Egypt Financial Services

Recovering headline stability and new listings should both help to invigorate Egypt’s capital markets in the medium term, with investor appetite for assets across the region providing an additional boost. 

Financial support from Gulf allies, signs of economic recovery and a quieter atmosphere on the streets have helped Egypt’s capital markets make up some lost ground. The country’s key share index hit a three-year high in early November, with the market up 20% on just two months previously.

The Egyptian Exchange (EGX) has been through a roller coaster ride of late, buffeted by political crises, economic slowdowns and government involvement. But a new deal intended to open the market to greater foreign investment, and possible regulatory changes, may be important steps in the bourse’s recovery.

A large, underbanked market makes Egypt an appealing prospect for financial institutions looking for long-term growth, although the effects of ongoing economic and political uncertainty are weighing on some lenders.

The stock market in Egypt got off to a bullish start in 2013, but political deadlock, ongoing unrest across the country, a rising government budget deficit, foreign reserve losses and currency depreciation have all seen the Egyptian Exchange (EGX) struggle in recent weeks. A recent government decision to impose a tax on all EGX transactions is likely to contribute to continued unstable performance.

Despite an uncertain political climate and a sluggish economic recovery, the long-term prospects of Egyptian banks are attracting attention from their Gulf counterparts. Two recently announced acquisitions have brought the sector back into the headlines on a positive note, helping offset a recent ratings downgrade.