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Thursday, 15 March 2018

What we’re tracking on 15 March 2018

As we near the central bank’s Monetary Policy Committee meeting a week from today, research houses are guiding their clients to expect an interest rate cut. The sentiment comes on the back of annual urban inflation falling to 14.4% in February from 17.1% in January, inching ever closer to the CBE’s target inflation rate of 13%.

Who’s saying what? EFG Hermes sees the CBE pushing through a second rate cut of 50-100 bps “before the CBE takes a pause to assess the impact of its two rounds of monetary easing on key monetary aggregates. Additional visibility on the next round of energy subsidy cuts … should also provide more guidance on short-term movement in policy rates,” the firm writes. Pharos’ research department sees a cut of 100 bps at the meeting, which should work in favor of highly leveraged companies and the real estate sector. It sees inflation falling another 200 bps by the end of the year. CI Capital’s research team also sees a 100 bps rate cut this month, projecting interest rates to fall 5% by the end of the year. Mubasher sees the MPC cutting rates a sharp 200 bps as the base effect continues to kick in on the inflation side of the equation, saying the pace of inflation only be slightly affected by the projected wave of subsidy cuts in July as these would not be as drastic as the previous round.

Meanwhile, our friends at Pharos Holding announced yesterday (pdf) that they have tapped specialist emerging markets investment bank Exotix USA to act as Pharos’ chaperone partner covering meetings and trades with US clients. Elwy Taymour, Pharos group chairman and co-CEO, said, “We look forward to working with Exotix USA, Inc. in the USA to expand our joint reach to reach new institutional clients, just as the economic turnaround in Egypt is beginning to attract far larger equity flows into the stock market … With the wide footprint which Exotix holds in emerging markets, the working relationship with Exotix allows Pharos to inform a wider client base about the Egyptian capital markets and the economy, through our Research product and in sales within our Brokerage division.”

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