Egyptian stock-tracked fund reports best week in 11 years

Reuters/Mohamed Abd El Ghany

Investors have flocked to an exchange-traded fund tracking Egyptian shares to ride a rally in the country’s stocks as domestic investors worried about soaring inflation and a potential currency devaluation take refuge in equities.

The VanEck Egypt Index ETF, tracking the MVIS Egypt Index, jumped nearly 19 percent last week, its best weekly performance since June 2012.

“Egypt (stock market) is up more because of local investors looking for a hedge for high inflation, rather than a revisit by foreign investors, who remain concerned about devaluation,” said Hasnain Malik, head of equity research at Tellimer.

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The fund, with $22 million in net assets, saw net inflows of $1.3 million on Thursday, its best showing in nearly seven months, according to Lipper data.

Inflation in Egypt hit its fourth consecutive record high in September, rising to 38 percent, compounding the cost-of-living crisis.

Rapid money supply growth over the last two years has led to a sharp rise in prices with the Egyptian pound losing almost half its value against the US dollar since March 2022.

All that points to the need for another devaluation, but according to some analysts, Egypt is unlikely to devalue its currency before the December presidential election for fear of causing unrest.

The VanEck Egypt Index ETF, however, fell three percent in early trading on Monday, as investor focus turned to the ongoing conflict between Israel and the Palestinian group Hamas in Gaza, that borders Egypt.

Egypt’s blue-chip index, which has gained 60.2 percent this year led by a sharp rally over the past three months, slid 0.8 percent on Sunday after President Abdel Fattah Al Sisi warned that the region risked becoming a “ticking time bomb”.