How does EGP depreciation against US dollar affect Egypt’s IDRs performance? 

Daily News Egypt
3 Min Read

The performance of International Depositary Receipts (IDRs) varied at the end of Sunday’s trading session on the London Stock Exchange. The most active certificates were those of Commercial International Bank (CIB), coinciding with speculations on the dollar in the Egyptian market reaching unprecedented levels. The current exchange rate for the dollar in the black market is around EGP 61.

This was reflected in the significant gap between the prices of CIB shares on the Egyptian Exchange and the IDRs on the London Stock Exchange. CIB is traded at approximately $1.30 per certificate, according to last Friday’s session. Dividing the price of CIB’s stock on the Egyptian market by the price of the IDR indicates that the dollar is equivalent to about EGP 59.7.

The share price of CIB on the Egyptian Exchange was around EGP 79.3, equivalent to about $2.47 according to the official exchange rate of EGP 30.9 at the Central Bank, highlighting the pricing gap between the London and Egypt stock exchanges.

The CIB share has fluctuated since the movement of the dollar in the black market on 7 October, dropping from $1.28 to its lowest level in a year at $1.06 per share on 25 October. It then began a journey of ascent, reaching $1.30 per share with an increase exceeding 21%.

Meanwhile, the IDR of Edita Food Industries jumped from $2 in early November, after trading at that level since 7 October, to $2.80 following last Friday’s session. The stock is traded at around EGP 30 on the Egyptian Exchange, concluding last week’s transactions.

The IDRs facilitate investment in local stocks for foreign investors by offering them in a different currency on their market. The proceeds from the sale are then converted back into the Egyptian market, benefiting from the share’s price arbitrage, and vice versa.

However, the Financial Regulatory Authority has implemented a decision to mitigate speculation, requiring Egyptian depositary companies to convert the proceeds from the sale of IDRs for Egyptian investors to one of the local banks and in the same currency as the issuance of local stocks.

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