In light of the crises that the global financial markets have been witnessing recently, as a result of the Russian-Ukrainian war, the inflation rise, and the supply chains crisis, Daily News Egypt surveyed the opinions of local asset managers and heads of research departments regarding their most prominent concerns during 2022, their expectations for the Egyptian Exchange (EGX), and the fate of interest rates.
They expressed their optimism about the stock market, considering that 2022 will witness a recovery in the Egyptian financial market, however, they also expected that inflation will further increase and the Central Bank of Egypt would adopt a strict monetary policy.
The survey participants expected that this year will witness a significant boom in the volume of funds’ assets, and an increase in investment through brokerage firms, with many government IPOs.
About 41.7% of the respondents expected that 2022 would be the year of shares in the Egyptian Exchange, while the same 41.7% expected that this year would not be fair for shares, while 8.3% considered 2022 as the beginning of the journey of ascent for shares, and 8.3% expected that the year would witness no noticeable changes in the performance of Egyptian stocks.
Trading volumes on the Egyptian Exchange witnessed a growth during the past year to jump to about EGP 1.003trn including shares, bonds and OTC deals, compared to EGP 689.9bn during 2020.
Asset managers’ big concerns
On the main concerns of asset managers during 2022, 66.7% of the respondents said that the rise in inflation rates to historical levels is the most prominent concern during the current year, along with monetary tightening policies from central banks, while about 33.3% of the respondents feared that this year will witness a liquidity crisis.
About 50% of respondents said that value stocks are the most beneficiaries during 2022, while 41% chose growth stocks, and 9% of the participants said that 2022 is not the year of stocks.
About 50% of the respondents expected that the Central Bank of Egypt would raise interest rates this year by about 200 basis points, while 25% expected that the central bank would resort to stabilizing prices, and 8.3% said that the Monetary Policy Committee of the CBE would raise interest rates by more than 200 points during the year, while 16.7% of asset managers expected to raise interest rates by 100 basis points during 2022.
In a related context, the Central Bank of Egypt has raised interest rates by 1% during the Monetary Policy Committee meeting on Monday.
This came in line with the expectation of the credit rating agency, Fitch, especially with the increase in the inflation rate.
Globally, last Wednesday, the US Federal Reserve raised interest rates by 0.25 points for the first time since 2018, to 0.5%, after keeping the interest rate steady near zero since the beginning of the Corona pandemic.
The Fed expects interest rates to be in a range of 1.75% and 2% by the end of the year, as the FOMC has also set interest rate hikes at each of its six remaining meetings this year.
About 83.3% of asset managers expected a rise in inflation rates in 2022 to more than 7%, while 16.7% expected inflation rates to range between 5 and 7% during the year.
According to an official statement by the Central Agency for Public Mobilization and Statistics, the consumer price index for the whole country reached 121.4 points in February, registering an increase of 2% from last January, and the annual headline inflation was 10% in February 2022, compared to 4.9% for the same month of the previous year.
Investment trends for individuals
With regard to the investment trends of individuals, 36.4% of the asset managers participating in the opinion poll expected that the current year would witness a significant boom in the volume of funds’ assets, and the same percentage expected that 2022 would witness an increase in self-investment through brokerage firms, while 27.3% of the respondents expected individuals to think about using stock funds.
About 9.1% of the respondents said that individuals will invest in gold with continued investment in real estate, while 9.1% said that individuals’ investment tendencies will focus on real estate during the current year.
75% of the respondents expected that the government would offer government companies to the stock exchange during 2022, while 16.7% expected that companies would not be offered this year, while 8.3% expected a limited movement in government offerings this year by offering only some companies.
The EGX received 3 new offerings during 2021, worth EGP 7.95bn, including e-finance company for financial and digital investments, with a number of shares of 1.6 billion shares, with a value of EGP 5.84bn, Taaleem for Management Services with 730.3 million shares, with a value of EGP 2.1bn, and Emerald Development and Management projects in the small and medium-sized companies market with 425 million shares, worth EGP 57.6m, in addition to offering “Macro Group” during the current year
Factors influencing asset management industry growth
And about the factors increasing growth of the industry, 55% of the participants said that the return of foreigners and the outbreak of the pandemic are the most important factors affecting the growth of the industry, while 45% of the participants indicated that the announcement of a clear policy to privatize companies is the most important factor affecting the growth of the industry during 2022.
By asking the participants about the most prominent opportunities available to investors during the current year, asset managers enumerated dozens of opportunities to invest during 2022, which come on top of stocks and cash funds, new IPOs such as the Macro Group, investment in gold, infrastructure, agriculture, the banking sector, non-financial services, Health, Fintech, Startups, Heavy Industry, Real Estate, Food and Long-Term Investments.
Advantages of COVID-19
With regard to the most prominent gains of Covid-19 that will continue after recovering from the pandemic, the opinions of the respondents varied, as some of them said that the most prominent gains are flexibility in corporate business models, the growth of the non-bank financial sector, the growth of bank portfolios and the enhancement of financial inclusion, while others said that the growth of the communications and technology sector, the rise in demand and the lack of supply of major commodities, whether oil, gas, minerals or food, which had a positive impact on companies operating in these sectors.
Egyptian financial market stimuli
Regarding their vision of the most important stimuli that the Egyptian capital market needs during the current year, some participants said that ending the controversy over tax treatment and the absence of changes in taxes is one of the most important motivators, while some of them said that reducing the interference of regulatory authorities in daily trading and creating a market based on institutions, not speculation to encourage foreign investor most prominent demands.
A percentage of the participants said that accelerating the offering of companies and giving advantages for listing and offering private sector companies on the stock exchange, and not interfering in market mechanisms are among the most important incentives that the Egyptian capital market needs.
Some asset managers pointed out that it is necessary to pay attention to laws and legislations, especially that affect different sectors and therefore companies operating in these sectors, with the availability of an investment law and a unified investment map that applies to all investors, whether foreigners, Arabs and Egyptians, as well as spreading investment awareness among individuals.