The warmth of January
The Egyptian stock market continues to illustrate the January effect, an anomaly in which stock prices tend to rise in the first month of the year. Indeed, the benchmark EGX 30 has averaged positive return of 6.9 percent in January since its inception in 1998—by far the best month of the calendar year. And so far in the new year, the phenomenon appears to be holding. The EGX 30 was up 7.6 percent in the period from Jan. 1 to Jan. 15. Between Dec. 15 and Jan. 15, the EGX 30 was up 17.3 percent at 13,287.8, while the EGX 70 and the EGX 100 were up just 4.7 percent and 8.6 percent at 472.9 and 1,155.4, respectively. Still, advances outnumbered declines by a ratio of 3-to-1.
The winners list included both large-cap and small-cap stocks, but an overall theme was that this was a month driven by rumors and company-specific events. For instance, Abu Dhabi Islamic Bank Egypt (ADIB) ended the period up 76 percent at LE 8.94 after initially falling in the wake of the sudden death of its CEO, Nevine Loutfy. The bank, which is a 49.6-percent subsidiary of the UAE-based parent institution, has a par value of LE 10 per share and a book value of LE 7.25 per share. Also, Ezz Steel (ESRS) saw its shares jump 61.5 percent to LE 21.80. Asked about the stock’s abnormal performance, the company cited the overall general uptrend in the market after the float of the pound. However, the stock may have been reacting to higher iron prices globally in anticipation of rising local prices.
Within the non-banking financial sector, EFG Hermes Holding (HRHO) led the pack, with its stock up 41.3 percent at LE 27.9. The MENA region’s largest investment bank continues to grow its business lines, expanding into renewable energy, frontier markets and financial leasing. Meanwhile, Qalaa Holdings (CCAP) saw its stock jump 36.7 percent to LE 1.23 on the news that it might soon be selling its East African railway. Meanwhile, Faisal Islamic Bank of Egypt (FAIT) saw its EGP-denominated shares jump 36.3 percent to LE 18.81 after the bank’s year-end earnings skyrocketed by 283 percent to LE 2.89 billion. Elsewhere, Global Telecom Holding (GTHE) surprised the market with two announcements: a) that it would buy back 10 percent of its shares and b) it plans to cancel its global depository receipts program, perhaps foreshadowing a wider change to the company’s share structure. The stock jumped 25.6 percent to LE 7.71 on the news.
Investors are becoming more skeptical about the sustainability of the market’s recent bull run following the liberalization of the Egyptian pound. Indeed, after the IMF released a document detailing discussions with the Egyptian government, including the possibility of levying a capital gains tax on stock trading, the market fell sharply. But at press time, January still looked to be on its way to a positive close.