Another historic high for the greenback

Here are the stories driving the day, both at home and abroad. The USD passed the EGP 56 mark in trading today, recording EGP 56.21 for buying and EGP 56.35 for selling, according to Central Bank of Egypt (CBE) data, extending the EGP’s downward trajectory over recent days. “Recent movements are a natural reflection of a flexible foreign exchange market,” economist Ayman Ghoneim tells EnterpriseAM, adding that the exchange rate is not expected to drop below the EGP 50 mark in the near future due to hot money outflows.

The USD’s recent momentum reflects the interplay of several factors, including seasonal demand for FX from companies and importers, portfolio investment shifts, global USD strength, and heightened uncertainty driven by regional geopolitical developments, Ghoneim tells us. “The flexible exchange rate policy adopted by the CBE is precisely what reduces the need to deploy international reserves as a buffer to absorb external shocks,” he adds.

“The CBE is expected to continue allowing the exchange rate to adjust to supply and demand, with a primary focus on maintaining USD liquidity and curbing inflation,” London-based economist Ali Metwally tells EnterpriseAM. Breaching the EGP 56 threshold doesn’t necessarily signal the start of an extended downward spiral for the EGP, as currency stability hinges on the volume of USD inflows relative to FX demand and the persistence of the geopolitical shock, he says. “Remittances from Egyptians abroad and foreign exchange reserves hovering at historic highs provide relative support to the FX market,” Metwally adds.

ON THE EGX FRONT- The EGX30 closed down 1.66% at 48.4k today, extending the selloff after opening at 49.2k and touching 47.9k intraday before clawing back part of it, according to market data. In USD terms, the drop was even steeper (-2.45%), with the gap explained by the EGP’s slide. The benchmark is still up 15.75% YTD in local currency.

Volatility is expected to persist across upcoming sessions, with the potential for a gradual technical rebound following the recent sharp sell-off, Metwally tells us, particularly among blue-chip stocks and companies with solid balance sheets and stable cashflows. “A sustained recovery through November and December will depend primarily on the de-escalation of regional tensions, exchange rate stabilization, and the return of market liquidity and investor confidence,” he adds.

Banque du Caire priced its IPO at EGP 5.30 a share, the top of the range it was guiding on, after institutional orders covered the private placement 6x over, the state-backed lender said in an EGX disclosure (pdf). Coverage rose to 19.8x excluding shares already allocated to anchor investors. The private book closed on Friday.

The 19.8x figure gives a better read of open-market demand, but it measures that demand against a smaller pool. Before the book closed, four foreign cornerstone funds had already locked in a large share of the institutional tranche (USD 256 mn), with the IFC and the EBRD separately agreeing to take up to 15.74% of the enlarged private placement.

^^ We’ll have more on this story in tomorrow’s edition of EnterpriseAM.

☀️ TOMORROW’S WEATHER- Consider this your cue to enjoy the outdoors while the weather is still playing nice, as temperatures reach a high of 30°C tomorrow before dipping to a cool 20°C overnight, according to our favorite weather app.

MAKING HEADLINES ABROAD-

Luiz Inácio Lula da Silva’s victory in Brazil’s presidential election is still dominating headlines this afternoon as his right-wing rival Senator Flávio Bolsonaro refuses to recognize the result and plans to challenge it. Also getting top billing is a pullback in oil prices as US-Iran tensions ease, while investors weigh the impact of further attacks on Saudi energy infrastructure. Brent fell 1.89% to USD 114.8/barrel, still trading near a six-month high, while WTI slid more than 2% to USD 101/barrel, as of the time of publication.

MEANWHILE- Senior officials from Makkah Pact members Saudi Arabia, Turkey, and Pakistan are set to meet with Iranian leaders in Tehran today in a bid to cool tensions and get peace talks back on track. Saudi Defense Minister Khalid bin Salman, Pakistan’s Army Chief Asim Munir, and Turkish intelligence chief Ibrahim Kalin will represent their respective countries.

IN OTHER NEWS- Venezuelan opposition leader and Nobel laureate María Corina Machado returned home on Sunday after more than 10 months in exile. Her return poses a challenge to the US-backed interim government, installed after US forces seized Venezuela’s socialist president Nicolás Maduro in January and Vice President Delcy Rodríguez assumed the interim presidency.