The warmth of Jan­uary

Business monthly (Egypt) - - INSIDE -

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.

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