Small-business investors liquidate portfolios to invest in platinum savings certificates

Offering saving certificate with an interest rate of 12.5% increased opportunities to offset part of the losses incurred in the capital market over the past year

Capital market experts predicted that other banks would follow the footsteps of the National Bank of Egypt (NBE) and Banque Misr and offer platinum saving certificates of 12.5% interest, which would encourage small investors to liquidate their investment portfolios and invest in savings certificates.
This comes amid warnings from short-term tradings in the stock market, as it will be risky in the light of the appealing saving certificates. Many investment reports advised investors to focus on long-term investments in the coming period.
The stock market and saving certificates are two competing investment pots, as they both aim to attract investors based on yield achieving.
Chairman of Al-Shorouk Brokerage, Hany Helmy, said that small-business investors have already started to liquidate their portfolios and invest in saving certificates to offset the losses they incurred over more than a year.
He explained that the average losses that hit small portfolios are of up to 70%, so investors will tend to invest in banks to achieve returns of up to 37.5% after three years.
Helmy noted that stock prices are likely to fall, because they have been fluctuating over the past period as a result of the unstable economic conditions. He however pointed out to negative factors that could reduce stock prices even more, including tourism income decline, as well as the new attractive platinum saving certificates.
The main stock index EGX30 fell during trading yesterday by 2.58% to close at 7,347 points.
Pharos Investment Bank has published a report that cited a trend in the banking sector to raise interest rates, following NBE and Banque Misr to offer saving certificates of interest rates as high as 12.5%.
According to the report, raising interest rates would increase the required rate on the debt and increase the return on treasury bills and bonds this week, in addition to lowering stock valuations on the short term.
SAIB (Société Arabe Internationale de Banque) began negotiations with the Central Bank of Egypt (CBE) to offer three-year saving certificates of 12.5% annual interest.
Pharos said this would result in a decline in the market's liquidity, and slightly raise the value of the pound.
Pharos predicted that CBE will be forced to raise interest rates in early December to keep the balance of the structure of interest rates, as most corporate debt pegged to the price of the corridor, which is the return on the deposit and lending rates for one night.
Return on these new savings certificates is of 200 basis points from the highest interest rates in the market until last week, and up to 300 basis points compared to the interest rate in Credit Agricole.
This rate exceeds the interest rate offered for the Suez Canal certificates, which is of 12% per year.
Pharos renewed its advice to traders to take caution in the short-term trading, in light of the current attractiveness of the saving certificates, with paying more attention to long-term investments in the capital market.
Pharos stated that although current interest rate anecdotes further cuts of more than 10% in currency value or even float the pound, there are stocks that are more appropriate for this stage, which include, Madinet Nasr for Housing & Development (MNHD), EFG-Hermes, South Valley Cement, Oriental Weavers, and Alex Container and Cargo Handling.