The Egyptian Exchange (EGX) is expected to carry on the upward trend this week, as investors are likely to inject cash in the blue-chip stocks on lower valuations.
The EGX is expected to maintain the positive performance next week, head of capital market committee at the African Economic Council, Ayman Fouda said.
The benchmark EGX30 index may retest 13,175 and 13,260 points if it settles above 13,150 points, Fouda highlighted, pointing out that the index has support at 13,000 and 12,991 points.
As for the small- and mid-cap EGX70 index, he added that it has a short-term resistance at 688 and 695 points, while it has support at 675 and 666 points.
For his part, Head of Technical Analysis Department at Arabeya Online, Michael Armia, said that the EGX30 will move downward in the short- and medium-term, and will see a sideways trend in the long-term.
Armia noted that the index has main support at 12,830, 12,700, and 12,620 points, while it has resistance at 13,275, 13,435, and 13,600 points.
Last week, the EGX returned to gains in the week that ended 1 November, after negative performances dominated last month.
The benchmark index EGX30 rose by 1.3% or 178.59 points and closed at the level of 13,202.32 points.
The small and medium-sized enterprise index EGX70 added 2.9% this week as it ended the trade at 687.57 points, while the broader index EGX100 increased by 2.6% to 1,722.31 points. Similarly, the equal-weighted index EGX50 gained 3.36% to settle at 2,101.67 points.
Market capital rose by EGP 13.9bn to reach EGP 750.9bn by the end of the week.
In October 2018, the Egyptian equity market continued to sell off on a more severe pace than September, driven in part by the negative sentiment after the first phase of the public offerings program (POP) and other private-sector IPOs which were postponed.
Egypt’s market valuation is still attractive with the market benchmark EGX30 still traded at a discount to both MSCI EM and MSCI FM.
The heavy selling pressures came from foreigners who widened their sales in October compared to September.
Continuing its negative performance, Egypt was the second worst performing market in October across the MENA region.
The EGX30 lost 10% in USD terms (-12% YTD) but still outperformed MSCI EM in October and on a YTD basis.
The bad performance in emerging markets, as well as investors’ fears about a tighter monetary policy, continued to affect Egyptian equities in October in addition to a gloomy view about the IPO programme which is now the missing piece of the puzzle.
On the valuation side, Egypt is now considered the third cheapest market in the MENA region behind DFMGI and Oman markets, having been the second cheapest in September because of forwarding earnings downgrades of six EGX30 constituents by analysts. As such, EGX30 valuation discount was cut in half from 22.6% to just 9.6% vs. MSCI EM.
In other market news, National Bank of Kuwait – Egypt (NBK) reported a 26% year-over-year rise in profits for the first nine months of 2018.
Net profits amounted to EGP 1.4bn during the period from January to September, versus EGP 1.16bn in the year-ago period, including minority shareholders’ rights, the lender said in a filing to the EGX.
Interest revenues grew to EGP 5.14bn in the nine-month period ended September from EGP 4.04m in the same period a year earlier.
The NBK Egypt previously posted a 36.1% year-over-year growth in profits for the first half (H1) of 2018, recording EGP 989m from EGP 727m.
Interest revenues rose by 25.8% to EGP 3.3bn in H1 of 2018, versus EGP 2.62bn in H1 of 2017.
Meanwhile, Canal Shipping Agencies reported a 66% year-oover-year increase in net profit for the first quarter (Q1) of fiscal year (FY) 2018/19.
Net profit stood at EGP 59.2m in the three-month period ended September, versus EGP 35.6m in the year-ago quarter, the company said in a filing to the EGX.
Revenue jumped to EGP 32.5m in Q1-2018/19, compared to EGP 24.11m in the same quarter last year.
Canal Shipping previously said it logged EGP 271.16m in profits for FY 2017/18, versus EGP 155.199m in the year before.
In other market news, Financial Brokerage Group, a subsidiary of EFG Hermes Holding, said that Ekuity Holding has raised its stake in Sixth of October for Development and Investment (SODIC) to 4.9% from 4.86%.
Ekuity Holding has purchased 150,000 shares at a value of EGP 2.3m, or EGP 15.6 per share, the company added in a filing to the EGX.
It is worth noting that SODIC previously posted a 9.5% year-over-year increase in consolidated profits for the H1 of 2018, recording EGP 374.09m in profits, compared to EGP 341.5m.
Total revenues hit EGP 1.05bn in the six-month period ended June, versus EGP 1.17bn in the prior-year period.
In other earnings news, Oriental Weavers Carpet reported a 27% year-over-year drop in consolidated profits for the first nine months of 2018.
Net profit fell to EGP 436.4m in the nine-month period ended September, from EGP 598.7m in the year-ago period, the household durables firm said in a filing to the EGX.
Sales rose slightly to EGP 7.59bn at the end of September from EGP 7.54bn in the corresponding nine-month period of 2017.
At the level of standalone business, profits surged to EGP 380.4m in the January-September period of this year, versus EGP 297.6m in the prior-year period.
Oriental Weavers previously said its consolidated profits fell by 31.3% year-over-year in the H1of 2018, registering EGP 326.38m in profits, versus EGP 475.03m.
On the other hand, standalone profits grew to EGP 211.37m in H1 of 2018, versus EGP 184.95m in the same period a year earlier.