Books – Mustafa Eid:
Egypt will officially join the JPMorgan government bond index for emerging markets, starting from January 31.
JPMorgan said in a press release that the weight of Egyptian bonds in the index will be 1.85%.
And last April, the global “GB. Morgan” Corporation announced that Egypt had joined the watch list in the “JP Morgan” index of government bonds for emerging markets. This is in preparation for the inclusion of the Egyptian government debt instruments in the local currency in the index within a maximum period of 6 months.
What does joining mean?
Noaman Khaled, an analyst and assistant manager at Investment Bank Arqaam Capital, said that Egypt’s entry into the MSCI emerging market index is an important step that the government has been seeking for years, and finally these efforts have borne fruit, as this measure allows major investment funds to invest in Egyptian debt instruments in the local currency.
He added to Masrawy that Egypt’s weight in the index is 1.85%, allowing it to enter between 10 billion to 12 billion dollars of foreign investments in debt instruments, as soon as Egypt officially enters the index.
Khaled pointed out that Egypt’s entry into the index comes at a difficult time, as it will reduce any pressure on the prices of treasury bills and bonds in the local currency, and there will be much higher liquidity to invest in these bills and bonds with the expansion of the investor base.
Egypt joined this index, but exited from it in June 2011 for not meeting the requirements of the “JP Morgan” institution, according to previous statements by Dr. Mohamed Maait, Minister of Finance.
About two and a half years ago, the Ministry of Finance began seeking to rejoin the “JP Morgan” index by fulfilling the bank’s requirements, including: extending the life of government debt, adjusting the yield curve, and raising the proportion of foreign investors’ participation in government financial instruments with Increase the size of each version.
Noman said the volume of funds investing in the Morgan Stanley emerging market bond index amounts to about $800 billion.
Khaled said that Egypt’s entry into the index will increase dollar flows, which is an important result at a time when the world is suffering from crises affecting various countries and their foreign exchange flows.
He said that entering the index provides a large offer on treasury bills and bonds, and therefore in the event of the expected rise in interest rates globally in the coming period, the interest rates on Egyptian debt instruments will be stabilized at least, if not reduced, and therefore there will be no need to raise interest rates in Egypt, which is This also lowers the cost of these investments while retaining them.
Khaled added that this provides more comfort to the Central Bank, whether with regard to pressure on exchange rates or interest rates, and it is possible with the flows of investments through this indicator to cover any negative part in the banks’ net foreign assets, thus securing this aspect and strengthening the Egyptian indicators.