After the Central Bank of Egypt (CBE) tightened again its monetary policy earlier this month by raising interest rates, banks and real estate stocks remain the “top pick” chosen by a pool of analysts surveyed by Daily News Egypt.
The CBE’s Monetary Policy Committee surprisingly raised the benchmark overnight deposit rate by 200 basis points, or 2%, to 18.75%.
In the wake of the move, Egypt’s shares tumbled by its fastest daily pace in two months, while real estate and banking stocks bucked the trend and closed almost unchanged.
The banking sector index was the only gainer alongside with the real estate sector index last week.
A recent research note issued by Beltone expected Egypt’s bank to benefit most from interest rate hike.
“The banking sector stands to benefit most despite potential low down in credit extension and credit related fees, and some impact on asset quality. Banks benefited also from substantial balance sheet growth last year thanks to translation gains that boosted asset and deposit growth,” Beltone explained.
Last week, heavyweight Commercial International Bank – Egypt was among the top gainer in Cairo bourse rising 6.75%.
“Banks are mostly geared for higher rates with positive re-pricing gaps, but bad debt charges may rise, but banks are very well provisioned and have ample operating earnings capacity to absorb those charges,” Beltone noted.
Meanwhile, share in the real estate sector are also among the top picks by analysts in the medium term.
“Real estate shares are being favoured at this time to hedge from rampant inflation rates,” Craig Plumb, a senior analyst at Jll real estate consultancy told Daily News Egypt.
Egypt’s headline inflation hit an annual rate of more than 30.9% in June, with food prices climbing at least 3% for six months in a row.
“So anything related to the real estate sector would attract investors whom are way about their cash value,” Plumb added.
The real estate sector index has gained most among Egypt’s bourse sectors since the start of 2017, rising 9.8% according to bourse data.
“Investors are always expected to pump more cash in all real estate assets; among them stocks, especially for shares of big developers,” he confirmed.