Trading on the Egyptian Exchange (EGX) jumped by nearly 5 billion Egyptian pounds ($98.5 million) following the Central Bank of Egypt's recent interest interest rate cut, signalling stronger investor interest in equities.
Data reviewed by Al Manassa indicated that turnover in listed stocks increased from 21.5 billion pounds to 26.1 billion pounds over six trading days between April 20 and April 30. Analysts foresee continued improvement in the EGX's performance through 2025, provided the exchange rate remains stable and monetary policy continues on its current easing path.
Smaller-than-expected increase
“Average daily trading improved modestly following the rate cut, though gains were somewhat dampened by a series of public holidays during that period,” said Amr Elalfy, head of equity strategy at Thndr Securities.
The CBE's April 17 decision marked its first interest rate cut in almost five years, ending an extended period of tight monetary policy implemented to combat inflation. Economists view the move as the beginning of a shift towards policy easing.
Previously, high interest rates had made fixed-income assets more attractive, diverting capital away from riskier investments like equities. The reversal is now encouraging a recalibration in investor behavior.
“We expect daily trading to rise further, possibly reaching an average of 7 billion pounds in the coming months,” said Mostafa Shafei, head of research at Arabeya Online Brokerage.
With annual inflation easing to 13.1% in March, analysts believe the CBE may proceed with additional cuts. In a previous report, Al Manassa cited expert forecasts predicting cumulative reductions of up to 3.75% by year-end.
However, Shafei cautioned that a full recovery in retail trading hinges on several factors, including a stable exchange rate, improved macroeconomic conditions, and a de-escalation of regional geopolitical tensions.
The Egyptian pound lost roughly one unit against the US dollar earlier in April, prompted by an exodus of foreign capital from domestic debt markets amid global concerns over an expanding trade war.
Rate-cut winners
Lower interest rates have also improved market sentiment regarding the financial outlook of listed firms. “Falling rates reduce corporate borrowing costs and improve earnings prospects, particularly for heavily leveraged companies,” said Elalfy.
Consumer finance firms are among the most likely beneficiaries. “As financing becomes more affordable, demand for consumer credit rises, which helps boost share performance and trading volumes in that segment,” he added.
A research note by NAEEM Investment Bank, reviewed by Al Manassa, projected that lower interest rates would spur an increase in loans for capital spending, giving firms better access to cheaper financing.
The report identified several near-term beneficiaries, including Telecom Egypt, property developers, and pharmaceutical firms such as Ibnsina Pharma and EIPICO.
Is recovery on the way?
According to Al Manassa’s calculations, the EGX 30 index — a key measure of Egyptian stock market performance — climbed 3.4% over six trading sessions following the April rate cut, closing at 32,162 points.
Shafei believes the stock market could gain further traction if Egypt advances its privatization drive through the stock exchange. He argues that broadening ownership in state enterprises would help attract new retail and institutional investors.
In December, the Central Bank partially divested its stake in United Bank through an initial public offering — the first time shares were made available to public investors. The offering was oversubscribed nearly 59 times, indicating strong appetite.
The government has committed to speeding up privatization to close Egypt’s external financing gap. Earlier this month, the prime minister announced plans to restructure and sell shares in five companies affiliated with the military-linked National Service Projects Organization.
“We remain optimistic about the market’s trajectory, especially with expectations that total interest rate cuts could reach 6% by the end of 2025,” Shafei added.
