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Egypt shares to extend upwards trajectory as CBE seen cutting interest rates - Daily News Egypt

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Egypt shares to extend upwards trajectory as CBE seen cutting interest rates

EGX30 records best weekly gains since December 2016 in heavy trade

Egypt shares are expected by analysts to keep their rally alive as the Central Bank of Egypt (CBE) is seen cutting interest rates at a faster pace, with inflation falling to its targets.

“The market will keep its rally alive in the medium-term. There is lots of stimulus that could help in incurring more foreign inflows in the few coming weeks,” analyst Sameh Gharib of The Roots Stock Brokerage House said.

Gharib also noted that initial public offering (IPO) activity could serve as another boost to the market in the long run.

Last week, Egyptian Exchange (EGX) Chairperson Mohamed Farid said that the market could see seven fresh IPOs this year.

In an interview with Bloomberg, Farid added that the first IPO will be launched this month and the second will take place in April.

Another four or five IPOs are scheduled to be launched on the EGX prior to the end of 2018, he noted, giving no further details on the names of the firms that will make share sales or the sectors they belong to.

“As we see, the inflation records are falling towards the CBE targets, which means more interest rate cuts will be on the cards,” Gharib confirmed.

Egypt’s headline inflation rate—which covers urban consumers only—was down from 17.1% year-over-year in January and a peak of 33.0% y-o-y in July last year.

“Today’s reading means that inflation is now within the central bank’s target range for the end of this year of 13% ±3%,” Capital Economics said in a recent research note.

“We think today’s data will be enough to persuade Egypt’s Monetary Policy Committee (MPC) to cut interest rates again when it next meets on 29 March. The MPC embarked on an easing cycle last month, lowering its benchmark overnight deposit rate by 100 basis points (bps), to 17.75%, and we expect this to be followed up with another 100 bps reduction this month,” the report added.

The report also noted that the central bank’s efforts to improve its inflation-fighting credibility mean that a series of very sharp rate cuts is unlikely.

“But that does not rule out a substantial and prolonged easing cycle. Overall, we anticipate the overnight deposit rate ending this year at 13.75%, whereas the consensus expects it to fall to 14.25%,” it added.

The CBE cut its overnight deposit and lending rates by 100 basis points on 15 February to 17.75% and 18.75% respectively.

“Its main operation and discount rates were also cut by 100 bps, to 18.25%. The CBE had increased rates by 700 bps since devaluing the Egyptian pound in November 2016,” Fitch Ratings noted in a report.

Meanwhile, economist Safaa Fares said that the EGX is likely to maintain the bullish trend and extend gains on the back of purchasing power of local institutions.

The benchmark EGX30 index has resistance at 16,100 points and an upside potential at 16,400 points, while it has support at 15,750 points and a downward potential at 15,500 points, Fares highlighted.

Moreover, the EGX70 index has resistance at 890 points and an upside potential at 920 points, while it has support at 875 points and a downside potential at 866 points, she added.

For her part, 3Way Finance Chairperson Rania Yacoub said that the EGX30 index was able to break resistance above 16,000 points last week, backed by the remarkable financial results of major firms, mainly real estate and petrochemical firms.

Yacoub projected the EGX to extend gains and hover around 17,000 points before mid-2018.

EGX30 records best weekly gains in more than a year

The Egyptian Exchange (EGX) saw a very positive performance in the week that ended Thursday 9 March, supported by foreign investors’ purchases.

The benchmark index EGX30 rose 6.61% and closed at 16,742 points, seeing traded volumes of 991m shares, with a turnover of EGP 5.9bn.

As for market capital, it gained a total of EGP 65.5bn, closing at EGP 957.9bn, compared to EGP 892.2bn last week.

Small and medium enterprise index EGX70 rose 0.64% to 861.59 points, while the broader index EGX100 gained 2.87% to 2,220 points, and the equal-weighted index EGX50 also went up by 3%.

Market analyst Michael Mamdouh Naguib said in a research note that the Egyptian Exchange was able to reach a new peak.

Meanwhile, Beltone Financial Holding reported turning to losses in 2017 due to an increase in salaries and commissions.

Net loss amounted to EGP 14.25m last year, compared to a net profit of EGP 44.27m in 2016, including minority shareholders’ rights, the company said in a filing to the Egyptian Exchange (EGX).

Revenues climbed to EGP 696.7m in 2017, versus EGP 231.05m a year earlier.

The company attributed the 2017 loss to salaries that rose to EGP 303m from EGP 90.16m, in addition to losses from execution commissions in foreign markets which amounted to EGP 171.9m last year.

Standalone losses stood at EGP 12.008m last year, against profits of EGP 37.7m in 2016.

The main index saw a return of purchasing powers, which helped push its gains, according to analyst Gharib of Roots Stock Brokerage House.

Gharib added that EGX recorded a meteoric rise in volume last week driven almost entirely by record-setting foreign institutional trading.

In the cement sector, the financial indicators of Suez Cement showed an 80.9% y-o-y hike in consolidated losses for the full year 2017.

Net loss stood at EGP 1.13bn last year, up from EGP 629.3m in 2016, the company said in a filing to the EGX.

Sales increased to EGP 6.46m in 2017, compared to sales of EGP 6.14m a year earlier, the EGX-listed firm said.

Meanwhile, standalone losses grew to EGP 441.7m in 2017, versus EGP 215.59m in the prior year.


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