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Sunday, 9 September 2018

Foreign investors exited some EGP 29.9 bn worth of Egyptian treasuries in June 2018

**#2 Foreign investors exited some EGP 29.9 bn worth of Egyptian treasuries in June as the Emerging Markets Zombie Apocalypse deepened, according to central bank data (pdf). Foreign holdings of treasuries stood at EGP 269.1 bn at the end of FY2017-18, down EGP 29.9 bn from the previous month. International fund managers’ appetite for Egyptian T-bills has eased since April, impacted by the wider emerging markets sell-off, the CBE’s data also shows, falling from a high of EGP 380.0 bn in March.

Don’t be confused by the two sets of figures out there: The Finance Ministry shows foreign holdings today at about USD 17.1 to USD 17.5 bn, compared with the USD 15.06 bn (EGP 269.1 bn) figure recorded by the central bank. As we understand it, the CBE figure includes only short-term instruments, while the Finance Ministry tracks short- and longer-term maturities. The Finance Ministry was out with a statement, carried by Al Mal, deferring to the central bank on this to mitigate any confusion.

FinMin downplays impact of EM crisis on EGP: Egypt’s currency is handling the emerging markets sell-off much better than other EM currencies, with the EGP having slid just 0.5% since January 2018, Vice Minister of Finance Ahmed Kouchouk said in an interview with Al Masdar. Compare that with a 41% drop in the TRY, the 36% slide in the ARS, and the 15% drop in the RUB. The results show that Egypt has lowest risk of market contagion as its economic reforms and fundamentals have largely shielded it from the impact of the EM Zombie Apocalypse, Kouchouk said.

But is the central bank propping up the currency? Capital Economics has a report out last week alleging that the EGP’s stability can only have come from the CBE propping up the currency, despite previous pledges by CBE Governor Tarek Amer that those days were over. The report warns that the impact of the EM crisis, including stock and bond outflows, would force the CBE to abandon the policy, projecting that the EGP could lose up to 10% of its value against the USD by 2020 — still, a fairly modest dip.

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