Egyptian food prices - one spark of the revolution - continue to rise



CAIRO // Egyptian inflation accelerated in March on rising food prices, one of the causes of the unrest that toppled President Hosni Mubarak.

The inflation rate in urban parts of Egypt, the gauge that the central bank monitors, rose to 11.5 per cent from 10.7 per cent in February, the Central Agency for Public Mobilisation and Statistics said on its website today.

"On a monthly basis, food is the main driver" behind inflation, Mohamed Abu Basha, an economist at the Cairo-based investment bank EFG-Hermes Holding SAE, said by telephone before the data was released. An increase in the inflation rate "does not justify any sort of action by the central bank on the interest rate," he said.

Eighteen days of protests in Egypt, sparked by falling living standards and high unemployment as well as a lack of democratic rights, led to the ouster of Mubarak on February 11. The economy is still reeling from the impact of the uprising. Growth may slow this fiscal year to between 2.5 and 3 per cent from 5.1 per cent in the year earlier, Finance Minister Samir Radwan said.

As protests continue, tourists have stayed away and factory output has been hit by strikes. Egypt's net international reserves fell for a third month in March to $30.1 billion (Dh110bn), the lowest level in more than three years, from $33.3bn in the previous month, after the bank bought pounds to prop up the currency.

The central bank on March 10 left its overnight deposit rate unchanged at a four-year low of 8.25 per cent and kept the overnight lending rate at 9.75 per cent to support economic growth. The Monetary Policy Committee, which is due to meet on April 28, last raised interest rates in September 2008.

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How Tesla’s price correction has hit fund managers

Investing in disruptive technology can be a bumpy ride, as investors in Tesla were reminded on Friday, when its stock dropped 7.5 per cent in early trading to $575.

It recovered slightly but still ended the week 15 per cent lower and is down a third from its all-time high of $883 on January 26. The electric car maker’s market cap fell from $834 billion to about $567bn in that time, a drop of an astonishing $267bn, and a blow for those who bought Tesla stock late.

The collapse also hit fund managers that have gone big on Tesla, notably the UK-based Scottish Mortgage Investment Trust and Cathie Wood’s ARK Innovation ETF.

Tesla is the top holding in both funds, making up a hefty 10 per cent of total assets under management. Both funds have fallen by a quarter in the past month.

Matt Weller, global head of market research at GAIN Capital, recently warned that Tesla founder Elon Musk had “flown a bit too close to the sun”, after getting carried away by investing $1.5bn of the company’s money in Bitcoin.

He also predicted Tesla’s sales could struggle as traditional auto manufacturers ramp up electric car production, destroying its first mover advantage.

AJ Bell’s Russ Mould warns that many investors buy tech stocks when earnings forecasts are rising, almost regardless of valuation. “When it works, it really works. But when it goes wrong, elevated valuations leave little or no downside protection.”

A Tesla correction was probably baked in after last year’s astonishing share price surge, and many investors will see this as an opportunity to load up at a reduced price.

Dramatic swings are to be expected when investing in disruptive technology, as Ms Wood at ARK makes clear.

Every week, she sends subscribers a commentary listing “stocks in our strategies that have appreciated or dropped more than 15 per cent in a day” during the week.

Her latest commentary, issued on Friday, showed seven stocks displaying extreme volatility, led by ExOne, a leader in binder jetting 3D printing technology. It jumped 24 per cent, boosted by news that fellow 3D printing specialist Stratasys had beaten fourth-quarter revenues and earnings expectations, seen as good news for the sector.

By contrast, computational drug and material discovery company Schrödinger fell 27 per cent after quarterly and full-year results showed its core software sales and drug development pipeline slowing.

Despite that setback, Ms Wood remains positive, arguing that its “medicinal chemistry platform offers a powerful and unique view into chemical space”.

In her weekly video view, she remains bullish, stating that: “We are on the right side of change, and disruptive innovation is going to deliver exponential growth trajectories for many of our companies, in fact, most of them.”

Ms Wood remains committed to Tesla as she expects global electric car sales to compound at an average annual rate of 82 per cent for the next five years.

She said these are so “enormous that some people find them unbelievable”, and argues that this scepticism, especially among institutional investors, “festers” and creates a great opportunity for ARK.

Only you can decide whether you are a believer or a festering sceptic. If it’s the former, then buckle up.