Egypt shares ended last week on a mixed note, with the main benchmark closing on a down note hit by banks’ stocks.
EGX30, the main gauge, lost 0.5 percent to close at 13,881.97 points.
Egypt shares resumed their rally last week, bolstered by foreign investors’ purchases, while local investors ended the week as net buyers.
EGX30’s fall was fueled by the performance of banks’ stocks after the central bank’s decision to raise the reserves requirement to 14 percent, head researcher at Roots Stock Brokers Sameh Gharib told Daily News Egypt
Heavyweight Commercial International Bank of Egypt lost 2.77 percent last week, serving as the main drag of the main benchmark.
The Central Bank of Egypt (CBE) has decided to raise the reserves requirement for banks from 10% to 14%, according to a statement last week.
The decision is effective beginning 10 October 2017.
The cash reserves ratio settled at 14% between 2001 and 2012, and was gradually lowered since January 2011 by 4%, until it reached 10% to support the Egyptian banking sector.
The CBE’s statements said that in light of the positive financial indicators for Egyptian banks that show an improvement in performance and profitability, which is reflected on fiscal and financial stability, it is now suitable to bring back the reserve ratios to previous levels.
A separate research note by Pharos has expected banks’ stocks to be hit by the decision in the few coming weeks.
On the other hand, EGX70 rose 1.7% to 742.58 points, while EGX100 hiked 5.58% to 1,652.01 points.
The equally-weighted EGX50 index added 3.61% to 2,176.98 points, with a turnover of EGP 4.9 billion.
The main index might increase over the 13,700-point level next week, Gharib added.
EGX70 managed to break through last week’s maximum level at 707 points, to target the 750-point level, Gharib added.
Traded volume on the EGX30 index reached 2.06 billion shares, with a turnover of EGP 4.3 billion.
Market capitalisation hit EGP 14.2 billion to EGP 719.61 billion during the week, from EGP 705.39 billion the week before.
Foreign and Arab investors were net buyers with EGP 656.2 million and EGP 42.4 million, respectively, while Egyptians were net sellers with EGP 698.6 million.
“Foreign investors will serve as the main boost for the market next week,” Ghareeb added.
Egypt’s new stock exchange chief said in an interview two weeks ago that the bourse will launch a raft of reforms aimed at increasing trading volumes over the next six months, with the listing of big companies high up on the list.
“We are working on strengthening the market and increasing trading frequency over the short term by introducing new trading methods and streamlining current regulations,” he said at his office on the western outskirts of Cairo.
Around 270 companies are listed on Egypt’s stock market, which comprises of the main EGX bourse and the Nilex small-cap exchange. Some 500,000 investors are registered to trade, though only 80,000 to 100,000 of those are active, according to bourse data.
Foreign investors are expected to inject free cash in Egypt’s stock market, when the Central Bank of Egypt embarks on a slew of monetary policy easing in the few coming months, a recent report issued by Frontera Research expected.
“Investor interest in Egyptian equities is visible in the long run. If inflation declines in the next 2 to 3 months and the central bank finds itself in a position to reduce rates thereafter, interest rate sensitive sectors like financials, real estate, and consumer discretionary could see a rise. The first two form 48% of the EGPT’s portfolio,” the report seen by Daily News Egypt said.
Meanwhile, the report said that foreign inflows could be affected by US Federal Reserve monetary policy.
“Keeping an eye on the US dollar would be essential as well. If the Federal Reserve starts reducing its balance sheet and undertakes more than one hike for the remainder of 2017, the dollar can be expected to strengthen. This would inevitably hurt the EGPT’s returns even if the underlying stocks, denominated in pounds, do well,” the report confirmed.