Cairo – Mubasher: Merrill Lynch said it hold Egypt at Marketweight, as GCC aid supports external position but spreads remain tight on a ratings-adjusted basis.
The Central Bank of Egypt (CBE) notional adoption of a more flexible exchange rate arrangement suggests EGP is likely to weaken further, noted Merrill Lynch through its Global Research report.
Spreads are pricing in macro improvement following reforms and low oil prices that ease fiscal strains, but have now started to adjust, added the report.
The socioeconomic impact of fiscal reforms, EGP weakness, failure to mobilize sufficient external financing or GCC aid and fiscal consolidation slippage are negative risks.
Meanwhile, Egypt’s Adoption of supportive macro policies, potentially as part of an IMF program, would provide upside risk.
