Egypt's stock market responds positively to stimulus package after losing EGP 162.255 bln

Doaa A.Moneim , Thursday 19 Mar 2020

Egypt's stock market (Reuters)

Egypt’s stock market started responding on Thursday to the stimulus procedures the government has adopted and to the initiative that the National Bank of Egypt (NBE) and Banque du Caire have launched to pump investments in the stock market.

NBE and Banque du Caire pumped on Thursday EGP 3 billion for purchasing shares in the EGX to support it.

In response, the EGX performance on Thursday was more consistent, despite the fact that the opening session had to suspend trades on 74 shares due to exceeding the decline benchmark of five percent.

By the end of Thursday's session, EGX 30 stayed in the green zone, upping by 4.46 percent with 9,146 points, driven by corporate purchases over the leading indices.
EGX 70 traded at 833 points with a decline of 1.12 percent.

However, the outbreak of the virus has caused capital market losses of EGP 162.225 billion since the beginning of March, with a total EGX 30 decline of 29.4 percent, and a total EGX 70 drop of 30.5 percent.

In its strategy note, SHUAA Security said that the market has been on a downward spiral with the EGX 30 haemorrhaging one-third of its value in March alone. So far, March 2020 is competing with October 2008 as the worst month for the EGX 30 in which it lost 33.2 of its value.

At the current prices, the EGX 30 is close to pre-floatation levels in EGP terms with 16, out of 30, stocks down an average 40 percent since 2 November 2016. However, in USD terms, the EGX 30 is down 43 percent with 22, out of 30, stocks down an average 55 percent. Moreover, there are five stocks with market caps below their net cash balances and 16 stocks with net cash representing 50 percent or more of their market caps and other 78 stocks trading below book values, as SHUAA tracked.

For the Central Bank of Egypt’s urgent three percent interest rate cut, SHUAA said that it was an action aimed to shield against any slowdown in economic activities and somewhat ease pressures on corporate cash flows in Egypt. 

“Nonetheless, we do not think the move will result in stronger demand for credit. In other words, the emergency rate cut was aimed to support existing rather than future borrowers."
SHUAA noted that Egyptian equities extended their worst performance in March so far after shedding severe losses in February. 

“During the past few days, global and MENA equities were hauled into tailspin largely by Brent, -c.60 percent ytd, on the back of the oil prices war which sent oil prices to their 2017 lows,” it added.

Yet, SHUAA asserted that there is a lot of opportunities in the Egyptian market at the current price levels, especially in the healthcare, consumer, and financial sectors to be tapped with a positive outlook.

Financial markets Expert Ayman Foda told Ahram Online the EGP 3 billion initiative launched on Thursday boosted confidence in the Egyptian financial market and forced all indices to perform slightly better by the end of the week.

He added that all procedures that have been adopted to boost the EGX performance will have a positive impact on its performance, expecting that its performance will be better next week.

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