Today’s Trading Playbook
KEY THEMES
Last Thursday, the Central Bank of Egypt (CBE) kept its key interest rates unchanged, citing inflation levels well within the CBE target (i.e. 7% ± 2%). This comes in line with our expectations which was for the CBE to pause its easing cycle until H2 2021 to assess how Egypt’s good macroeconomic fundamentals. This also comes at a time where we are witnessing higher commodity prices, which could heighten Egypt’s imports bill and pose inflationary pressures down the road. Thus, despite a relatively stable domestic monetary environment, we believe the global space for monetary policy will play a vital role in the fate and the pace of the CBE’s easing cycle.
Elsewhere, aluminum prices extended their rally, approaching the USD2,300/ton level. We remind you that during the rally that took place in 2018, prices reached as high as USD2,556/ton before ending the year below the USD2,000/ton mark. While the dynamics of the current rally are different (as aluminum prices are now peaking on supply concerns from China), the result should be pleasant for Egypt Aluminum’s [EGAL] Q3 2020/21 profitability; at the very least we do not expect to see gross losses during the quarter.
POSITIVE
EGAL: Rising aluminum prices should enhance EGAL’s P&L performance in Q3 2020/21.
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