Egypt's stocks respond well to currency controls
The stock market in Cairo responded well to new currency controls
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Egypt's stock market rose strongly on 2013's first day of trading, confirming analysts' expectations that the Central Bank's new system of currency auctions would give the market a boost.
The Egyptian pound had plummeted to an eight-year low against the US dollar Sunday afternoon, following a currency auction in which the Central Bank sold $75 million to local banks. For years the pound sold at a rate of around LE6.2 per dollar. It finally stabilised at a selling price of LE6.42 per dollar Wednesday.
Egypt's benchmark EGX30 index rose by a healthy 3.15 per cent to stand at 5,634 points. The broader-based EGX70 witnessed an increase of 3.07 per cent.
Out of 172 traded stocks, an impressive 147 registered gains and only five suffered losses. Global Depository Receipts (GDRs) stocks, including Orascom Construction Industries (OCI), Commercial International Bank (CIB) and Orascom Telecom (OT) were the biggest gainers today.
"Currency devaluation boosted the stock market significantly as GDR prices became quite attractive for foreign and Arab investors. We could say that the newly announced currency auctions by the CBE (Central Bank of Egypt) led the stock market upwards," said Issa Fathy, vice president of the securities division at Cairo's Chamber of Commerce.
Egyptians were net sellers for the day offloading a total of LE36 million in shares, while Arab and foreign investors were net buyers picking up almost LE24 million and LE13 million respectively, leading the market to vigorous gains.
"The fiscal-cliff deal (in the US) made stock markets surge worldwide, and this had an indirect effect on the EGX30 as foreign traders are likely to invest heavily in the stock market," explained Fathy.
The US Congress averted a fiscal disaster and boosted stock markets in Europe and Asia with a last-minute deal postponing tax hikes and massive spending cuts that threatened to unleash economic mayhem.
Blue chip stocks OCI and CIB rose by three per cent and 3.5 per cent respectively.
The real estate sector also showed strong gains today, with Talaat Mostafa Group (TMG) and Palm Hills Development rising 4.29 per cent and 4.10 per cent respectively.
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