eastern gains
    • All but one of its 30 members advanced
    • READ: Egypt Stocks Lead World Gains as Index Recovers From Turmoil
    • While an escalation in protests cannot be ruled out, according to Bertoni, “the economic consequences of the 2011-2013 period are still very much in the memories of ordinary Egyptians with the majority of the population inclined to put pressure on the government without disrupting the positive momentum in the economy”
  • The Tadawul All Share Index adds 0.3%
    • READ: Saudi Arabia Eyes $2.7 Billion in Contracts for Red Sea Project
    • MORE: Saudi Arabia Agrees to Limited Cease-Fire in Yemen War
  • In Dubai, stocks drop for a fourth day, losing 0.6%, while Abu Dhabi’s ADX General Index rises slightly
    • READ: Freed of Sanctions, Denizbank to Tap Syndicated Loan Market
  • Equity benchmarks in Kuwait, Qatar and Bahrain drop between 0.2% and 0.4%

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