The Egyptian stock market was rated the second fastest emerging market worldwide in the first half of 2012, with Venezuela taking the lead, recording a staggering 115% growth rate.
The Egyptian market saw a 30% jump, which has somewhat restored confidence and relative optimism with regards to country’s economic future.
The growth occurred amidst a series of political turbulences that followed the events of January 2011, the direct effect of which was a 50% decline. The market rebounded, however, making powerful gains that lasted until the end of last February when it reached 5,400 points.
The market then witnessed a steady decline until it spiked again in reaction to President Morsi electoral victory. The market has not, however, recovered from all the losses suffered in 2011.
The rebound was reflected in renewed buying, as Ezz Steel, Palm Hills, and Talaat Mustafa Group shares rose 87%, 76%’s, and 48% respectively, making up for all losses in 2011, which had reached roughly 80%. Egypt’s main index, EGX30, rose 28% in the first half of 2012 to close at 4,709 points.
Mohamed El-Aasar, director of the technical analysis division of Sigma Capital Securities Trading, commented that the market had seen the type of gains last week that had not been recorded since last March. He added that the market closed after significant gains supported by fresh buying that intensified during the final period of last week’s trading in particular, and in the final period of the first half of 2012 in general. He said the gains portend a severe corrective movement in the market that could see it shrink to 4,200 within a month.
El-Aasar predicts that the market would continue on an upwards trajectory to reach 4,770 points, and could even continue on to hit 4,880 points within the week before encountering corrective buying pressures to sink to 4,500 points.
The real estate sector was expected to drive growth during the current week, particularly the Palm Hills development company; the share price of the company is expected to hit EGP 2.05 after closing at EGP 1.92, a level that hasn’t been seen in over a month and a half. El-Aasar stated that the shares of Talaat Moustafa Group were expected to reach EGP 4.6 and that Orascom Construction Industries’ shares could reach EGP 266. Ezz steel shares were expected to reach EGP 7.75.
He added that Orascom Telecom shares are expected to reach EGP 1.7 or EGP 1.75, as the company distributed an EGP 1.05 per share coupon. The move is expected to increase the number of Egyptians buying the company’s shares despite expectations of foreign selling pressures.
El-Aasar stressed that transactions were beginning to reflect the state of relative stability of the Egyptian political scene during the last week. He also predicted that transactions this week would equal roughly EGP 450 million and that foreigners will begin to re-enter the market and contribute to the upcoming market corrections.
Hany Mahmoud, the Managing Director of Blom Egypt Securities, concurred with El-Aasar’s analysis. He believes that the real estate sector will lead the market in the coming period, but that most businesses in the sector are restricted companies with problems. He also commented that the market as a whole is in need of fresh blood and clear proposals from the large companies that drive growth.
It is noteworthy that Egyptian traders recorded EGP 167.4 million in net purchases, accounting for 73.47% of all market transactions last week. Foreigners recorded net sales of EGP 492.96 million accounting for 16.98%. Non-Egyptian Arabs recorded EGP 309.09 million in net purchases accounting for 9.55%. The transactions of institutions equalled 61.37% of the market while individuals’ transactions were recorded at 38.63%.
Trading during last week’s transactions was valued higher than any other time in the last three months. Trading equalled EGP 2.908 billion with 702.9 million stocks traded in 118,765 deals.