THE STOCK market reacted to rumours of anti-regime protests in Egypt last week, spread by some Arab and foreign news channels, when its main index the EGX30 and the broader-based EGX100 recorded their highest losses in several years, reports Sherine Abdel-Razek.
The EGX30 index, tracking the performance of the 30 most actively traded companies, incurred a total of a 11 per cent loss in the three trading sessions following Friday’s protests. On Sunday, the next trading day, the stock exchange suspended trading for 30 minutes after its two main indices lost more than five per cent. All the 30 companies comprising the EGX30 shouldered a decline in their share value, pushing the index down by 5.3 per cent, its biggest loss in one day since mid-2016. Meanwhile, the EGX100 retreated by 5.7 per cent, recording its largest daily loss since 2012.
“Most of the stocks broke their important support levels and hit their 10 per cent daily downside limits and with relatively high volumes reflecting the dominance of sellers,” said Radwa Al-Swaify, an analyst at Pharos Securities.
Analysts believe that investors have been worried about the rumours and have rushed to sell their holdings, thus weighing down on the market. A break-down of the trading figures on the first two sessions shows that most of the sellers are individuals, both locals and Arabs. Individual investor decisions are sometimes hastily taken and can be driven by rumours and not by fundamentals. The foreigners joined the selling rally on Tuesday withtheir orders counting for 26 per cent of the overall turnover.
Before this decline in value, the EGX30 was one of the top four performing indexes among major peers tracked by the US company Bloomberg globally in dollar terms. Economic indicators in Egypt have also been improving on the back of the government’s economic reforms, and the inflation level nosedived to 7.5 per cent in August, its lowest in six years. The pound also gained ground against the dollar.
The decline in the stock market might push the Central Bank of Egypt (CBE) to be more cautious in its meeting today, encouraging it to either keep interest rates on hold or introduce a symbolic cut that Al-Swaify put at 0.5 per cent “in the light of the market imbalances and investor uncertainties that emerged this week”.
Previously, the investment banks had expected the CBE to cut rates at its meeting today by 0.5-1.5 per cent in the light of the decline in inflation and high real interest rates.
*A version of this article appears in print in the 26 September, 2019 edition of Al-Ahram Weekly.