Egypt's relisting on JP Morgan bond index could attract $4.8bn

Egypt's impending relisting in the JP Morgan emerging-market government bond index could attract $4.8 billion in new inflows and cause the Egyptian pound to appreciate by 5% against the dollar, Rand Merchant Bank (RMB) estimated on Monday.

Egypt, which was removed from the index in the aftermath of a 2011 uprising, has been working for more than two years to be relisted. It is expected to be included in the second half of 2021, said RMB economist Neville Mandimika.

It has done unusually well in improving its macroeconomic fundamentals after finishing an International Monetary Fund programme in 2019 and has had consistent primary budget surpluses that have paved the way for its debt-to-gross-domestic-product profile to compress, RMB said.

Egypt has a combined nominal $28.2 billion in eligible bonds that mature in more than 2.5 years, the minimum amount for inclusion in the index, Mandimika said.

This would give Egypt a 2% weighting in the index and divert a portion of some $240 billion of assets under management.