Morgan Stanley is turning to a pessimistic stance towards Egypt, with the cash-strapped country facing what the American bank described as “increasing risks” in the coming months.
The bank lowered Egypt’s sovereign credit rating from “neutral” to “unfavorable,” and its decision was part of a report in which it revised its preference for emerging market debt with high risks and generous returns over investment-grade securities, explaining that the rise in inflation-adjusted US bond yields Reduce the comparative advantages of risky assets.
Morgan Stanley strategists said the impending presidential election in December would weaken Egypt’s ability to continue implementing reforms – including moving to a flexible exchange rate regime, a key condition in the International Monetary Fund’s $3 billion loan programme.
Bloomberg: The uncertainty of the Egyptian economic landscape raises concerns for investment banks
There is also the risk of a credit rating downgrade by Moody’s Investors Service, which could push the country’s rating further into high-risk territory, leading to “a kind of forced selling,” they said.
In a note on Monday, the bank’s analysts, including James Lord and Neville Mandimeka, wrote: “We believe that Egypt lacks any positive stimulus in the near term, which makes us unfavorable to its credit position.”
2023-10-02 18:26:59
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