Egyptian stocks jumped after the central bank said it would allow the currency to float as part of measures designed to tackle a dollar shortage that has sapped economic growth.
The EGX 30 Index rallied as much as 8.3 percent, the most in eight years, before trading 5.7 percent higher as of 10:34 a.m. in Cairo. Commercial International Bank Egypt’s 1.6 percent gain was the biggest contributor to the index’s rally.
The gauge was the best performer among more than 90 measures tracked by Bloomberg worldwide as all but one of its 30 members advanced. That sent company valuations based on future earnings to the highest level in more than a year.
The Egyptian pound’s 12-month non-deliverable forwards weakened to a record 17 per dollar.
The central bank said it would end exchange-rate controls and raise interest rates by 300 basis points in a bid to restore investor confidence in an economy still recovering from a series of uprisings that toppled two leaders in less than six years. The move would bring the nation closer to securing a $12 billion loan from the International Monetary Fund, helping attract foreign cash back into the market.
“The market is in a state of complete euphoria; the long wait has finally come to an end,” said Mohamed Radwan, head of equities at Cairo-based Pharos Holding. “We’re going to enjoy this rally as much as possible, because the reality of decisions like raising interest rates by 300 basis points could soon kick in.”
Policy makers set a tentative exchange rate of 13 pounds per dollar, plus or minus 10 percent, until the central bank holds a foreign-currency auction at 1 p.m. local time, according to two people familiar with the matter. Allowing the currency to devalue would bring the pound’s official rate in line with its black market counterpart, narrowing a gap that has deterred overseas investors.
The EGX’s price-to-earnings ratio for the next 12 months rose to 10.3 times, the highest level since July 2015. The gauge’s 14-day relative strength index jumped to 76, above a threshold that signals to some investors the measure has risen too quickly.
Source: Bloomberg
