No foreign takers for Egyptian stocks
OVERSEAS SHAREHOLDERS, EXCLUDING ARABS, WERE NET SELLERS OF ABOUT $18M ON WEDNESDAY
As Egyptian stocks surged the most in six months, foreign investors headed for the exit. Overseas shareholders, excluding Arabs, were net sellers of about 138 million Egyptian pounds (Dh64.72 million, $18 million) on Wednesday, the most in more than two weeks. The central bank’s decision to pay off the long line of foreign investments trapped in the country because of its dollar shortage wasn’t enough to persuade them to stay.
The sell-off reflects scepticism about Egypt’s ability to allow the free flow of capital as the government continue to defend an overvalued local currency with restrictions on money transfers abroad. It’s struggling not to deplete foreign reserves to pay for imported basic commodities and the backlog of investors has been building even after the central bank announced it would repay them.
“Consistency is important,” said Akhilesh Baveja, lead manager of the Magna Mena Fund at London-based Charlemagne Capital Ltd and who has faced difficulty repatriating funds from Egypt. “This has happened several times before but the consistency in repaying investors wasn’t there so the backlog kept building up again.”
Investor confidence
The stock dump comes as the benchmark EGX 30 Index posted its biggest jump since May. Speculation that the central bank’s decision would help restore investor confidence and lure inflows had boosted trading activity to the highest in five months.
Egyptian equities have been battered by almost five years of political unrest as nationwide energy shortages and lack of hard-currency weighed on corporate profits. The country’s stocks now have the smallest weighting on MSCI Inc’s emerging-market gauge after those of Malta.
Restrictions on cash flowing abroad and the subsequent line-up of investors waiting to repatriate their money are among the main reasons the market is the world’s fourthworst performer this year.
The central bank’s repayment decision is the first major move by Governor Tareq Amer, who took office on November 27, to ease a shortage of dollars that has curbed economic growth and repelled investors since the uprising that ousted President Hosni Mubarak in 2011. The regulator will soon sell a larger amount of dollars to banks to meet the needs of importers than the usual $40 million it deals at its regular currency sales, President Abdul Fattah Al Sissi’s office announced on Tuesday after he met with Amer.
Shares of Egyptian companies traded in London rallied after the decision, led by Commercial International Bank Egypt SAE, the nation’s biggest publicly traded lender. The stock is up 13 per cent in the last two days, the biggest move over a similar stretch in more than two years.
It’s “a very healthy signal,” Radi Elhelw, the Cairo-based executive director for Arqaam Securities Brokerage SAE, said by phone Wednesday. “We absolutely think foreigners will put their money back in this market. If the foreign exchange situation is fixed, with a devaluation or otherwise, they’re going to come back in like a herd.”