{"id":647902,"date":"2017-05-23T03:43:05","date_gmt":"2017-05-23T03:43:05","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/"},"modified":"2017-05-23T03:43:05","modified_gmt":"2017-05-23T03:43:05","slug":"rencap-praises-rate-hike-as-mobius-local-investors-disagree","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/","title":{"rendered":"RenCap praises rate hike, as Mobius, local investors disagree"},"content":{"rendered":"<p><a class=\"content-anchor\" id=\"tldr-story-01\"><\/a> <strong>Voices in the wilderness?<\/strong> The central bank\u2019s decision to increase policy rates by 200 bps on Sunday is probably \u201cgood news\u201d for the EGP, Renaissance Capital\u2019s chief economist Charles Robertson believes, the <a href=\"https:\/\/www.ft.com\/content\/7c032efe-5eef-3e0a-a9b8-7e78f35ff6f2\">Financial Times<\/a> reports. The move came later than hoped, Robertson says, but it <strong>shows \u201ccommitment to getting inflation back down again, after months where it has consistently been running high<\/strong>. Currency stability \u2014 which should be supported by the higher interest rate \u2014 will help drive down month on month inflation. Currency appreciation should help more.\u201d <strong>RenCap still believes the EGP continues to be the cheapest EM currency<\/strong>, as it compares the current exchange rate to a \u201cfair value\u201d closer to EGP 14-15 per USD 1.<\/p>\n<p><strong>Proving there is one in every barrel, the Federation of Egyptian Chambers of Commerce <\/strong><strong>is down with the rate hike.<\/strong> The Federation\u2019s General Secretary Alaa Ezz described the move as \u201cnecessary medicine\u201d to help curb inflation and \u201cthe only right move,\u201d <a href=\"http:\/\/www.alborsanews.com\/2017\/05\/22\/1025485\">Al Borsa<\/a> reports. He added that the inflation was a bigger threat to investors than a mere 200 bps spike in interest rates, which he downplayed as only a \u2018marginal\u2019 hike. Despite the shock to the EGX yesterday, Ezz believes the decision will not negatively impact foreign investors considering the higher rates of return.<\/p>\n<p><strong>People actually running business in Egypt were \u201cin shock\u201d following the hike, <\/strong>Ihab Farouk writes for <a href=\"http:\/\/ara.reuters.com\/article\/businessNews\/idARAKBN18I0SM?sp=true\">Reuters\u2019 Arabic service<\/a>. \u201cWe don't understand the logic of this decision,\u201d Prime Holding economist Eman Negm said, telling <a href=\"http:\/\/af.reuters.com\/article\/egyptNews\/idAFL8N1IO3NB?sp=true\">Reuters<\/a> that the rate hike may have the opposite effect of worsening inflation levels by raising borrowing costs for companies. An unnamed investment banker went a step further, calling the decision \u2014 taken under the recommendation of the IMF, according to an unnamed government official \u2014 \u201c<strong>disastrous \u2026 what happened is a big mistake, but no one wants to listen<\/strong>.\u201d A Cairo-based banker told the wire service, \u201c<strong>It is clear that the IMF is going by the book while Egypt is different to other countries<\/strong> \u2026 so what works elsewhere does not necessarily work here. There are different dynamics, such as that <strong>less than 10 percent of the population is banked<\/strong>.\u201d<\/p>\n<p><strong>Hani Berzi, CEO of top snack food maker Edita and head of the Food Exporters<\/strong><strong>Council, says the rate increase was \u201can unpleasant surprise\u201d<\/strong> that adds to the borrowing costs and increases pressure on state finances. Others in his industry shared his view, with the head of the food industries division of the Federation of Egyptian Industries (FEI), Ashraf El Gazayerli, saying the decision will be reflected in higher production costs and will slow down market activity and investment decisions. He tells <a href=\"http:\/\/www.alborsanews.com\/2017\/05\/22\/1025528\">Al Borsa<\/a> that the move would exacerbate food inflation.<\/p>\n<p><strong>The fear was reflected in the auto industry as well<\/strong>, as Alaa Saba from the Automotive section of the Federation of Egyptian Chambers of Commerce says the rate increase will feed into an increase in inflation in the future. He says \u201cif I have to borrow now it\u2019ll cost me over 18% \u2026 this will feed into higher prices for everyone.\u201d Bavaria Auto Group board member Khaled El Saad tells <a href=\"http:\/\/www.alborsanews.com\/2017\/05\/22\/1025502\">Al Borsa<\/a> that this will negatively impact sales as 70% of car buyers borrow.<\/p>\n<p><strong>The Federation of Egyptian Industries (FEI) issued a statement yesterday saying the hike <\/strong><strong>was poorly timed and puts extra pressure on Egyptian industry<\/strong>. The higher interest rates will hamper the ability to expand and attract new investments, FEI head Mohamed Elsewedy says, according to <a href=\"http:\/\/www.alborsanews.com\/2017\/05\/22\/1025329\">Al Borsa<\/a>. Elsewedy called on the central bank to allocate funds to provide credit to Egyptian manufacturers at reduced interest rates to support their competitiveness.<\/p>\n<p><strong>OTMT boss Naguib Sawiris<\/strong> said the move would give foreign investors pause, as it reflects a lack of stability in monetary policy considerations, <a href=\"http:\/\/www.almalnews.com\/Pages\/StoryDetails.aspx?ID=334852\">Al Mal<\/a> reports.<\/p>\n<p><strong>Emerging markets icon Mark Mobius won our hearts<\/strong> when the Templeton Emerging Market Group executive chairman told <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2017-05-22\/mobius-says-one-size-fits-all-imf-rate-advice-no-good-for-egypt\">Bloomberg<\/a> that raising rates \u201cgo[es] well and good when the environment is healthy. But in an environment like in Egypt now, it is not a healthy situation at this stage\u2026 <strong>Unfortunately, people believe that if you raise interest rates, you lower inflation and inflation expectation\u2026 This is not necessarily the case<\/strong>.\u201d Echoing Berzi\u2019s comments, Mobius says: \u201c<strong>Rates are so high now, how can a businessman survive?<\/strong>\u201d And agreeing with RenCap\u2019s notion that the rate hike will support the EGP, Mobius suggests that <strong>a weaker EGP is preferable at this stage to \u201cget exports going.\u201d<\/strong> Salah Shamma, head of Investment, MENA Equity, Franklin Templeton Investments (ME) told <a href=\"http:\/\/www.reuters.com\/article\/us-egypt-economy-rates-idUSKBN18I1GQ\">Reuters<\/a> that he expects the rate hike to support the EGP and continue to attract foreign inflows, which should replenish the country\u2019s foreign reserves and find its way to the local banking sector. Pharos Holding <a href=\"https:\/\/ent.news\/2017\/5\/727.pdf\">breaks down the decision here (pdf)<\/a>.<\/p>\n<p><strong>The banking community did not immediately hike rates<\/strong>. Official reactions from the sector have been muted as senior banking executives were reportedly locked in meetings all of Monday to study the impact of the decision, <a href=\"http:\/\/www.dailynewsegypt.com\/2017\/05\/22\/banks-tend-maintain-interest-rates-unchanged-despite-cbes-2-hike\/\">Daily News Egypt<\/a> reports. Top state-owned banks the National Bank of Egypt and Banque Misr will await until their Alco (assets and liabilities committees) meetings sometime on Wednesday, according to <a href=\"http:\/\/www.almasryalyoum.com\/news\/details\/1137713\">Al Masry Al Youm<\/a>. Banque Misr\u2019s head Mohamed El Etreby said the hike in interest rates would have no impact on 18-month CDs issued by banks following the EGP float with yields of up to 20%. A notable exception to this wait and see plan was Banque Misr raising interest rates on VIP savings deposits 200 bps, <a href=\"http:\/\/www.almalnews.com\/Pages\/StoryDetails.aspx?ID=334839\">Al Mal<\/a> reports.<\/p>\n<p><strong>The Ismail government put on its best poker face<\/strong>, with the sole comment of note being one from Deputy Finance Minister Mohamed Maait, who said the inflation rate spike would not impact the FY2017-18 budget currently being discussed by the House of Representatives, <a href=\"http:\/\/www.alborsanews.com\/2017\/05\/22\/1025428\">Al Borsa<\/a> reports. <strong>Speaking of the House, opinions appear to be divided between its budget and economic committees<\/strong>. Budget Committee member Mohamed Fouad called for an inquiry into the move, stating that it foreshadows a monetary crisis. The interest rate hike appears to have found support from House Economic Committee member Ashraf El Araby, according to <a href=\"http:\/\/www.almalnews.com\/Pages\/StoryDetails.aspx?ID=334879\">Al Mal<\/a>.<\/p>\n<p>Meanwhile,<strong> average yields on Egypt's five-year and 10-year treasury bonds jumped at an <\/strong><strong>auction on Monday<\/strong>, according to the <a href=\"http:\/\/www.mof.gov.eg\/english\/Pages\/Home.aspx\">Finance Ministry<\/a>. The yield on the five-year bond rose to 18.760% from 17.357% at the previous auction, while the yield on the 10-year bond increased to 18.652% from 17.244%.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Voices in the wilderness? The central bank\u2019s decision to increase policy rates by 200 bps on Sunday is probably \u201cgood news\u201d for the EGP, Renaissance Capital\u2019s chief economist Charles Robertson believes, the Financial Times reports. The move came later than hoped, Robertson says, but it shows \u201ccommitment to getting inflation back down again, after months [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"single-feature.php","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8572],"tags":[72,2380],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-647902","post","type-post","status-publish","format-standard","hentry","category-speed-round","tag-enterpriseam","tag-speed-round","wpautop","entry"],"acf":{"mongo_id":"e154fef2-2558-4e54-9a4e-1e0b927dff4a","order":"0","is_powered_by":true,"story_type":"1","photo_url":"","photo_position":"above","related_issue":[647895],"teaser":"","voice_url":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.1 (Yoast SEO v27.1.1) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>RenCap praises rate hike, as Mobius, local investors disagree - EnterpriseAM Egypt<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"RenCap praises rate hike, as Mobius, local investors disagree\" \/>\n<meta property=\"og:description\" content=\"Voices in the wilderness? The central bank\u2019s decision to increase policy rates by 200 bps on Sunday is probably \u201cgood news\u201d for the EGP, Renaissance Capital\u2019s chief economist Charles Robertson believes, the Financial Times reports. The move came later than hoped, Robertson says, but it shows \u201ccommitment to getting inflation back down again, after months [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/\" \/>\n<meta property=\"og:site_name\" content=\"EnterpriseAM Egypt\" \/>\n<meta property=\"article:published_time\" content=\"2017-05-23T03:43:05+00:00\" \/>\n<meta name=\"author\" content=\"enterpriseam admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"enterpriseam admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/\"},\"author\":{\"name\":\"enterpriseam admin\",\"@id\":\"https:\/\/enterpriseam.com\/egypt\/#\/schema\/person\/ca597032db7e4db868359c123cec256d\"},\"headline\":\"RenCap praises rate hike, as Mobius, local investors disagree\",\"datePublished\":\"2017-05-23T03:43:05+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/\"},\"wordCount\":1068,\"publisher\":{\"@id\":\"https:\/\/enterpriseam.com\/egypt\/#organization\"},\"keywords\":[\"EnterpriseAM\",\"SPEED ROUND\"],\"articleSection\":[\"Speed Round\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/\",\"url\":\"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/\",\"name\":\"RenCap praises rate hike, as Mobius, local investors disagree - 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The central bank\u2019s decision to increase policy rates by 200 bps on Sunday is probably \u201cgood news\u201d for the EGP, Renaissance Capital\u2019s chief economist Charles Robertson believes, the Financial Times reports. The move came later than hoped, Robertson says, but it shows \u201ccommitment to getting inflation back down again, after months [&hellip;]","og_url":"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/","og_site_name":"EnterpriseAM Egypt","article_published_time":"2017-05-23T03:43:05+00:00","author":"enterpriseam admin","twitter_card":"summary_large_image","twitter_misc":{"Written by":"enterpriseam admin","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/#article","isPartOf":{"@id":"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/"},"author":{"name":"enterpriseam admin","@id":"https:\/\/enterpriseam.com\/egypt\/#\/schema\/person\/ca597032db7e4db868359c123cec256d"},"headline":"RenCap praises rate hike, as Mobius, local investors disagree","datePublished":"2017-05-23T03:43:05+00:00","mainEntityOfPage":{"@id":"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/"},"wordCount":1068,"publisher":{"@id":"https:\/\/enterpriseam.com\/egypt\/#organization"},"keywords":["EnterpriseAM","SPEED ROUND"],"articleSection":["Speed Round"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/","url":"https:\/\/enterpriseam.com\/egypt\/2017\/05\/23\/rencap-praises-rate-hike-as-mobius-local-investors-disagree\/","name":"RenCap praises rate hike, as Mobius, local investors disagree - 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Robertson remains bullish on Egypt following an investor trip to Cairo as he believes the government has shown zeal in implementing reforms and it is being supported by\u2026","rel":"","context":"In &quot;Speed Round&quot;","block_context":{"text":"Speed Round","link":"https:\/\/enterpriseam.com\/egypt\/category\/speed-round\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/ent.news\/internal\/536550.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":568839,"url":"https:\/\/enterpriseam.com\/egypt\/2020\/02\/05\/egp-overvaluation-to-surpass-20-in-the-coming-two-years-rencap\/","url_meta":{"origin":647902,"position":2},"title":"EGP overvaluation to surpass 20% in the coming two years -RenCap","author":"enterpriseam admin","date":"5 February 2020","format":false,"excerpt":"EGP overvaluation to surpass 20% in the coming two years -RenCap: Renaissance Capital has become \u201cmore bullish\u201d on the trajectory of the EGP over the coming two years, forecasting the currency to remain stable this year before falling to EGP 16.2 against the greenback during 2021. In a report issued\u2026","rel":"","context":"In &quot;Speed Round&quot;","block_context":{"text":"Speed Round","link":"https:\/\/enterpriseam.com\/egypt\/category\/speed-round\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/ent.news\/2020\/2\/70.jpg?fit=%2C&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":648843,"url":"https:\/\/enterpriseam.com\/egypt\/2017\/04\/13\/rencap-says-egypt-is-a-haven-trade-werr-says-state-of-emergency-could-slow-recovery-down\/","url_meta":{"origin":647902,"position":3},"title":"Rencap says Egypt is a haven trade, Werr says state of emergency could slow recovery down","author":"enterpriseam admin","date":"13 April 2017","format":false,"excerpt":"Renaissance Capital says investing in Egypt is an emerging market safe-haven trade, Global Chief Economist Charles Robertson told Bloomberg TV. Egypt is one of the places that provide \u201cidiosyncratic opportunities,\u201d he says, despite the terrorist attacks. \u201cIt\u2019s high yield and it\u2019s got a cheap currency,\u201d Robertson adds. Looking at EMs\u2026","rel":"","context":"In &quot;Speed Round&quot;","block_context":{"text":"Speed Round","link":"https:\/\/enterpriseam.com\/egypt\/category\/speed-round\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/ent.news\/internal\/536550.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":649270,"url":"https:\/\/enterpriseam.com\/egypt\/2017\/04\/27\/rencap-says-egypt-is-its-top-pick\/","url_meta":{"origin":647902,"position":4},"title":"RenCap says Egypt is its top pick","author":"enterpriseam admin","date":"27 April 2017","format":false,"excerpt":"Egyptian assets are Renaissance Capital\u2019s top pick: Egypt is now reaping the rewards of the EGP devaluation, according to Rencap\u2019s Global Chief Economist Charles Robertson. He says the weaker EGP \u201cshould spur exports and encourage foreign direct investment over the next few years.\u201d Robertson told Bloomberg \u201cEgypt is one of\u2026","rel":"","context":"In &quot;Speed Round&quot;","block_context":{"text":"Speed Round","link":"https:\/\/enterpriseam.com\/egypt\/category\/speed-round\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/ent.news\/internal\/536550.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":594453,"url":"https:\/\/enterpriseam.com\/egypt\/2019\/10\/30\/renaissance-capital-sees-inflation-slowing-to-3-as-weight-of-volatile-fruits-and-vegetables-continue-to-fall\/","url_meta":{"origin":647902,"position":5},"title":"Renaissance Capital sees inflation slowing to 3%, as weight of volatile fruits and vegetables continue to fall","author":"enterpriseam admin","date":"30 October 2019","format":false,"excerpt":"Annual headline inflation should slow down to about 3% in October, down from 4.8% in September, according to Renaissance Capital\u2019s Consumer Price Index (CPI) report. The report notes that the combined weight of the volatile fruits and vegetables has dropped to 6% in September from 18%, while other food and\u2026","rel":"","context":"In &quot;Speed Round&quot;","block_context":{"text":"Speed Round","link":"https:\/\/enterpriseam.com\/egypt\/category\/speed-round\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/ent.news\/2019\/10\/1304.jpg?fit=%2C&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]}],"_links":{"self":[{"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/posts\/647902","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/comments?post=647902"}],"version-history":[{"count":0,"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/posts\/647902\/revisions"}],"acf:post":[{"embeddable":true,"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/issue\/647895"}],"wp:attachment":[{"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/media?parent=647902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/categories?post=647902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/tags?post=647902"},{"taxonomy":"brand","embeddable":true,"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/brand?post=647902"},{"taxonomy":"newspack_spnsrs_tax","embeddable":true,"href":"https:\/\/enterpriseam.com\/egypt\/wp-json\/wp\/v2\/newspack_spnsrs_tax?post=647902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}