What is the capital market waiting for from the new CBE governor?

Fatma Salah
5 Min Read

The capital market is awaiting a decision on several files from the new acting Governor of the Central Bank of Egypt Hassan Abdalla.

Mohamed Maher — Head of the Egyptian Securities Association — said that the capital market is awaiting a clear policy from the banking sector regarding financing brokerage firms to finance marginal purchases, pointing out that there is a clear policy from some banks operating in the banking system.

He added that the other file that is also awaiting a decision is an increase in the investments of institutions affiliated with the banking system in the stock market, emphasising that he is looking forward to more investments being pumped to banks in the Egyptian Exchange (EGX).

The EGX’s indices closed on a collective rise at the end of last Thursday’s trading, as the main index rose by 0.36% at the close of trading, which recorded about $1.28bn.

Mohamed Fathallah — Managing Director of BLOM Egypt Securities — said that the stability of the exchange rate is one of the most important issues for the new governor, as the capital market can attract foreign capital and give more stability to the stock market.

He pointed out that the revaluation of the currency through a managed float should also be considered so that Egypt can obtain an International Monetary Fund (IMF) loan to bridge the financing gap and revive the stock market.

Furthermore, Rania Yacoub — Chairperson of the Board of Directors of Three Way Securities Brokerage — said that the CBE’s decision to fix the interest last Thursday is a positive decision for the capital market, especially since any increase in interest will affect the investment climate.

Yacoub added that the return of the production movement has become a strong necessity for the field of investment in general, along with opening channels with importers regarding the need to open documentary credits on raw materials for manufacturing as a start to ensure the sector’s activity, which in turn is reflected in the capital market.

She pointed out that the capital market needs economic activity as a whole for the Egyptian state, especially since the EGX is “the mirror of the economy.” There is also an urgent need for activity in all sectors of the economy so that the stock exchange can act as a financing tool.

Yacoub then stressed that the market is waiting on a decision to increase banks’ investments, given that investments can be pumped to create demand for cheap Egyptian assets, noting President Abdel Fattah Al-Sisi’s initiative to pump EGP 20bn into the EGX during the COVID-19 pandemic.

She added that creating success stories in the capital market by offering shares of major state-owned banking institutions in the capital market is an important goal that could aid in bolstering the EGX.

Furthermore, she stressed that the decisions of the CBE’s governor are independent and based on the economic data of the state, adding they they are not responsible for the causes, but for managing the results, and it is proper management that helps the state to overcome a crisis.

Yacoub also pointed out the need to create flexible policies in the EGP exchange rate to provide USD liquidity, especially since the EGP must reflect its true value in order to attract foreign investments.

For his part, Mohamed Hassan — Managing Director of BLOM Egypt Asset Management — said that the new portfolio must take into account the conditions of the capital market in decisions related to monetary policies and take them into account.

He added that the governor must look at the capital market and take steps to ensure its continued movement by urging banks to put their subsidiaries in the capital market, noting that government banks own thousands of companies that are suitable for offering in the small and medium enterprise market that require only some administrative restructuring before being offered on the EGX.

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