Report
Jaap Meijer

Egypt – Rate hike good for banks and portfolio investors

​The CBE hiked interest rates last night by 200bps, in a move contrary to consensus, but not totally unexpected, in order to anchor inflation expectations. The IMF had also earlier called for the move.

Inflation will remain high in 2017, despite the hike, due to our expectation of energy price and VAT increases. We believe the rate hike targeted portfolio investments ahead of high debt payments and energy price hikes. Still it could help the EGP/USD rate, reduce imported inflation, anchor inflationary expectations and accelerate inflows to USD 10bn by YE 17e.

Most banks (OW) will be positively affected due to positive net ALM positions, boosting NIMs, despite potential impact on credit growth.

Borrowers will pay the price, although not all debt will reset overnight. Ezz Steel, Ghabbour and Palm Hills are the most leveraged in our universe (Exhibit 5). We remove Palm Hills from our Core Buys and increase our position in Sodic by 2.5%. We remain cautious on the consumer sector due to volume pressure. 

Provider
Arqaam Capital
Arqaam Capital

Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa. 

Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research. 

Analysts
Jaap Meijer

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