Cairo stock market cap jumps 3%, EGX 30 dips in week

Egypt’s stock benchmark finished in the red on Wednesday, posting a slight week declines, driven by the central bank’s decision to raise the required reserve ratio.

Bourse trading in Egypt was shut on Thursday as national holiday on October war victory anniversary.

CBE move

The Central Bank of Egypt raised on Tuesday the required reserve ratio on local currency deposits for domestic banks to 14 percent from 10 percent, citing “improved economic indicators” and bringing the ratio back to pre-2012 levels.

A larger reserve ratio tend to dampen banks’ lending, which would counter lower interest rates.

Egypt kept the ratio at 14 percent from 2001 until 2012 when it was reduced to improve liquidity for lending activity, for the public as well as the private sector, amid deteriorating economic conditions that followed a 2011 uprising.

Economists said the rise, effective on October 10, could point to a coming benchmark interest rate cut or an effort to ease inflation which remains near record-highs despite a hike of 700 basis points since November last year.

Analysts at Arqaam Capital told Reuters that the move could be a “precursor to a looser monetary policy in 2018”, but in the meantime it could weigh on Egyptian banks’ net interest margins and put downward pressure on their return on equity.

Indices:

Benchmark EGX 30 fell 0.35 percent, to close the last day of trading this week at 13,882 points. For the week, the main gauge booked a decline of 0.05 percent.

The mid- and small-cap index, EGX 70 gained 3.19 percent in a week closing at 798 points during Wednesday’s session. Price index, EGX 100 also made a weekly gain of 3.76 percent closing at 1,788 points.

Market Capitalisation:

Market capital jumped three percent, registering weekly gains of 20 billion Egyptian pounds ($1.1 billion) as it closed on Wednesday at 768.626 billion pounds, compared with 748.598 billion pounds the previous week, the Egyptian bourse said in its weekly report.

Turnovers

During the week, the trading volume hit around 1.409 million securities, compared 2.642 million a week earlier. For the traded value, it reached around 5.2 billion pounds against 6.4 billion pounds a week earlier.