Devaluation Bets Send Egyptian Stocks Rising to August Highby and
Pound weakens to record 10.87 per dollar in black market
Trades worth twice the one-year daily average change hands
Egyptian stocks surged to an eight-month high on speculation that authorities will devalue the currency for the second time this year.
Local investors fueled a fifth day of gains as a persistent dollar shortage forced the Egyptian pound to a record low in black market trading. The nation’s decision to weaken its currency by the most in 13 years last month has so far proved insufficient to attract foreign investment and boost the economy.
“It’s all pure speculation at this point,” said Mohamed Ebeid, the head of brokerage at EFG-Hermes, Egypt’s biggest investment bank. “Local liquidity” is driving stocks higher “on expectations that there will be another devaluation after the government’s meetings with IMF officials this week and as the pound falls in the black market,” he said.
Egyptian government officials traveled to Washington D.C. to attend the International Monetary Fund’s annual spring meeting.
The benchmark EGX 30 Index gained 2.6 percent to 7,864.03 at the close in Cairo, as 1.1 billion Egyptian pounds ($124 million) worth of shares were traded, more than twice the daily average over the past year. Local investors were responsible for 76 percent of trading, according to bourse data.
Commercial International Bank Egypt, the country’s biggest publicly traded lender, advanced 4.4 percent to 42.3 pounds, the highest level since November. The stock, which makes up a third of the benchmark gauge, was the biggest contributor to the market’s gains.
The Egyptian pound tumbled in black market trading, falling to a record 10.87 per dollar, according to the average quote of six money changers surveyed by Bloomberg in Cairo and Aswan. That’s a 22 percent premium for dollars over the central bank’s official exchange rate, almost on par with the gap that existed before the regulator’s March 14 devaluation.
Black market dealers asked not to be identified because they are discussing trading outside price limits set by the central bank.