Omicron + Fed taper hits emerging-market bond ETFs: Investors pulled more than USD 850 mn from emerging-market debt ETFs last week as the discovery of the Omicron covid variant and the decision to keep Jay Powell as Federal Reserve head for another term fuelled risk-off sentiment, data from Bloomberg shows. Bond funds saw the biggest outflows, losing USD 640.2 mn during the week, but equities weren’t spared either, seeing USD 213.9 mn of outflows. The US’ biggest EM debt ETF — the iShare JPMorgan fund — had its worst week since the pandemic first hit in March 2020, falling 2.6% at the same time as investors pulled USD 709.5 mn.

Egypt wasn’t spared: The sell-off in bond ETFs meant that Egyptian assets saw net outflows of USD 19.3 mn last week. This represents a drop of around 12%, with foreign ETF holdings falling from USD 997.1 mn to USD 977.8 mn. Egyptian equities saw small inflows of USD 200k but this didn’t do anything to offset the USD 19.4 mn pulled from bonds.

Putting this into perspective: Egyptian assets held in ETFs are peanuts compared to the bns of USD invested directly in local-currency bonds. According to the most recent figures provided by the Finance Ministry, foreign holdings of Egyptian debt in August amounted to around USD 33 bn.

“We can’t see a positive environment for EM, as many EM countries will be last in line for vaccine that might be produced to counteract” the variant, Citigroup strategists Jamie Fahy, Adam Pickett and Yasmin Younes wrote in a note to clients Friday.

THE CLOSING BELL-

The EGX30 fell 0.6% at yesterday’s close on turnover of EGP 955 mn (33.7% below the 90-day average). Local investors were net buyers. The index is up 3.4% YTD.

In the green: Aspire Capital (+5.5%), Pioneers Properties (+4.3%) and Orascom Development Egypt (+3.5%).

In the red: Eastern Company (-10.1%), Speed Medical (-3.0%) and AMOC (-2.6%).