The risk sentiment on Egyptian Credit is all about good, but at the same time, this offers at the same time an above average opportunity for investors seeking longer-term opportunities.
Here is our stance:
- Credit faces a strong headwind amid tighter global monetary conditions and the war in Ukraine. Volatility is not expected to abate until the inflation outlook begins to provide more comfort.
- Interest rates: US interest rates is not far from reaching the top.
- Shorter-term Egyptian sovereign bonds (3 to 5 years) in USD offer a favorable risk-reward considering an expected IMF program, sound macro policies, and close relations with GCC countries.
- CCY: EGY is expected to devaluate further by about 20%, it is therefore not opportune to invest into the local CCY Bond market.
- Risks to our view include a deterioration in fiscal balances, reform fatigue, and rising political tensions on the domestic side. On the global front, persistent inflationary pressures and an escalation of the war in Ukraine are also key issues.