There will be no substantial portfolio inflows until the exchange rate stabilizes, CI Capital’s senior economist Hany Farahat suggests. He told Bloomberg “the price of the pound must first stabilize in the interbank market before we see major portfolio inflows … it will happen gradually over the coming months, not overnight.” Farahat also says banks domestically are in “uncharted territory” as they undergo a phase of price discovery using the interbank market.

…Fund managers agree, saying we should not expect “quick inflows of portfolio investment from abroad” into Egypt, according to Reuters. Analysts at Citi said the EGP’s value will steady once the backlog for USD demand is cleared, and they estimate that backlog at USD 9-11 bn. The devaluation "definitely makes it more attractive as the pound is now no longer such a risk … But at this level the good news is priced in on the [USD] bonds. Now the focus switches to the implementation of the IMF programme, which is more difficult,” said Allianz Global Investors portfolio manager Shahzad Hasan.

Early buying yesterday was mainly by local investors as many foreign fund managers said the devaluation was unlikely to cause them to rush back into Egypt, given continued uncertainty about the economy, Reuters reported. The EGX30 closed up 6.12% yesterday, while the broader EGX50 was up 4.24% and the EGX70 climbed 4.18%.

Also yesterday, the yield on 91-day treasury bills rose to 19.055% from 14.594% last week, while the yield on 266-day bills climbed to 20.367% from 16.545%, Reuters’ Arabic service reports. Yesterday’s was the first treasury auction to take place since the float of the pound and accompanying 300 bps hike in interest rates.