Analysts ruled out that the owners of the Suez Canal investment certificates, in the segment of EGP 1,000 and its multiples, would refund these certificates to purchase the ‘Platinum Certificate’ and the ‘Certificate of the Top’ issued by the National Bank of Egypt (NBE) and Banque Misr, which have an interest rate of 0.5% more than the Suez Canal certificate.
The duration of the Suez Canal certificates, issued in the first week of September 2014, is five years, giving an annual return of 12% that can be taken every three months for the segment of EGP 1,000 and its multiples. That is in addition to the cumulative return on the certificates of the EGP 10 and EGP 100 segments that are receivable at the end of the certificate’s duration. The duration of the NBE and Banque Misr certificates amounts to three years, with an annual return of 12.5% that can be received monthly.
According to Haitham Abdel Fattah, Head of the Treasury and Money Market Department at the Industrial Development and Workers Bank of Egypt, in spite of the NBE and Banque Misr’s returns, it is unlikely that citizens will abandon the Suez Canal certificates because they will incur losses.
Abdel Fattah explained that, according to Suez Canal certificate regulations, the EGP 10 and EGP 100 certificate segments cannot be refunded before the end of their duration, which is five years. As for the segments of EGP 1,000 and its multiples, they can be refunded with their complete value at the end of their duration, but cannot be refunded until after a year from their issue date.
He added that, in case the owner wants to refund the Suez Canal certificates before the end of their duration, the certificate return would be recalculated starting from the issue date, to be 7% in the second year, 8% in the third year, 8.5% in the fourth year, and 9% in the fifth year. After that, the return difference will be excluded.
According to Abdel Fattah, if the owner of the Suez Canal certificate decides to refund, he/she will lose 5% of the return that would have been taken. On the other hand, he/she will receive only 1.5% difference from both the certificates of the NBE and Banque Misr over three years, 0.5% annually. That means that the loss is about 3.5%.
Abdel Fattah believes that the Suez Canal certificates would be affected if the NBE and Banque Misr certificate returns increase to 14% for instance, or in case certificates in the market are issued with returns higher than that level.
Ezz El-Din Hassanein, a banking and economic expert and the general manager of a private bank, also reiterated that the NBE and Banque Misr certificates are not expected to have an effect on Suez Canal certificates.
Hassanein explained that Suez Canal certificates represent the sense of national belonging for Egyptians who purchased them. Therefore, they do not think of refunding the certificate to buy NBE and Banque Misr certificates.
He further added that the difference between Suez Canal certificate revenues and the revenues of NBE and Banque Misr certificates is only 0.5%, which is a slight difference and not very attractive.
The number of EGP 10 Suez Canal certificate holders reaches 70,000 Egyptian citizens, compared to 150,000 Egyptians who bought EGP 100 certificates, while the larger number of requests was for the EGP 1,000 certificates and their multiples.
Individuals acquired 90% of Suez Canal investment certificates compared to 10% from corporations and associations.
Earlier, former CBE governor Hisham Ramez noted that Suez Canal certificates will be refunded through a specialised fund for this matter. This fund is financed regularly through resources of the National Suez Canal Authority.
When Ramez was asked if the unprecedented turnout on buying Suez Canal certificates was only due to its large revenue, he affirmed that this is not true.
