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Sunday, 11 April 2021

JPMorgan is looking at Egypt

JPMorgan has confirmed that it is studying whether to include Egypt in its emerging-markets government bond index, Reuters reports. In a statement on Thursday, the Bulge Bracket bank said it is looking at including 14 EGP-denominated bonds worth USD 24 bn into its GBI-EM Global Diversified index, which would give them a weighting of 1.8%.

A decade of absence: This wouldn’t be the first time Egypt has been a part of the index, having been booted off in the wake of the economic turmoil that followed the 25 January Revolution in 2011.

Why now? Improved access to the local bond market and increased liquidity, the bank said last week. The Finance Ministry’s focus on longer-term issuance has also paid off, with the country’s debt profile now meeting the minimum maturity for inclusion in the index.

Say hello to more capital flows: Reinclusion could see up to USD 4.8 bn in inflows enter Egyptian bonds and perhaps a 5% appreciation of the EGP against the greenback, Rand Merchant Bank economist Neville Mandimika said recently.

We’ll be waiting for at least another six months: The bank will be out with an update on whether the bonds have met the grade in the next six months, it said last week. This fits with what Mandimika said last month, telling Reuters that Egypt may be reincluded in the index during the second half of the year.

We previously reported that Egypt’s bonds could be “Euroclearable” sometime between September and November of this year, making it easier for foreign funds to get into and out of Egyptian debt. We have the rundown here if you want more.

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