Egypt stocks surged to the highest in five months on bets the central bank’s first interest rates cut in four years will help boost economic growth. Government debt yields fell at an auction to the lowest in two years.
The benchmark EGX 30 Index jumped 2.9 percent to 5,530.46 at the close in Cairo, the highest since Feb. 26. The measure has gained 1.3 percent this year, compared with a jump of 17 percent for the Bloomberg GCC 200 Index of the biggest companies in the Persian Gulf. Six of October Development & Investment climbed 5.1 percent, leading the list of 27 gainers, while Commercial International Bank Egypt SAE, the country’s biggest publicly traded lender, rose to the highest since January.
The central bank cut the benchmark deposit and lending rates by 50 basis points to 9.25 percent and 10.25 percent, respectively, to address “downside risks” to growth. The Egyptian economy is facing its worst economic slump in two decades, with the median of 17 economists estimating growth this year of 2.1 percent.
“The interest rate cut shows movement on the central bank’s part to stimulate the economy and it’s being well-received by investors,” Teymour El-Derini, director of Middle East and North Africa sales trading at Cairo-based Naeem Brokerage, said by phone. “The political tension remains but it’s going to take something drastic to bring this market down as sentiment is high.”
Backers of former president Mohamed Mursi continued sit-ins in Cairo that started more than a month ago to demand his return. The government has warned it would move to disperse the gatherings, even after clashes with police left dozens dead.
The government raised the targeted 5.5 billion Egyptian pounds ($786 million) at an auction of treasury bills today, according to central bank data on Bloomberg. The average on three-month securities tumbled 91 basis points to 11.61 percent, the lowest since June 2011. The nine-month yield retreated 85 basis points to 12.75 percent, the lowest since May 2011.
Demand for three-month bills was 3.1 times the amount offered, compared with 1.5 times before Mursi’s ouster July 3. The yield on the notes has dropped 276 basis points since. The pound rose 0.3 percent in July, it’s first monthly advance since the central bank started foreign currency auctions in December. That pares the currency’s decline since the start of the auctions to 11.5 percent.
“The central bank’s interest rates cut and easing pressure on the pound leaves little doubt in investors’ minds that we’re moving forward,” Nour Mohei-el-Din, assistant general manager for treasury at BNP Paribas Egypt, said by phone. “The rate cut doesn’t only reflect on borrowing costs, but it’s an indicator of lower inflation going forward so demand for government debt is rising to lock in rates.”
Shares valued at about 390 million Egyptian pounds traded today, almost on par with the one-year daily average. Six of October, a luxury real-estate developer, jumped the most since July 9 to 20.13 pounds. Commercial International climbed 3.4 percent to 37.37 pounds.
Saudi Arabia’s Tadawul All Share Index (SASEIDX) climbed 0.8 percent to 7,972.11, the highest since September 2008, as Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemicals maker by market value, increased 1.1 percent.
Aldar Properties PJSC (ALDAR) pushed Abu Dhabi’s benchmark index 0.2 percent higher. The emirate’s largest property company jumped 7.7%, the most since May 19, before an Aug. 6 board meeting on financial results. Dubai’s benchmark index increased 1.1 percent.
Qatar’s QE Index (DSM) rose 0.6 percent and Oman’s benchmark gauge advanced 0.3 percent, while Kuwait’s SE Price Index fell 0.7 percent and Bahrain’s BB All Share Index lost 0.6 percent.
The Islamic holy month of Ramadan ends with the Eid Al Fitr holiday this week. Saudi Arabia’s bourse will be shut from the close tomorrow until Aug. 13, while markets in the United Arab Emirates will close from Aug. 7 for at least two days.
In Israel, the TA-25 Index (TA-25) gained 0.1 percent at the close. The nation’s 2023 government bonds rose the most in a week after U.S. jobs data eased bets for an early tapering of Federal Reserve stimulus and as Leonardo Leiderman withdrew his candidacy to be Bank of Israel governor. The yield on the nation’s 4.25 percent notes due March 2023 retreated four basis points, or 0.04 percentage point, to 3.76 percent.
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