GLOBAL BANK GLOOM-Banks across the world are in for a bumpy 2024 -Moody’s: Rating agency Moody’s has issued a negative outlook for the global banking sector in 2024, citing slower growth, rising default risk, and weaker financial performance.

#1- Slower growth: Growth will slow down as interest rates stay high “even as major central banks begin to cut rates.” This will limit business prospects and therefore limit loan growth across banks’ portfolios, which will prevent them from reaping the benefits of higher rates. “Elevated rates for the most part will lead to higher funding costs and greater asset risks among existing borrowers.”

#2- Bad loans: Financial conditions will reduce borrowers’ liquidity and income, making them unable to meet loan payments. That paired with higher debt-servicing costs will deteriorate loan performance among banks.

#3- Weaker profits: Moody’s believes that banks’ “profitability gains from the last two years will likely start to subside but remain sound,” citing higher funding costs and weaker loan demand due to heightened rates.

The news got attention from: Reuters and the Financial Times.

CHINA SLOWDOWN-Mounting debt and a property crisis tip China’s credit outlook into the red: Moody’s has downgraded its outlook on China’s sovereign credit rating to negative from stable on the back of the country’s pileup of state debt and persistent property crisis, Moody’s said in its latest report (pdf). China’s credit rating was last downgraded by Moody’s and S&P in 2017.

The property downturn: China’s real estate sector, which accounts for as much as 30% of the country’s GDP, has significantly contracted since the collapse of its largest property developer Evergrande in 2021. Moody’s is expecting the sector’s role in the economy to remain smaller than its pre-2021 levels.

ICYMI- Country Garden, one of China’s biggest property developers, is expected to undergo the largest corporate debt restructuring in the country’s history after defaulting on a bond payment in October.

EURO RATE PEAK? ECB official signals further interest rate are off the table:Hawkish ECB board member Isabel Schnabel said that further rate hikes are “rather unlikely” due to the “remarkable” drop in inflation, according to Reuters. Schnabel’s stance prompted markets to bet on rate cuts being implemented as soon as March.

EGX30

25,128

-0.5% (YTD: +72.1%)

USD (CBE)

Buy 30.83

Sell 30.96

USD at CIB

Buy 30.85

Sell 30.95

Interest rates CBE

19.25% deposit

20.25% lending

Tadawul

11,144

-0.4% (YTD: +6.4%)

ADX

9,520

-0.2% (YTD: -6.8%)

DFM

3,978

-0.2% (YTD: +19.3%)

S&P 500

4,567

-0.1% (YTD: +19.0%)

FTSE 100

7,490

-0.3% (YTD: +0.5%)

Euro Stoxx 50

4,453

+0.9% (YTD: +17.4%)

Brent crude

USD 72.13

-1.3%

Natural gas (Nymex)

USD 2.69

0.0%

Gold

USD 2,037.50

-0.2%

BTC

USD 44,019

+4.6% (YTD: +165.4%)

THE CLOSING BELL-

The EGX30 fell 0.5% at yesterday’s close on turnover of EGP 5.2 bn (71.4% above the 90-day average). Local investors were net sellers. The index is up 72.1% YTD.

In the green: Elsewedy Electric (+3.6%), Oriental Weavers (+3.3%) and Heliopolis Housing (+3.1%).

In the red: GB Corp (-3.8%), Orascom Development Egypt (-3.8%) and B Investments Holding (-2.8%).

Asian markets are bouncing back this morning after yesterday’s broad-based selloff. European and North American markets are set to follow later today, futures suggest.

Tags: