Live on Bloomberg TV

00:00That kind of a print and the expectation is that it goes higher from here. How much of a hike are you expecting and are you expecting a hike 100 percent. This this next meeting. Stop it. We expect a hike of about 50 50 IBEX. That's IBEX kids under no we don't rule out a higher hike on the 24th of March. Not just because of inflation. That's just come in at eight point eight percent. Remember Egypt still has a positive interest rate of close to 2 percent real interest rate of 2 percent vs. most emerging and debt markets that had a deep negative territory. Now what's coming is also going to be factored in by the by the CBA Anna Edwards an index NPC meeting going forward. What's coming this price. Possibly a weaker currency some sort of position in the currency. And of course cost push inflation. Egypt imports 50 percent of its grains needs. And you have fertilizer costs increasing input costs increasing feed costs increasing. So of course. So there's a lot there. So let's just pause and break some of it down. In terms of the wheat aspect obviously we are in a commodity inflation shock and oil inflation shock a sprains inflation shock. So let's deal with how does Egypt deal with this. The latest sign is that they're going to ban the export of foods. But how much wheat does Egypt actually import and how quickly can they subsidize their. Their reliance on Russian wheat. Yes. To give you a holistic context. Egypt's talking subsidies are supposed to be about five to six billion dollars budgeted and fuel subsidy about 2 billion and a one point five billion dollars wheat. Total consumption is about 20 million tons half of which is imported. And most of what is imported is imported from Ukraine and Russia. So that's where we stand. If you're looking at food inflation it's going to be factored in to the rising subsidy bill which is supposed to be 5.5 billion dollars on food of its wheat is supposed to be about three billion dollars. Now we're looking at a bill of possibly one billion dollar higher in terms of subsidy bills for four weeks. Looking at closer to 4 billion dollars in terms of wheat subsidies. That's gonna have quite a dramatic fiscal impact isn't it for the Treasury they're. Yes. We already factoring in you know a fiscal deficit closer to about seven point five percent is what is targeted right now at about six point eight the same person by the government. So it's is getting factored in. It's also getting factored into the markets. You've seen markets reacting quite negatively to the show. When I was going to say that you make the point that the Egyptian stock market's already in a correction territory of down over 10 percent. Do you think that that fully appreciates or reflects the fiscal position that you just outlined and the inflation risk. We still see some selling pressure but realistically if you're looking at things from a theoretical point of view yes I think it's fully priced in. But what's not yet priced in as foreign portfolio outflows which could also continue this week. Now we have inflation that's coming from you know from from the US. So we expect some more selling from foreigners or some other pressure going forward. And from that we suggest clients to just stay put in the third quarter end of the third week of the month and then take fresh positions as we get closer to the FTSE meeting on the 24th of March. And in terms of the biggest risks as you say in terms of volatility it looks as if oil has come back a little bit. But the other major market that is on fire is of course the fertilizer market. And from an equity point of view I'm just interested you know how much more exposure do you want to take to that market. What do you see prices going in your ear. Europe of course we see it you know these prices are seriously looking at historical point a field that usually appeared at 200 to 300 dollars per ton. You're looking at now at eight hundred fifty dollars per ton. So of course this is not sustainable. These prices are not sustainable. And if you look at fertilizer stocks in Egypt they're trading at price to earnings multiples for multiples of six times which is a 50 percent discount to to any emerging market might have to leave alone fertilize equities and multiples which stated much higher premium. So significant value in Egyptian stocks in terms of fertilizers industrials. And don't forget Egypt still subsidizes. You know it's it's you know if you look at market.

No schedule data available.

Allen Sandeep - Naeem Brokerage Director of Research

Surging food prices have sent the inflation rate in urban parts of Egypt to the highest level since mid-2019. CPI rose 8.8% in February -- driven largely by a 17.6% increase in food and beverage costs. That's adding to the likelihood of an interest-rate hike this month. Allen Sandeep -- Director of Research at Naeem Brokerage speaks with Manus Cranny on "Bloomberg Daybreak: Middle East." (Source: Bloomberg)

More From Bloomberg Daybreak: Middle East
All episodes and clips

Bloomberg Technology
The only daily news program focused exclusively on technology, innovation and the future of business from San Francisco. Hosted by Emily Chang.
More episodes and clips