Egypt’s Bourse hit a significant new low on Wednesday as stocks plunged for the third consecutive session with political uncertainty and a lack of government support continuing to cast a shadow on trade.
The EGX30 main index slipped 1.83 per cent to fall below the 4,000 point level for the first time since April 2009, closing at 3,951.99. The EGX70, which represents smaller stocks, also fell 1.6 per cent.
"The exchange is in a really bad shape. Even when we reached these low levels in 2009, market turnover was at a reasonable level," said Mostafa Badra, a capital markets expert. "Now volumes are very poor [making it difficult] for the market to pick up,”
Trading volume continued to falter, recording LE242.5 million (US$40 million) in today’s four-hour session.
Badra attributes the shaky performance to Egypt’s political turbulence.
“The uncertainty in the political scene is making everybody hesitant to trade, as the county’s future has become vague,” he said.
Political parties have failed to reach an agreement with Egypt’s de-facto military ruler on the elections law, even after they signed an eight-point accord on Saturday. Several of the signing parties reversed their decision after facing backlash from their constituencies and other political groups.
On Tuesday, the Muslim Brotherhood, Egypt’s largest political group, announced they had joined the stampede of parties rejecting the agreement, further complicating the issue.
Finance minister Hazem El-Beblawi's statement that the government will not give the stock exchange direct support started a wave of pessimism among investors, analysts and brokers.
Beblawi, also Egypt's deputy prime minister, announced the government will only interfere in the market through policy-making and not through its public banks.
“It seems that the government does not know the importance of the stock market to the country,” lamented Mohamed Metwally, trader at Prime Securities.
From the186 shares traded today, 141 lost value while 38 finished in the green.
The financial sector took a big hit, with two of its largest shares, EFG Hermes and Citadel Capital, dropping 4.88 and 5.45 per cent respectively.
Orascom Construction Industries, the Bourse’s largest share in term of capitalisation, dipped 2.01 per cent to close at LE198.8 per share. The company's second share dividend distribution was carried out today.
Commerical International Bank moved against the tide as only major stock to finish in the green, rising 0.77 per cent and closing at LE22.39 per share.
The share was the most active in today’s session, making up LE27 million -- or 11 per cent -- of total trade.
“CIB gained today for two reasons: first, the share price is approaching a level that is near the lowest market expectation so it’s luring investors to buy it,” Metwally says.
“The second reason is the news about Standard Chartered Bank's possible acquisition of Piraues Bank, which is very good for the sector as a whole.”
Standard Chartered is considering buying Piraeus Bank's Egyptian subsidiary, a deal that would boost the Greek bank as it seeks to strengthen its balance sheet in light of the downturn facing debt-laden Greece.
Foreigners made up about one third of trading, net-buying LE16.8 million in stocks. Egyptians and Arabs were net-buyers, with the former making up 66 per cent of trade.