EGX30 extends rally after CBE loosens monetary policy: The benchmark EGX30 index climbed 3.3% at session close yesterday in response to the central bank’s 100 bps interest rate cut on Thursday and muted protests over the weekend. All of EGX30 shares rose yesterday, led by Qalaa Holdings, which surged 13.7%. Index heavyweight CIB rose 2.5%. The EGX30 has now rallied for three consecutive sessions following last week’s abysmal performance when the first three trading days of the week saw it nosedive 11% on the back of investor anxiety about protests, almost wiping out 2019 gains. A recovery on Wednesday and Thursday helped the index claw back some of the losses, finishing the week down 6%.

A quiet weekend and the CBE rate cut are driving the rebound, Bloomberg quoted Naeem Brokerage’s Allen Sandeep as saying. Investors “miscalculated” the risk of political instability which caused them to dump stocks, he said. Raffaele Bertoni, head of debt capital markets at Gulf Investment Corp, added that, “The repricing of near-term political risk through a sell-off in Egyptian assets has already happened and investors should continue to look for confirmation that the good macro story is intact before taking any more aggressive positions in the country.” Reuters also took note of the recovery.

The EGP strengthened on Sunday to 16.31 to the greenback compared to 16.38 at the end of last week, CBE data showed. Banking sources told Reuters the appreciation was driven by inflows sparked by last week’s interest rate cut. “We are seeing hot money flooding the gates before the yields go down any further,” an unnamed banker told the newswire. “The EGP carry trade is still the most attractive in the world.”

Commentary on last Thursday’s interest rate cut continues to roll in: Beltone Financial said in a note yesterday it expects the Central Bank of Egypt (CBE) to sustain its monetary easing cycle in the coming months, with “a favorable base effect and EGP strength” helping to keep inflation rates within the CBE’s targets through the end of the year. Beltone doesn’t expect the currency to rally beyond the EGP 16 / USD 1 mark, with limited fluctuations that will help keep inflation in check and allow for further rate cuts. The firm sees another 50 bps rate cut at the Monetary Policy Committee’s next meeting in November, with a further 300 bps worth of cuts coming in 2020.

Falling interest rates and slowing inflation will provide a boost to consumer spending, HC said in a research note yesterday (pdf).