The London-trading securities of Egypt’s largest listed bank point to expectations of another devaluation of the North African country’s currency.
CIB’s Certificates of Deposit are trading on the London Stock Exchange at a 31% discount to its share price in Cairo, the widest difference since August 2016. “This reflects expectations that Egypt will allow its currency to depreciate again,” according to Hassan Malik, strategist at Telemer. ” in Dubai.
Egypt’s dollar-denominated bonds recorded new declines
He said, “The unwillingness to move to a fully flexible currency means that there is another major devaluation of the pound coming,” according to a report published by “Bloomberg” agency, which was seen by Al Arabiya.net.
Concerns that pent-up demand for dollars will not ease without more flexibility in the exchange rate and stronger investment flows have fueled speculation that Egypt may have to allow its fourth devaluation since March 2022. The value of the pound has varied more on the local black market than at the official rate. In banks, while derivatives traders hedge against the possibility of a sharp decline in the exchange rate of the pound.
In the non-deliverable futures market, the price of the 12-month contract fell to 41.6 against the US dollar. The price of the pound has declined by about 50% since March of last year, and it was trading at 30.9 in today’s trading, Wednesday.
The government pledged in October to move to a more flexible exchange rate, which enabled it to strike a $3 billion deal with the International Monetary Fund.
“Financing options in Egypt have shrunk considerably, and the move toward a flexible currency is likely to see the official exchange rate converge with the parallel market rate, and will need to be coupled with an additional lift in the interest rate to keep inflation at bay, which is a tricky balancing act against the backdrop of already high inflation and low growth.”