It’s the story all of Egypt emailed us / forwarded / sent us on El-Whats yesterday: When an arbitrage loss becomes the go-to solution to overcome FX shortages: The “hot trade” in Egypt is a guaranteed money-loser, Ahmed Namatalla writes for Bloomberg (autoplay video). Desperate for USD, clients buy CIB shares in EGP on the EGX and sell them as global depository receipts (GDRs) in London for losses as big as 30%. “Big international companies are so desperate to get [USD] that they’re willing to swallow the losses on the deals.” The method is “perfectly legal,” Mohamed Radwan, head of equities at Pharos Holding, says and cost is not an issue “for investors that are looking for a full exit or immediate access to hard currency, because they cannot afford to wait and risk further devaluation of the [EGP].” Head of arbitrage at Beaufort Securities says the “trade is pretty crazy … The only reason anyone would do this is because they must really want the currency. It’s purely to get the money out of the country.” This is causing CIB a problem, as it means the bank is close to reaching the regulatory limits of how much of the company’s shares can be traded offshore as GDRs. The EGX banned the trade for local investors last year, mandating them to be paid in EGP, but left the door open for overseas investors.