“It would be better for those who have savings in a foreign currency to hold onto some of them and free up the remainder to invest in bank certificates at 20 per cent interest rates,” advised Riham Al-Dessouki, a senior economist at the UAE Arqaam Capital Investment Bank, when asked where best to invest in the wake of last week's devaluation of the Egyptian pound. Al-Dessouki believes it would be best for people who do not have a natural panache for investment to hold onto their money in the form of bank certificates, even if only short-term, until the economy recovers and the impact of recent decisions on commodity and services pricing become more clear. She expected interest rates to drop in 2017 as conditions stabilise. On the morning of 3 November, the Central Bank of Egypt (CBE) decided to float the Egyptian pound, meaning its official rate in the banks as decided according to the laws of supply and demand. The CBE also decided to raise interest rates by 300 basis points. In a statement, it said it would also cancel the import priority list for food commodities it had previously imposed. After the CBE made the announcement to float the pound, the National Bank of Egypt (NBE) and Banque Misr announced new savings certificates with an interest rate of 16 per cent per month or 20 per cent every three months. The move should create demand for the Egyptian pound after the liberation of the exchange rate. Omar Al-Shenety, founder of the Multiples Investment Group, said it would be better to avoid purchasing dollars for the next six months. “During this period there will be sharp fluctuations in the price of the dollar,” Al-Shenety said. “It would be better not to invest in dollars for the time being.” Egypt's foreign currency reserves are low as revenues from tourism, exports, remittances from Egyptians working overseas and the Suez Canal have all dropped over recent years. A report by the Ministry of Planning on Friday said that the tourism sector had shrunk by 28.7 per cent in the fiscal year ending in June. According to CBE figures, Egypt's balance of payments data for 2015-2016 showed a drop in tourism revenues by 48.9 per cent to $3.8 billion, compared to $7.4 billion in the previous fiscal year. The CBE added that Egypt's commodity exports also retreated in the past fiscal year by $3.5 billion, compared to the previous year, to reach $18.7 billion. Before the announcement by the CBE to float the pound, the value of the dollar jumped several times on the parallel market to almost LE16, the official price in most banks the day after the CBE's decision. Before last week's floatation, the CBE controlled the exchange rate of the pound through periodic tenders to sell dollars at a fixed price to local banks. The government took the decision to float the pound and raise the prices of fuel, including petrol, solar, mazut, and butane, to meet the conditions of an IMF loan worth $12 billion over the next three years. Real estate is the best investment option for those with high net worth. Arqaam Capital's Al-Dessouki said it was best for those with high incomes who would not be affected by the expected rises in living costs and had large savings to invest in real estate. But revenue from the purchases would not be possible in the short term, he said. The building and construction sector in Egypt has seen notable growth of 10.8 per cent over the past fiscal year, according to the Ministry of Planning. Al-Shenety agreed that real estate was a good vessel for investment. “The prices of real estate will rise, and owners will be able to rent out their property for a reasonable revenue,” he said. The investment banks also anticipate there will be a spike in inflation rates in the coming phase. A report by Beltone Financial issued on Saturday predicts inflation rates will peak in the first half of 2017 to around 25 to 30 per cent. This wave of inflation will also raise the price of energy. Certificates with 20 per cent interest rates are better investment options for some. Hani Tawfiq, former head of the Direct Investment Association, believes senior citizens or those who prefer not to take risks, would be better off investing their money in the new bank certificates. “They are a safe savings instrument,” he said. For investors willing to take risks, they could put part of their savings in bank certificates at a 20 per cent interest rate and invest the remainder in the stock market through buying shares or in other sectors that experts recommend. The drops in share prices resulting from the devaluation of the pound should encourage foreign investors to buy on the local stock market, improving its indices. Al-Shenety agreed that 20 per cent was a good return from monetary investments for those lacking experience in the stock market. He said that investing in the stock market was a good idea, as he anticipated many shares peaking beyond the 20 per cent mark in 18 months. However, he advised those who are inexperienced or do not have a good broker to stay away. Tawfiq believes there will not be much interest in real estate investment in the coming phase, with the purchasing power of many of those with savings dropping. He advised those with large savings to invest 25 per cent of their money in this sector and to distribute the rest in the stock market and investment certificates. Al-Dessouki advised against investing in gold or other minerals since it could be difficult to predict the direction of their prices. However, Al-Shenety disagreed, saying that investing in gold was a good option. Even if the gold price overseas is fixed by the dollar, its value has risen in Egypt to reflect the rise in the value of the dollar.
