Egypt: 2016 devaluation
Egypt (EGPT) is a relatively new investment for Tundra Fonder. The Swedish asset manager entered this frontier market (FRN) (FM) late last year, soon after the currency devaluation in the economy in November 2016.
A shortage of dollars in the economy led Egypt’s central bank to free-float its currency in November 2016. The move led the Egyptian pound to weaken by about 50% against the dollar. The devaluation was also one of the key requirements from Egypt in its attempt to secure a $12 billion (3-year) loan from the IMF. From a macro perspective, the weaker Egyptian pound should serve to boost external competitiveness and encourage more foreign investment into the economy.
What Tundra likes about the Egypt story
Tundra Fonder is positive on this African (EZA) (AFK) (GAF) country. What they like about the Egypt story is that “they’re doing what Nigeria (NGE) should do. They prepared their companies in advance in terms of economic policy. They’re now trying to improve domestic growth and production to substitute for imports.
Egypt has very srtrong corporate quality, similar to the good corporate management you find in Pakistan (PAK),” Mattias Martinsson, Chief Investment Officer of the asset management firm Tundra Fonder, recently told Frontera.
Over the near term, however, Martinsson believes that 2017 will be very tough for Egypt. So, those entering should keep in mind that it will take some time for Egypt investments to bear fruit.