Sunday, March 5, 2017

Egypt is beaten down but looks alot like Pakistan did a couple of years ago

I like to buy out of favor countries when they show signs of making positive economic changes and when they are still out of favor. This is what I did with Pakistan last year. I am up on that trade 38%.

My next country trade is Egypt.

Egypt is suffering economically under high debt and a recent currency devaluation. The poor economic conditions in the country were not helped by the downing of a Russian jet full of tourists. Another issue that is affecting the economy is the continuing security issues with ISIS terrorists in the Sinai.

The government of Egypt recently agreed to an IMF bailout deal and is set to receive the second tranche of the bailout funds  fairly soon. In addition to the the IMF bailout the government of Egypt has instituted several economic reforms such as a currency devaluation, changing the of oil and gas laws, and infrastructure initiatives.

The Egyptian Pound has recently been able to recover after the devaluation. The economy has begun to stabilize as the purchasing managers index, although still showing the economy contracting, has been rising the last several months.

On other fact is that Egypt has found tremendous amounts of natural gas offshore. These deposits are currently being drilled and will lead to Egypt going from an energy importer to an energy exporter by 2019. 

So Egypt has all the hallmarks of being on the cusp of positive changes that could turn the economy around and lead to higher stock prices. I am going to play this trend through the VanEck Vectors Egypt Index ETF (EGPT)

1 comment:

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