Research centres unanimously agreed that some economic sectors that are tied to the Egyptian Exchange (EGX) benefited directly from the Central Bank of Egypt’s (CBE) decision to raise interest rates by 100 basis points during an emergency meeting of the Monetary Policy Committee (MPC) on Monday.
Research from Prime Securities said that banks are on top of the list of stocks to benefit from higher interest rates and treasury yields given the robust loan portfolio growth driven by USD-denominated loans.
They added that there are a large number of shares that benefit directly from the rise in the price of the USD against the Egyptian pound, including Abu Qir Fertilisers, Egyptian Kuwaiti Holding, Egypt Fertiliser Production, Egyptian Chemical Industries, Finance and Industrial, Sidi Kreir Petrochemicals, Ezz Steel, Misr for Chemical Industry, cement producers, Misr Aluminium, Elsewedy Electric, Orascom Construction, Maridive, Alexandria Containers, Canal Shipping Agencies, Lecico Egypt, Cairo Investments, and Al-Ezz Ceramics and Porcelain.
This is in addition to AMOC, Telecom Egypt, Qalaa Holdings, Oriental Weavers, Dice, Delta Sugar, Raya for Call Centres, and Nilesat.
This morning, the CBE’s MPC held an extraordinary meeting that raised the key lending and deposit rates by 100 basis points to 10.25% and 9.25%, respectively.
Prime indicated that the CBE’s decision to raise interest rates by 1% aims to combat the enormous inflationary pressures arising from the situation in the global commodity market, pointing out that the inflation target by the CBE in the fourth quarter (4Q) of 2022 remained 7% (±2%).
The surprise move came three days before the MPC was set to meet on Thursday, 24 March, indicating that the CBE is opting for more “flexibility”, as stated in its press release.
Radwa Al-Swaify — the Head of Research at Al-Ahly Pharos Securities Brokerage — said that there is an expected benefit from the CBE’s decisions this morning for fertiliser companies and the industrial sector in general
The CBE identified a double indirect benefit from the movement in the local currency exchange rate for banks, real estate sector companies, and non-banking financial service companies, with the change in consumer patterns during the coming period to search for high returns and assets with a fixed value.
Hassan Kenawy — the Executive Director of the Department of Foreign Trade at HC Investment and Securities — said that the decision of the CBE will re-evaluate the shares listed on the EGX once again based on the revaluation of assets.
He also pointed out that changing the exchange rate would attract investments and foreign flows again to the Egyptian market, especially after the positive impact witnessed by the money market during yesterday’s session.
Furthermore, Kenawy said that all stocks related to commodities, exporters, and the banking sector are among the main beneficiaries of the rise in the price of the USD against the Egyptian pound.