Market Commentary

The EGX30 is the top performer of the week, gaining 5.60%. Excitement gain the Egyptian market this week as the Central Bank of Egypt finally decided to allow the Egyptian pound to float and increase interest rates by three percentage points. The devaluation of the pound will put the currency on par to its value on the black market. The benchmark strengthened as a result as the move brought the country closer to securing a $12bn loan by the IMF. Dollar shortage means that investors will still face capital controls preventing them to repatriate profits.

In its bi-yearly report IMF cut its 2017 growth outlook for sub-Saharan Africa to 1.4% from 3% growth expected earlier because of commodity-exporting countries struggling with weak demand. Sub-Saharan Africa is witnessing its lowest growth in 20 years however some countries still expect to expand by 4% or more.

The ZSE Ind. is the best performer of the week gaining 7.52%. In order to solve the issue of cash shortage in the country, the country is introducing dollar-backed bond notes announced the central bank Governor John Mangudya. Since the 2009 crisis, the country is facing a shortage in foreign currencies and bond notes should tackle the issue. However, the concept is facing push backs as people look at them as a return to the controversial Zimbabwean dollar. This, despite the fact that the bonds would be backed by a $200mn loan from a multilateral lender.

The ZSE Ind. is the best performer of the week, gaining 10.82% as most heavy weights showed strong performance thanks to solid demand. Moreover, Dr Mlambo, deputy governor of the Reserve Bank of Zimbabwe announced the country would not join the rand monetary union despite calls from business to do so in order to increase its competitiveness. Mlambo cites South African rand’s own challenges and the fact that the country does not have its own currency. He however recognised that using the US dollar was not optimal because of liquidity issues. The strengthening of the dollar against regional currencies has weakened the competitiveness of Zimbabwean goods on the regional market, which has hurt the local industry.