The stock exchange’s main indicator, the EGX30, reflected ongoing instability in the market with a shaky day of trading Wednesday. A slight dip started the day, followed by an up-swing that lasted until midday before it closed at 5,668 points, losing 0.38 per cent of its value.
The market has been sensitive to contradictory news reports that reflect global uncertainty, mainly related to the government’s negotiations with the International Monetary Fund, some pending business deals as well as governmental decisions.
Finance Minister Momtaz El-Saeed told Reuters that a preliminary memorandum of understanding will be signed with the IMF mission before the end of their current visit to Cairo.
A final deal is expected to be signed by this time; the minister early stated during the Euro Money conference held in Cairo on 9-10 October that he expected the agreement with the IMF to be finalised two weeks after the visit scheduled for late October. The government’s failure to finalise a plan for IMF approval delayed the procedure however.
The cabinet met Tuesday with President Mohamed Morsy to review the government’s development roadmap, which was criticised by Al-Borsa newspaper as “very weak” and lacking any original solutions to the most pressing problems.
In other news, the long awaited NSGB acquisition by Qatar National Bank (QNB) has not yet been confirmed. The bank denied in a memo to the stock market authority Monday that a deal was signed concerning the sale of 77.2 per cent of its shares to the Qatari bank for $2.6 billion.
Ihab Saeed, director of the technical analysis division of Osool ESB securities Brokerage, said that the market has seen very low transaction volumes of late. “There is a sharp decrease in the transacted volumes since the ill-fated decision,” Saeed said, referring to the government’s stated intention to impose taxes on the stock exchange and initial public offerings (IPOs).
“The market witnessed extremely weak transaction volumes subsequent to the decision; EGP 280 million were transacted on the day the decision was announced, and EGP 200 million in the following day, which is the lowest in 7 months.”
On the IMF issue, Saeed said there are rumors confirming the conclusion of an agreement and others which discount it. Commenting on the NSGB deal he said QNB had already proposed buying some Egyptian banks and had completed due diligence, but the sale was not finalised and that the NSGB deal may meet the same fate, despite the bank’s confirmation that the negotiations are ongoing and that they are looking for a new bank manager. “A a result, the NSGB stock went up from EGP 40 to EGP 50 and then back,” he said.
Saeed expected that the sideways movement will persist until the withdrawal of the “ill-fated decision”, confirming that the weakness of the transaction volumes remains the biggest problem.
The head of technical analysis at Pioneers Brokerage, Mohamed Youness, confirmed the decrease in transactions. However he said he believed these sideways movements are a prelude to what will be an upwards trend. The current performance of the market he attributed to economic and political variables; “the lack of clear vision, and the confusing governmental decisions lead to a total uncertainty.”
Youness also said that striking Metro workers and other protests negatively impact the stock market, as does the uncertainty surrounding the NSGB acquisition and conflicting reports on the IMF agreement.
However he didn’t believe IPO taxes would affect the market because they are not issued very often. “What could really influence the market are the taxes on the transactions and profit distribution,” he said. The government had disavowed its intention to impose taxes on stock transactions but the taxes on profit distribution are still under debate. “It would be a double taxation, because companies already pay taxes on their profits,” he said.
Youness concluded on a positive note, saying “I expect an ascending trend if we succeed in breaking the 5900 points level, this can materialise if the government doesn’t surprise us with more bad decisions.”