Egypt's Stock Market Is the Best-Performer in the Region This Week

Published September 3rd, 2018 - 09:49 GMT
Egypt’s stock market index gained 4.82 percent this week. (AFP)
Egypt’s stock market index gained 4.82 percent this week. (AFP)

Egypt’s stock market index gained 4.82 percent this week, and was up by 1.1 percent on Thursday, with buying momentum dominating trading on Cairo’s bourse during the last week of August.

Qatar’s index was the second-best performer in the region, adding 4.3 percent for the week.

Egypt has been conducting reforms imposed by the IMF-backed austerity plan in 2016, in a $12 billion loan programme which aims to revive the economy. According to a Reuters poll of 13 economists conducted during the month of July, participants expect Egypt's GDP to grow at an average of 5.2 percent for the fiscal year that started in July.

“After a quiet period in the summer (July, August) we are finally witnessing an uptick in turnover, and performance. This is justified as Egypt has posted very decent earnings growth numbers, and is looking among the cheapest in emerging narkets on a PEG (price/earnings to growth) ratio basis, owing to superior EPS growth expectations,” Mohamad Al Hajj, equities strategist at EFG Hermes, told Zawya by email yesterday.

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“We remain bullish on Egypt and see decent upside ahead of us. Our favorite theme remains food names (companies) where we see continuation of a recovery. Commercial International Bank is also looking cheaper on P/B (price-to-book ratio) following recent pullback and we expect this to lead to greater interest in the name, especially as growth outlook is strong.” Al Hajj added.

“Finally FTSE added four names to its Emerging Markets All Cap index effective 21 September 2018. These are Juhayna Food Industries, Ibnsina Pharma, Abu Qir Fertilizers and Chemical Industries (ABUK), and Alexandria Mineral Oils (AMOC) and this should drive around $40m into Egypt, which should be supportive. ABUK is up more than 9 percent today, AMOC has added 3 percent, supported by the FTSE addition news,” Al Hajj said on Wednesday.

Credit ratings agency Moody’s Investors Service had raised Egypt’s credit outlook to positive from stable on Wednesday, citing progress in implementing the IMF-backed austerity plan.

“Egypt equities have outperformed regional peers this week with a positive return of 4.8 percent which has helped the index to end the month in positive territory and we expect the rally to continue for the remainder of the year. Investors are back this week from vacation and prices have been attractive in terms of valuation. We think the positive momentum will continue, especially after Moody’s raised the country’s credit outlook,” Reda Gomma, Head of Equities at Mashreq Capital told Zawya over the phone.

“We see a high probability that the Central Bank of Egypt cuts interest rates by the end of the year, which would reflect positively on the stock market. There is doubt about the Fed raising interest rates in December, which might also push the Central Bank of Egypt to cut rates. One of the externalities that has stopped the CBE from cutting rates in the past is the increase in the interest rate on dollar,” He said.

Gomma ended: “The country has outperformed its peers in terms of EPS growth and we see it as a good growth story”.

Dubai’s index added 0.87 percent during the week, Abu Dhabi’s index gained 2.08 percent, Saudi Arabia’s index added 0.56 percent, while Kuwait’s index lost 1.46 percent and Bahrain’s index dropped 0.91 percent.

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