As 2024 starts, the theme of “inflation hedging” raised by institutional and individual investors is likely to continue into the new year. This is due to the ongoing tight monetary policy of the Central Bank of Egypt, which anticipates raising interest rates throughout the year. At the same time, the fluctuation of the Egyptian pound against the dollar, the speculation in the gold market, and the rising value of real estate add complexity to the investment landscape. Meanwhile, the stock market is reaching historic highs.
These factors prompt investors to seek the best investment avenues in 2024. The competition is fierce among various investment options, each offering a refuge from the relentless inflation. The country’s core inflation reached 35.9% on an annual basis in November.
The main index of the Egyptian Exchange returned 66% from 2023 until 28 December, increasing the market capitalization to EGP 1.66trn in 2023, a 73.09% rise from 2022. The market capitalization-to-GDP ratio also rose to 16.4%, the highest in years.
A report from CI Capital Asset Management indicates that the current year will present promising investment opportunities in Egyptian stocks. This is based on the improved outlook for Egypt’s economy in the later months of the current year. Moreover, the drop in the prices of Egypt’s dollar-denominated bonds, yielding between 13% and 14%, after previously ranging between 17% and 18%, is expected to contribute to further improvement, especially if there is a significant change in US monetary policy.
While stock valuations in emerging markets are generally attractive, along with the current real returns in debt instruments, they are expected to improve gradually with the stabilization of inflation rates by the US Federal Reserve. The Federal Reserve has successfully controlled inflation, which fell from 7% at the beginning of 2023 to around 3% in recent months, close to the target level. However, it has not yet started to lower interest rates from the current 5.5%, the highest in over twenty years.
Nonetheless, global financial markets, especially bond markets and US debt instruments, are beginning to expect a soon decline in interest rates based on economic indicators. The yield on long-term US bonds fell below 4%, and global stock markets rose significantly in the last quarter, registering a near 25% increase by the end of 2023.
The total trading value during the year reached a historical level of EGP 3.349trn due to the increase in trading values for listed stocks, especially after the start of actual trading on treasury bills in the secondary market on Sunday, 24 September 2023. The Egyptian Exchange saw a record number of new investors in 2023, totalling 364,400, with new individual investors rising to 361 thousand compared to 175,800 in 2022. Additionally, the number of new institutional investors rose to 3,500 compared to 1,500 in 2022.
