Egypt shares jump 4.6 pct this week on expectations of a rate cut

CAIRO, Jan 31 (Reuters) - Expectations that Egypt would cut interest rates and improved performance across emerging markets pushed up the country’s stocks 4.6 percent this week, with some analysts expecting the trend to continue in coming weeks.

Gains by the Egyptian pound and a plunge in inflation contributed to expectations the central bank would cut rates at its meeting on Feb. 14. Those expectation spurred optimism among domestic and foreign investors, who increased their holdings.

“There is no financial reason pushing the market higher, but expectations of interest rate cuts and the central bank governor’s statements helped stocks and the market rally this week,” said Ahmed Hesham, vice president of equity and quantitative strategy at Beltone Financial.

Central bank Governor Tarek Amer told Bloomberg last week the pound would see greater volatility after the bank ended a mechanism that guaranteed foreign investors could repatriate their dollars when they sold Egyptian securities. Instead, investors will deal via the interbank market.

The pound gained about 2 percent this week. The Egyptian Exchange’s benchmark index closed at 14,127 points on Thursday, up 4.6 percent from last week.

“There is a state of recovery in emerging-market indicators, including Egypt, alongside the monetary policy variables in the country,” said Mohammed El Saiid, head of technical analysis at HC Securities & Investment. “All of that helped lift the market.”

Urban inflation dropped in December to 12.0 percent from 15.7 percent in November, fuelling speculation the central bank would cut rates. It had left rates unchanged at its December meeting, before the positive inflation figures.

“December inflation figures had a direct impact on what is happening in the market, especially as the figures were unexpected, as did investor expectations of an interest rate cut,” said Radwa El-Swaify, head of research at Pharos Securities Brokerage.

“There is optimism about the market’s performance. We may see a continuation of the rally until April,” Swaify said.

Among the shares that saw strong gains this week were Commercial International Bank, investment bank EFG Hermes, Ezz Steel and real estate developers SODIC and Talaat Mostafa Group. ($1 = 17.6200 Egyptian pounds) (Reporting by Ehab Farouk; writing by Yousef Saba and Patrick Werr; editing by)