Egypt’s economy and related exchange traded fund may be shaking off the specter of volatility as the country pushes forward with structural reforms that could bring back foreign investors.
The Market Vectors Egypt Index ETF (NYSEArca: EGPT) is up 5.0% year-to-date and increased 8.6% over the past year. The Egypt ETF has also been trading at a discount to its net asset value, according to Morningstar data.
Egyptian stocks may begin to pick up, along with the economy. Egypt’s Finance Minister Hany Kadry Dimian believes economic growth will accelerate to as much as 5.5% over the next fiscal year ending June 2016 after growth “north of 4 percent” this year, Bloomberg reports. In contrast, economists point to a 4.2% average growth.
“Things are progressing and we have some concrete indicators that we can measure,” Dimian said in the article, citing a rebound in manufacturing, upward revisions by ratings agencies and drop in cost of insuring Egypt’s debt. “Our main mission is to bring back confidence.”
Egyptian markets have been stuck in a rough patch after the country ousted former President Hosni Mubarak in 2011. The following governments have struggled to bring back foreign investors as protests and violence increased uncertainty.
Nevertheless, President Abdel-Fattah El-Sisi has focused on restoring security and stabilizing the economy. The changes are slowly working as the benchmark EGX 30 stock index jumped almost 40% over the past year. Fitch Ratings upgraded the country’s credit rating December 19 to B from B-, and Moody’s Investors Service revised its outlook for the economy to stable from negative.
Egypt has been enacting reforms like cuts in energy subsidies, introduction of a smart card system to administer rationing of food subsidies and broadening the tax base to diminish the government deficit from 10.2% to 10.5% for the fiscal year to about 8% to 8.% in fiscal 2018 to 2019. [Egypt Lures Foreign Investors]
“Our economy is going to be stabilized and progressing based on structural reforms — real ones,”Dimian added.
Market Vectors Egypt Index ETF
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Max Chen contributed to this article.