Egypt’s currency is likely to drop quite significantly in the next couple of months due to dry gross reserves, Cavan Osborne, Portfolio Manager at OMIGSA told CNBC Africa on Tuesday.
“We still remain pretty cautious on the market from our side. There’s two parts to it, there’s obviously what happens to local valuations and then what happens to the currency. On the currency side I still remain very concerned that it could slip quite sharply in the next couple of months,” Cavan Osborne, Portfolio manager at Old Mutual Investment Group–South Africa (OMIGSA) told CNBC Africa on Tuesday.
Osborne said the oil-rich country is currently running a major fiscal deficit and a current account deficit. Egypt’s crumbling public finances may be in even worse shape than previously estimated.
The country’s economy has been on a roller-coaster ride since the ousting of President Mahammad Morsi by the army, nearly two weeks ago.
“There’s still a significant amount of uncertainty in the markets. It is important to understand when you look at the Egyptian Equity market that it’s very much a retail driven market. The context that we speak to in the country has been in euphoric mood following the ousting of the president,” he added.
Osborne said OMIGSA remains cautious of Egypt’s market particularly on what is going to happen to local valuations and the currency. He said a couple of Arabic neighbours have come into the party to offer their support, which includes the Saudis, the United Arab Emirates (UAE) and from Qataris.
“As far as companies go, we were in Egypt a month back and things were looking okay. This whole process was on the cards, it’s been planned for around three months, we just didn’t know that the outcome was going to be a change in the president,” Osborne noted.
“The underlying companies when chatted to are all performing particularly well. We met with a couple of businesses and most of them were chatting about strong volume growth in the first couple of months of the year.”
Opposition clashes are continuing in Egypt as police reportedly fired tear gas in central Cairo on Monday when disbursing protesters calling for the reinstatement of the ousted Islamist president.
Former United Nations official Mohamed ElBaradei was sworn in as Egypt’s vice-president on Sunday as the post-Islamist government began to take shape.