Zawya – Egypt's stock market recovers from last week's sharp drop

Egypt’s main stock market index EGX30, which includes the top 30 listed companies in terms of market capitalisation and liquidity on the exchange, has added 4.01 percent since the start of the week, outperforming its regional peers. It is now trading near the 13,815 level.

“Overall, the index looks bullish as it bounced from near support levels and strong support is available near 13,400 and 12,900 level(s),” Vijay Valecha, chief markets analyst at Dubai-based Century Financial Brokers told Zawya by email.

Saudi Arabia’s index gained 1.69 percent so far this week, while Dubai’s index dropped 0.5 percent, Abu Dhabi’s index edged down 0.22 percent, Qatar’s index gained 3 percent, Oman’s index dropped 0.82 percent, Bahrain’s index fell 0.21 percent, and Kuwait’s index fell 1.46 percent.

On Wednesday, EGX30 added 0.92 percent. Data from the exchange showed that Arab investors and non-Arab foreign investors were net buyers at 26,925,386 Egyptian pounds ($1.5 million) and 94,499,786 pounds ($5.3 million) respectively, while Egyptians were net sellers, disposing of 121,425,172 pounds of shares.
“This week’s recovery is more aligned with slightly better global sentiments (especially, in context of Turkey); foreigners are net buyers in the EGX starting Monday, averaging around 30 percent of market turnover,” Allen Sandeep, director of research at Naeem Brokerage told Zawya by email.
Weak emerging markets (EM) sentiment has been weighing on the Egyptian market in 2018, as MSCI’s emerging market index has declined by 14.48 percent so far since the start of the year, dragging down EGX30 to drop 8.01 percent from January 2018 to date.
“Since the start of the EM rout for instance, foreign investors reduced their investments in local (Egyptian) treasuries to $14bn from a peak of $23bn as of 1Q18.” Sandeep said.
Most stock markets around the globe recorded sharp drops last week after investor sentiment was hit as the International Monetary Fund (IMF) downgraded its global economic growth forecasts for 2018 and 2019.
However, early this week, global markets started recovering and Egypt’s main index tracked the rebound after dropping 5.82 percent last week.
In addition to the improvement in global sentiment, Naeem Brokerage’s Sandeep said: “This week saw the conclusion of Sarwa Capital’s IPO listing, so all of the margin calls must have been settled by now… in simple terms, better liquidity.”
Sarwa Capital’s shares began trading on Monday. In a statement to the exchange, the company said that its private placement was oversubscribed 10.83 times.
Commercial International Bank, the largest bank in terms of market capitalization on the EGX30 index, added 4.37 percent so far this week.

“Commercial International Bank (CIB) having a weightage of 32.27 percent in EGX 30, has powered the rally in the benchmark Egyptian index during the last few days,” Century Financial Brokers’ Valecha said.
“A raft of analyst upgrades as well as CIB being named as the World’s Best Emerging Markets Bank 2018 by Global Finance has boosted the momentum in Egypt’s leading private sector bank,” Valecha added.

According to data from Eikon, three analysts have a ‘strong buy” rating on the stock, five analysts have a ‘buy’ rating, while three analysts have a ‘hold’ rating.