Egypt hits 8-yr high on FX euphoria, Saudi up
Egypt’s stock market surged to an eight-year high yesterday because of hopes for foreign fund inflows after the currency was floated last week, while a plan by Saudi Arabia’s government to pay debts to the private sector boosted that market.
The Egyptian blue chip stock index jumped 2.5 percent to 10,097 points, its loftiest finish since June 2008 - although it closed well off the day’s high of 10,177 points, and trading volume, while heavy, decreased considerably from Monday’s massive amount. The index has soared 18.4 percent since the Egyptian pound’s peg of 8.8 to the U.S. dollar was scrapped last Thursday. Yesterday, the pound continued drifting down to near 18 - a level making Egyptian assets look cheap to foreigners.
Yesterday ‘s rise brought the index above major technical resistance on its February 2015 peak of 10,066 points; any break, confirmed by two straight closes above that level, would point up to the April 2008 record high of 12,039 points.
In contrast to the previous three days, however, the broader EGX100 index outperformed the blue chip benchmark yesterday, rising 3.5 percent - a sign that profit-taking pressure was emerging in blue chips. Exchange data again showed foreign investors were net buyers of stocks, by a ratio of over four to one. They bought a net $31 million, not much by the standards of other emerging markets but one of the largest amounts Cairo has seen in the last few years.
“The very good news is that foreigners are testing the water in the stock market. Their contribution in terms of size and direction had not been seen in a long time,” said one fund manager. Global Telecom rose 2.4 percent and Commercial International Bank climbed 1.9 percent. Juhayna Food Industries surged to its 10 percent daily limit.
The Saudi index gained 2.1 percent to 6,328 points in its fourth straight day of gains, rising above minor technical resistance at the September peak of 6,238 points. “The trend is bullish as (the index) is trading over the 14-, 21- and 50week simple moving average levels,” Abu Dhabi’s NBAD Securities said in a note. The Riyadh government aims to settle its unpaid debts to the public sector before the end of December, the state news agency reported late on Monday. The delayed payments are believed to total over $20 billion and be concentrated in the construction sector. Builder Al Khodari climbed 4.2 percent in heavy trade.
Saudi Pharmaceutical Industries, the only listed drug producer, gained 2.8 percent in a second day of heavy trade after the energy minister said on Sunday that Riyadh planned to develop automotive, pharmaceutical and solar industries. All 12 listed banks rose; they have been bullish since the government’s successful $17.5 billion international bond sale last month. Samba jumped 4.2 percent.
“This has been a relief rally for construction stocks and a fundamentals-driven rally for the banking and petrochemical sectors,” said Santhosh Balakrishnan, research analyst at Riyad Capital. He added that long-term investors had returned to buy blue chips that dropped sharply over the last year. — Reuters