Egypt stocks to jump on currency float: traders

[DUBAI] Stock markets in Egypt look set to rally in massive trading volume on Thursday after the central bank floated the Egyptian pound, traders and equity analysts said.

The central bank said it had floated the pound and hiked interest rates by 300 basis points to rebalance currency markets. Bankers told Reuters they had been informed that the central bank would set an initial guidance rate of 13 pounds to the dollar at a sale at 1300 local time (1100 GMT), compared to the previous official rate of 8.88 pounds.

The central bank also said in a statement that it would abolish the priority list for imports and phase out monetary financing of the budget deficit over coming months. "This is very encouraging news. The stock market would love this news because the bottleneck has finally been relieved,"said a Dubai-based analyst.

An equities trader in Cairo said: "There is a wave of buy orders we are receiving at the moment. I think this will outdo the rally in March."

In mid-March, the central bank devalued the pound to 8.85 per dollar from 7.73 and simultaneously pumped nearly US$200 million into the dollar-starved banking system. The stock market rallied 6.7 per cent in very heavy trade that day.

Economists believe a more flexible exchange rate mechanism could help unlock billions of dollars in foreign investment.

The Dubai analyst, however, said that some foreign investors were likely to remain cautious about putting money into Egypt for now until they saw how well Egyptian authorities managed the float, and because of uncertainties overhanging emerging markets such as the US presidential election.

REUTERS