By Aliaa Motouhi and Ahmed Allam
The Egyptian Stock Exchange usually sees fewer transactions during the month of Ramadan, but other circumstances are expected to drive transactions down even lower this month.
Securities experts predict that the largest factor to affect the Egyptian Exchange this Ramadan is the political situation, especially the fate of the Constituent Assembly, and the prospect that the Shura Council will be dissolved.
Hani Mahmoud, managing director of Blom Bank Egypt, expects that transactions will not exceed EGP 150 million, noting that the high temperatures and thirst deter investors from following the market closely.
Mahmoud said that there are a number of factors which will have a negative impact on the stock market this Ramadan, including the current slow pace of the Egyptian economy and the absence of any particular events that encourage investment.
He forecasts that market activity will be concentrated on a number of selected stocks that are expected to perform well or ones that have been successful in the first half of the current year.
Shawkat Al-Maraghy, Managing Director of the HC Securities, expects that the stock market will see a 70% decline in the amount of trading, elaborating that the reigning characteristics of the current month’s trading are calmness and anticipation.
He doubts that investors will exert much energy to closely follow the market given its current stagnant state.
The Managing Director of Prime Securities, Mohamed Maher, said that Ramadan rarely comes with good news regarding companies listed on the Egyptian Exchange.
He noted that companies themselves are often lethargic during the holy month, with the boards of directors often putting off any decisions until after Eid Al-Fitr.
Maher doubts that transactions during Ramadan 2012 will surpass EGP 200 million and that most sessions will averagely record EGP 150 million.
Adel Abdelfattah, Chairman of the Board of Directors for the company Themar Securities Brokerage, predicted that trading would be weak during Ramadan and will not exceed EGP 100 million to EGP 150 million per session due to the ongoing struggle in the political arena.
Over the last 15 years, an increase in trading during Ramadan only occurred two or three times, Abdelfattah noted. Egyptian traders drive the market and they tend be very relaxed during the holy month.
The political situation, he articulated, is the catalyst of the economy in general and the Egyptian Exchange in particular.
Mohamed Fathallah, Managing Director of the company Al-Tawfeek Financial Brokerage, said that the political situation will have a significant effect on market transactions, particularly the formation of a new cabinet and whether or not it will represent the will and aspirations of the people.
According to Managing Director of Rasmala Egypt, Ahmed Abu Saad, 70% of transactions are frozen during Ramadan.
The holy month will have a greater effect on individuals than on institutions and funds.
He said that market is waiting for any positive signs in order to catch its breath during Ramadan, particularly clarity in the political and economic arenas.
Mahmoud Gabreel, Managing Director of Amwal for Management of Funds and Portfolios, concurred that the main influence on the Egyptian Exchange during Ramadan and in the coming period will be the clarity of the political situation moving forward, saying that the economy needs clear laws in order to drive investment.
About investment strategies during the holy month, Gabreel foresees that investors will focus on particular companies that have announced strong budgets or positive results for the first half of the current year.
He also noted that investors will concentrate on companies with stocks that have fallen below their nominal value, presenting an opportunity for profit taking.
The Egyptian Exchange began its normal Ramadan procedures, reducing trading hours from four hours to three so that trading begins at 10:30 A.M. and ends at 1:30 P.M.
It is worthy to note that transactions during Ramadan 2011 equalled EGP 290 million, compared to EGP 410 million in the previous month. Trading during Ramadan 2010 was EGP 550 million, down from EGP 650 million the previous month.