Egypt Stocks Rally Seen Lasting Longer With Lower Rates in Sight

CAIRO (Capital Markets in Africa) – Egypt’s main stock index extended a winning streak to the seventh session as investors increased bets on stocks poised to benefit from a surprise cut in interest rates.

The EGX 30 climbed 0.2 percent on Monday, bringing gains to about 17 percent year-to-date. The gauge’s 50-day moving average climbed above the 100-day measure. The last time this happened, the shorter average stayed above the longer one for over two years.

An unexpected rate cut late last week added to positive momentum that has built up since the start of the year following a broader recovery in emerging markets, according to analysts. Egypt’s shares have managed to reverse losses of 13 percent last year even after the government ended a foreign exchange repatriation mechanism for foreign investors. The main index is the best performer among peers globally this year, after Argentina’s.

The research arm of Cairo-based EFG-Hermes Holding estimates that “inevitable rate cuts” will allow the local index to climb about 26 percent from the current level over the next 12 months. Naeem Holding analysts estimate the cuts could stimulate bank lending as well as spur domestic consumption and spending in the private sector. For Shuaa Securities, sectors poised to benefit from easing interest rates include real-estate and non-banking financials.