A trend of optimism has come over the Egyptian Exchange (EGX), as the Central Bank of Egypt (CBE), removed caps on deposits and withdrawal of foreign currency for importers of non-essential goods.
A stronger financial performance, a hike in sales, as well as a rally of EGX indices are expected as results of the mentioned decision, according to both importers and market experts.
Awad Gabr, chairperson of Cairo for Drugs and Chemical Industries, asserted that the CBE’s decision will affect the company’s financial performance in a positive way.
“We were facing obstacles regarding importing raw materials because of the previous caps imposed on importers by the CBE,” he said.
Moreover, Gabr illustrated that the company won’t be affected by the high interest rates, revealing that they do not rely on bank facilities.
“What can be affected by the high interest rates is pumping new investments or launching new economic beings,” he highlighted.
Abd ElHameed Emam, financial analyst at Tycoon Brokerage Securities, asserted that the CBE’s decision is supposed to have an impact on the total economy of Egypt, adding that dollar liquidity indicates that the past period witnessed dollar flow from tourism and Suez Canal revenues, in addition to governmental dollar treasuries.
“The decision enhances the outlook of rising the value of the EGP versus the dollar,” he highlighted.
This is why Emam expects that the value of the dollar versus the EGP may decrease on the decision, leading the costs of industry and production to drop during the coming months.
“As a result, companies are likely to achieve solid profits,” he added.
Hany Amer, senior financial analyst for the banking sector at Mubasher International for Securities, revealed that private sector investors are waiting for the CBE’s coming financial committee meeting in order to decrease interest rates to benefit from removing caps for the deposit and withdrawal of foreign currency for importers of non-essential goods.
“Importers hesitate to ask for loans because of the recent high interest rates,” he revealed.
Moreover, Amer asserted that the decision is a chance for the banking sector to support their financials.
Ahmed Abd Elnaby, a strategist and senior equity analyst at Mubasher International for Securities, assured that listed companies which depend on importing are expected to benefit from the decision, which is supposed to support increasing consumption rate, which means that there will be a surge in sales to be seen by the end of the first quarter of fiscal year 2018.
“There is no specific sector likely to benefit from the decision, for all of the listed companies that utilise importing are meant to have increasing profits,” he added.
On the technical side, Remon Nabil, market analyst, highlighted that the CBE’s decision will affect the EGX performance positively, supporting a foreign direction of purchase.
“All shares of companies that work in the fields of industry, trading, manufacturing medical equipments and foods, in addition to shares of banks are likely to witness a strong performance on the CBE’s decision,” he illustrated.
Nabil indicated that liquidity of money in listed banks will support an active movement within the banking sector, namely, the relatively small banks.
“For instance, Bank of Abu Dhabi and Bank of Suez Canal are supposed to lead a rally among the banking sector,” Nabil said.
In this respect, the market expert expected that the banking sector will witness an upside movement as of the current week until the end of December.