Market Report: Egypt stocks dip in Israeli embassy aftermath

Ahram Online, Sunday 11 Sep 2011

Main index falls a less-than-expected 1.24 per cent in the wake of the weekend's protests, but total trade plunges to its lowest level since 2004

Egypt stock market
A perfect storm of global and domestic factors chokes market turnover and main index alike (Photo: Reuters)

Egyptian stocks took a dip Sunday as trade volume fell to its lowest level in seven years, weighed down by investor unease after the storming of Israel's embassy and protests in Cairo over the weekend.

The benchmark EGX30 index dropped 1.24 per cent to 4,698 points in the first trading day of the week, adding to losses of around 34 per cent in the year to date. But several market commentators said the fall-out was less than expected.

"The drop could have been worse," said Walaa Hazem asset manager at Cairo-based HC Securities. "There is no appetite for buying at the moment, but with share prices so low there is no-one who wants to sell either."

A combination of factors, local and global, had already dented the market before the latest crisis, he explained.

The storming of the Israeli embassy by protesters early on Saturday morning was the most serious challenge to relations between Egypt and the Jewish state since the signing of their peace treaty in 1979, and put the brakes on already-choked equities trade.

Total turnover on Sunday was LE205.6 million, its lowest ebb since 2004 according to market-watchers. Foreign investors represented  just 6.47 per cent of trade and were net-sellers, with nine-tenths taken up by locals.

"We haven't seen this low a ratio in the last 10 years," capital markets expert Mostafa Badra told Ahram Online. "Liquidy is lacking due to an individual lack of appetite, constant political turmoil and the ongoing trial of ex-regime members."

World stocks slid further on Friday amid concern over the eurozone -- worries reflected in Egypt's market. From its 174 listed stocks, 42 gained value and 112 lost, with all sectors except industrial goods either finishing in the red or remaining stagnant.

These declines were visible in the performance of the broader EGX70 index which tracks lower-cap speculative stocks and slipped 0.74 per cent.

More than a tenth of trade involved private equity firm Citadel Capital which announced on Sunday it has completed a $70 million capital increase for a platform company with plans to reactivate a century-old railway line connecting Kenya and Uganda. Its high-cap stocks edged 0.24 per cent up by close of play.

Egyptian Electrical Cables saw the second highest trade and gained 2.88 per cent, pushing the entire industrial sector into the green. It was left to smaller firms like Arab Pharmaceuticals and El Ouraba Securities to make the larger gains.

El Kahera El Watania Investment continued its recent losing streak to dip a further 3.6 per cent, the biggest individual fall of the day.

"Egypt's stock market is a specific case where worries about internal security and politics combine with global fluctuations," said Hazem. "The current performance might change if we witness elections or a clear political visions. Otherwise this slim turnover will be constant."

This gloomy prognosis for investors was slightly tempered by two recent announcments on trading regulations.

The first puts a partial end to stock-buying on credit, with the Egyptian Financial Supervisory Authority (EFSA) ruling against 'loans' for investors who don't already have strong portfolios.

The watchdog also re-enforced disclosure rules for executives and board members who buy Global Depository Receipts (GDRs) in their own companies, requiring them to report any transactions they make on the London Stock Exhange-listed shares.

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