Egyptian stocks poised to extend record rally; Abu Dhabi slides
Egyptian stocks were set to extend their record winning streak as investors bet last week's currency devaluation will boost the economy of the most populous Arab nation. Abu Dhabi shares fell as traders cashed in following the biggest jump since January. The EGX 30 Index rose 0.5 percent as of 12:51 p.m. in Cairo, extending its advance for a 12th day, the longest rally since Bloomberg started tracking the measure in 1998. About 261 million shares traded, compared with a one-year full daily average of 198 million. Abu Dhabi's ADX General Index retreated the most in two months.
Undeterred by the biggest interest rate increase in at least 10 years, investors piled into Egyptian stocks after the central bank weakened the currency 13 percent last week, the most since 2003. The devaluation was part of policy makers' plan to lure foreign investment and alleviate a dollar shortage that has crippled North Africa's biggest economy. The EGX 30 entered a bull market this month and is now up 32 percent from a two year-low in January.
Egypt's stocks are "seeing a clear trend reversal," said Cairo-based Ashraf Akhnoukh, the manager for Middle East and North Africa at Commercial International Brokerage Co. "Investors are taking in positive signals from the central bank as officials finally move to address the dollar shortage." The rate increase was already priced in, he said.
Property developer Six of October Development & Investment Co. was the biggest gainer, jumping 5.6 percent on almost three times the full-daily average trading volume in the past three months. The company said last week its 2015 profit more than doubled.
The ADX General Index fell 2.4 percent. The gauge had climbed the most in seven weeks on Thursday. First Gulf Bank PJSC and Emirates Telecommunications Group Co., which together account for more than half of the gauge, led the emirate's stocks lower.
First Gulf Bank declined 6.6 percent after rising 11 percent on Thursday. Etisalat dropped 1.9 percent, falling for a second day. The largest telecommunica- tions operator in the United Arab Emirates, which shares a monopoly with Dubai's Du, has retreated from the highest level in a decade this month after its 14day relative strength index rose to 88, well above the 70 level that signals a security is overbought.
"The market is correcting itself following a strong and quick rally," said Tariq Qaqish, the head of asset management at Dubai-based Al Mal Capital PSC, which manages more than $160 million in equities and bonds across the Middle East and North Africa. "Provided that global stocks and oil continue to rise, the drop we're seeing today will probably be shortlived. We're looking at buying opportunities in businesses negatively correlated to oil such as the telecoms sector, as well as high-beta real estate stocks."
The six-nation Gulf Cooperation Council is home to about 30 percent of the world's proven oil reserves, and nations in the region depend on income from crude to finance government spending. While Brent, a benchmark for half the world's oil, fell on Friday, it closed higher for a fourth week, at $41.20 per barrel.