The most recurring question in recent times is which investment vessel is better in light of the current crises? This has especially become more relevant given the record high inflation in Egypt, which reached 21.5% in November as a result of the rise in prices, the coronavirus pandemic and its impact on supply and supply chains, and Russian-Ukrainian War.
Additionally, the local currency faces many pressures as a result of these successive crises, which prompted investors to search for the best investment vessels to preserve the value of their funds from the increasing inflation. So, what is the best alternative to investment bank certificates, especially with the increase in their lustre after the Central Bank of Egypt’s (CBE) decision on Thursday to raise the interest rates by 3%? Which in turn will create investment certificates with a return of more than 20%.
Or the draw of stocks, especially since they are trading at less than their fair value? Or should our focus be on gold and real estate?
Daily News Egypt sat down with a few experts to figure out what the best option may be.
Gold
First up, Sameh Al-Torgoman — Chairperson of the Board of Directors of Evolve Investment — believes that the portfolio of any investor currently must contain an investment in gold.
He stressed that the precious metal is the best investment vessel in the world in light of crises and is known as a safe haven, especially as it helps to preserve the value of money in the event of fluctuations.
He also stressed that 2023 is the year of investment in gold, explaining that crises create great investment opportunities that must be seized.
Gold prices rose in the local market in Thursday’s trading amid the market’s anticipation for the decisions of the Monetary Policy Committee (MPC) of the CBE to determine the country’s latest interest rates.
Consequently, the value of an ounce of gold rose slightly on the global stock exchange, supported by the weakness of the dollar amid weak trading due to Christmas celebrations, as prices moved in a narrow range, with investors awaiting economic data that will provide a clearer picture of future inflation rates and the US Federal Reserve’s directions regarding its interest rates over the next year.
Saeed Imbaby — Executive Director of the iSagha platform for trading gold and jewellery via the internet — said in press statements that gold prices rose by about EGP 20 during Thursday’s trading session, compared to the end of Wednesday’s session, as a gram of 21 carat gold recorded price of EGP 1,760, while an ounce came in at $1,815.
He added that a gram of 24 karat gold recorded about EGP 2,012, 18 karats recorded EGP 1,509, 14 karats EGP 1174, and a pound of gold came in at EGP 14,080.
Stocks
Next up, Randa Hamed — Managing Director of Okaz Asset Trading — said that the best type of investment in the current circumstances is stocks, because they are a good hedge for the currency to not lose its value with the continued high inflation rate.
She believes that there are promising sectors that still have not achieved their targets as per the financial or technical analysis, such as the petrochemical, banking, communications, technology, and food sectors.
Hamed advises investors in the stock exchange to consider looking first at the financial statements, profits, and the profitability multiplier, adding that the profitability multiplier for the main index, the EGX30, is x8.4, which is good compared to competing markets.
She explained that the stock exchange was the best performer in terms of investment certificates, which were issued with an interest rate of 17.25%, noting that the rate rose by 37% since the liberalisation of the EGP’s exchange rate last October.
Hamed also indicated that it is better than real estate given the latter’s exorbitantly high prices and difficult-to-liquidate nature.
Furthermore, she said that buying gold pales to speculating on stocks, since its price is declining globally and is expected to also fall in Egypt as soon as USDs become more available in the future.
Additionally, she expects more indices to rise in 2023, pointing to 2003 and 2016, when the indices rose by more than 100% of their value after the exchange rate was liberalised to compensate for the decline in the value of the EGP.
It is worth noting that the economy is expected to improve in general by the second half (2H) of 2023, according to Prime Minister Mostafa Madbouly, given that is when green inflows from the International Monetary Fund and Arab countries are expected to come in.
For his part, Mohamed Abdel Hakim — Head of the Research Department at Faisal Securities Brokerage — said that it is advisable to invest in assets and stay away from cash, stressing that the key lies in acquiring assets in the shortest time possible.
He believes that the stock exchange is where people are most likely to acquire assets quickly, especially since prices have been affected since the depreciation of the EGP.
Abdel Hakim added that defining a specific strategy for all investors is absurd, as every investor has their own unique strategy. However, he did point out that there are opportunities in stocks with dollar returns, such as AMOC and Abu Qir Fertilisers, along with the medical sector, which is seeing a lot of activity in terms of proposals and acquisitions.
He also pointed out that the share of companies of the broader EGX70 index may also prove lucrative, as they have not yet had a price boom in their stocks due to a lack of liquidity.
Mix and match?
Finally, Mohamed Hassan — Managing Director of Blom Securities Brokerage —explained that financial markets and gold are among the best investment opportunities currently.
He also pointed out that investment certificates are among the best options for individuals who fear risks and want a steady and stable income, such as the elderly.
Additionally, Hassan expects further liberalisation of the EGP’s exchange rate, which will lead to a re-evaluation of stock and gold prices and their rise in the long term.
Moreover, he expects a rise in the stock market’s indices in the beginning of the new year, noting that profit-taking and fluctuations may occur until 2H 2023 and that the index will rise to or exceed the level of 18,000 points due to the influx of Arab and foreign investments after the exchange and interest rates stabilise.
