Egypt shares close on mixed note in a week, likely to re­sume rally

FOR­EIGN IN­VESTORS EX­PECTED TO BUILD NEW PO­SI­TIONS IN BLUE-CHIPS

The Daily News Egypt - - Business | Stock Markets - By Elsayed Soly­man

Egypt shares ended last week on a mixed note, with the main bench­mark clos­ing on a down note hit by banks’ stocks.

EGX30, the main gauge, lost 0.5 per­cent to close at 13,881.97 points.

Egypt shares re­sumed their rally last week, bol­stered by for­eign in­vestors’ pur­chases, while lo­cal in­vestors ended the week as net buy­ers.

EGX30’s fall was fu­eled by the per­for­mance of banks’ stocks af­ter the cen­tral bank’s de­ci­sion to raise the re­serves re­quire­ment to 14 per­cent, head re­searcher at Roots Stock Bro­kers Sameh Gharib told Daily News Egypt

Heavy­weight Com­mer­cial In­ter­na­tional Bank of Egypt lost 2.77 per­cent last week, serv­ing as the main drag of the main bench­mark.

The Cen­tral Bank of Egypt (CBE) has de­cided to raise the re­serves re­quire­ment for banks from 10% to 14%, ac­cord­ing to a state­ment last week.

The de­ci­sion is ef­fec­tive be­gin­ning 10 Oc­to­ber 2017.

The cash re­serves ra­tio set­tled at 14% be­tween 2001 and 2012, and was grad­u­ally low­ered since Jan­uary 2011 by 4%, un­til it reached 10% to sup­port the Egyp­tian bank­ing sec­tor.

The CBE’s state­ments said that in light of the pos­i­tive fi­nan­cial in­di­ca­tors for Egyp­tian banks that show an im­prove­ment in per­for­mance and prof­itabil­ity, which is re­flected on fis­cal and fi­nan­cial sta­bil­ity, it is now suit­able to bring back the re­serve ra­tios to pre­vi­ous lev­els.

A sep­a­rate re­search note by Pharos has ex­pected banks’ stocks to be hit by the de­ci­sion in the few com­ing weeks.

On the other hand, EGX70 rose 1.7% to 742.58 points, while EGX100 hiked 5.58% to 1,652.01 points.

The equally-weighted EGX50 in­dex added 3.61% to 2,176.98 points, with a turnover of EGP 4.9 bil­lion.

The main in­dex might in­crease over the 13,700-point level next week, Gharib added.

EGX70 man­aged to break through last week’s max­i­mum level at 707 points, to tar­get the 750-point level, Gharib added.

Traded vol­ume on the EGX30 in­dex reached 2.06 bil­lion shares, with a turnover of EGP 4.3 bil­lion.

Mar­ket cap­i­tal­i­sa­tion hit EGP 14.2 bil­lion to EGP 719.61 bil­lion dur­ing the week, from EGP 705.39 bil­lion the week before.

For­eign and Arab in­vestors were net buy­ers with EGP 656.2 mil­lion and EGP 42.4 mil­lion, re­spec­tively, while Egyp­tians were net sell­ers with EGP 698.6 mil­lion.

“For­eign in­vestors will serve as the main boost for the mar­ket next week,” Gha­reeb added.

Egypt’s new stock ex­change chief said in an in­ter­view two weeks ago that the bourse will launch a raft of re­forms aimed at in­creas­ing trad­ing vol­umes over the next six months, with the list­ing of big com­pa­nies high up on the list.

“We are work­ing on strength­en­ing the mar­ket and in­creas­ing trad­ing fre­quency over the short term by in­tro­duc­ing new trad­ing meth­ods and stream­lin­ing cur­rent reg­u­la­tions,” he said at his of­fice on the west­ern out­skirts of Cairo.

Around 270 com­pa­nies are listed on Egypt’s stock mar­ket, which com­prises of the main EGX bourse and the Nilex small-cap ex­change. Some 500,000 in­vestors are reg­is­tered to trade, though only 80,000 to 100,000 of those are ac­tive, ac­cord­ing to bourse data.

For­eign in­vestors are ex­pected to in­ject free cash in Egypt’s stock mar­ket, when the Cen­tral Bank of Egypt em­barks on a slew of mon­e­tary pol­icy easing in the few com­ing months, a re­cent re­port is­sued by Fron­tera Re­search ex­pected.

“In­vestor in­ter­est in Egyp­tian eq­ui­ties is vis­i­ble in the long run. If in­fla­tion de­clines in the next 2 to 3 months and the cen­tral bank finds it­self in a po­si­tion to re­duce rates there­after, in­ter­est rate sen­si­tive sec­tors like fi­nan­cials, real es­tate, and con­sumer dis­cre­tionary could see a rise.The first two form 48% of the EGPT’s port­fo­lio,” the re­port seen by Daily News Egypt said.

Mean­while, the re­port said that for­eign in­flows could be af­fected by US Fed­eral Re­serve mon­e­tary pol­icy.

“Keep­ing an eye on the US dol­lar would be es­sen­tial as well. If the Fed­eral Re­serve starts re­duc­ing its bal­ance sheet and un­der­takes more than one hike for the re­main­der of 2017, the dol­lar can be ex­pected to strengthen. This would in­evitably hurt the EGPT’s re­turns even if the un­der­ly­ing stocks, de­nom­i­nated in pounds, do well,” the re­port con­firmed.

WE WORK­ING STRENGTHENINGARE ON THE MAR­KET AND IN­CREAS­ING TRAD­ING FRE­QUENCY OVER THE SHORT TERM

EGX30 fall was fu­eled by the per­for­mance of banks’ stocks

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