Egypt’s central bank, after raising key interest rates earlier this month, has initiated negotiations with the International Monetary Fund (IMF) for a loan worth more than $5 billion, as per a report by Reuters.
Egypt’s economy has been suffering for quite some years now thanks to political unrest in 2011 and a string of terror attacks. This has led to a massive decline in tourism and foreign investments, key sources of hard currency. As a result, the country’s foreign reserve has dwindled to almost half since the uprising. A foreign-currency shortage has affected the domestic businesses badly (read: Top and Flop Country ETFs of Q1).
Earlier this month, Egypt’s central bank raised the key interest rate by 100 basis points to a multiyear high. This marked the second increase this year. In March, the bank had announced a 150 basis point increase. The central bank has also devalued the Egyptian pound by about 13% in a surprise move. Over the long run, it plans to move toward a more flexible exchange-rate policy in order to ease the foreign-currency shortage that is weighing on the already struggling, import-dependent economy.
While the government alongside the central bank has been implementing a series of reforms aimed at reviving its economy, a loan from the IMF could help speed up the process.
However, the negotiations may face some hiccups due to ongoing turmoil in the global markets due to the Brexit vote with world stock markets losing trillions of dollars and the British pound sinking to a 31-year low (read: British Pound ETF: Time to Buy?).
ETF in Focus
Keeping these points in mind, we highlight the sole ETF tracking Egypt–VanEck Vectors Egypt Index ETF . Let us take a look at this ETF in detail (see all Africa-Middle East Equity ETFs here).
EGPT, launched by Van Eck Global in February 2010, tracks the MVIS Egypt Index focusing on companies that are listed on an exchange in Egypt and generate at least 50% of their revenues from the country. The fund holds 27 securities in its basket and its top three holdings include Global Telecom Holding, Commercial International Bank and Talaat Moustafa Group. It is highly concentrated in its top10 holdings with an allocation of 60.9%.
As far as sector allocation is concerned, the product is highly concentrated in the financial sector with half of the total fund allocation, followed by telecom (16.7%), materials (9.8%) and consumer staples (9.6%).
The ETF is quite overlooked as it manages $28.2 million in its asset base and trades in a paltry volume of around 10,500 shares per day. It is highly expensive, charging 98 basis points from investors per year. The fund has lost 10.6% in the year-to-date period as of June 27, 2016. The fund has a Zacks ETF Rank #3 or ‘Hold’ with a High risk outlook (read: Bremain or Brexit: No Worries for EM ETF Investing).
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Will IMF Loan Boost the Egypt ETF?
Egypt’s central bank, after raising key interest rates earlier this month, has initiated negotiations with the International Monetary Fund (IMF) for a loan worth more than $5 billion, as per a report by Reuters.
Egypt’s economy has been suffering for quite some years now thanks to political unrest in 2011 and a string of terror attacks. This has led to a massive decline in tourism and foreign investments, key sources of hard currency. As a result, the country’s foreign reserve has dwindled to almost half since the uprising. A foreign-currency shortage has affected the domestic businesses badly (read: Top and Flop Country ETFs of Q1).
Earlier this month, Egypt’s central bank raised the key interest rate by 100 basis points to a multiyear high. This marked the second increase this year. In March, the bank had announced a 150 basis point increase. The central bank has also devalued the Egyptian pound by about 13% in a surprise move. Over the long run, it plans to move toward a more flexible exchange-rate policy in order to ease the foreign-currency shortage that is weighing on the already struggling, import-dependent economy.
While the government alongside the central bank has been implementing a series of reforms aimed at reviving its economy, a loan from the IMF could help speed up the process.
However, the negotiations may face some hiccups due to ongoing turmoil in the global markets due to the Brexit vote with world stock markets losing trillions of dollars and the British pound sinking to a 31-year low (read: British Pound ETF: Time to Buy?).
ETF in Focus
Keeping these points in mind, we highlight the sole ETF tracking Egypt–VanEck Vectors Egypt Index ETF . Let us take a look at this ETF in detail (see all Africa-Middle East Equity ETFs here).
EGPT, launched by Van Eck Global in February 2010, tracks the MVIS Egypt Index focusing on companies that are listed on an exchange in Egypt and generate at least 50% of their revenues from the country. The fund holds 27 securities in its basket and its top three holdings include Global Telecom Holding, Commercial International Bank and Talaat Moustafa Group. It is highly concentrated in its top10 holdings with an allocation of 60.9%.
As far as sector allocation is concerned, the product is highly concentrated in the financial sector with half of the total fund allocation, followed by telecom (16.7%), materials (9.8%) and consumer staples (9.6%).
The ETF is quite overlooked as it manages $28.2 million in its asset base and trades in a paltry volume of around 10,500 shares per day. It is highly expensive, charging 98 basis points from investors per year. The fund has lost 10.6% in the year-to-date period as of June 27, 2016. The fund has a Zacks ETF Rank #3 or ‘Hold’ with a High risk outlook (read: Bremain or Brexit: No Worries for EM ETF Investing).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>