The Egyptian stock market’s main index the EGX30 ended Monday’s transactions at 28,000 points, which means it has gained 14 per cent since the beginning of the year. While this may sound good, there is much more to the story.

This level is 15 per cent less than its highest-ever level of 33,000 points reached in mid-March, a week following the devaluation of the Egyptian pound.  

The index started the year on a positive note, continuing its year-long upward trend. In 2023, the market gained 70.5 per cent, thanks to investors buying as a hedging technique against the retreat in the value of the pound, which lost more than half of its value in 2023.

The gap between the official and parallel market rates for the pound widened, with the first stabilising at around LE30, while the second reached LE70 on some days.  

However, the stock market started to lose ground in the second half of March this year and up to the end of April, when it started to inch upwards.  

Omar El-Shenety, managing partner at Zilla Capital, listed several reasons for the March-April decline, at the top of which was the repricing of stocks at the new exchange rate as compared to the high parallel market rate before the devaluation.  

 “After the devaluation and the disappearance of the parallel market, the need to hedge against devaluation disappeared, and thus many investors that had entered the market in the last couple of years saw no further need for hedging,” El-Shenety said.

He pointed out in an article published by the AUC’s economic portal Business Forward that many investors who had previously borrowed money to buy stocks during the upward trend had started to sell their holdings, thus pushing prices further downwards.

Individual investors fled the market pushed by successive declines in the EGX30 index and share prices, a trend that was supported by rumours that a new capital gains tax would be applied this year.

This came before the government announced that the tax, which was introduced, frozen, and then reintroduced, would not be applied before March-April 2025 as its executive regulations have not been published.

The total value traded on the stock market in the first two quarters of the year came in at LE6.8 trillion compared to LE373 billion in the corresponding half of 2023.  

Foreigners both Arab and non-Arab represented 14 per cent of overall transactions during this six-month period. Non-Arab foreigners were net buyers in the market, with transactions valued at LE1.752 billion, and Arabs were net sellers by LE6.6 billion.  

One of the main developments in the market this year has been the introduction of the long-awaited Sharia Index to the EGX33.

The index includes 33 companies, 90 per cent of whose revenues are generated by Sharia-compliant activities. The companies represent 16 sectors. Each listed company will have an average weight on the index with a ceiling of 15 per cent weighting for each.

The Talaat Moustafa Group has the highest weighting on the index (15 per cent) followed by Elsewedy Electric with 10.3 per cent and Abu Qir Fertilisers with a 9.1 per cent weighting.

The performance of the most actively traded companies was good over the first half of the year. While the results of the second quarter have not been published, those of the first quarter, as well as the news during the following three-month period (April-June), were heartwarming.  

The Talaat Moustafa Group has made headlines several times since the beginning of the year. First, there was a big bang with its partnering with the Abu Dhabi Sovereign Wealth Fund in the Ras Al-Hekma project, which at $35 billion is Egypt’s largest ever foreign direct investment (FDI).  

In May, the company launched its Banan City project in Saudi Arabia, and two weeks ago it revealed its partnering with the Egyptian government in South Med, a 23 million square metre development on the North Coast. The group said it had sold units worth LE60 billion in the first 12 hours of booking.  

The group recorded a 491 per cent increase in profits during the first quarter, compared to the same quarter in 2023, to reach LE4.1 billion. The profits figure was fed by its acquisition last year of a majority stake in a group of seven historic hotels. This deal pushed the profits of its hotel division up by 360 per cent.  

It was a good quarter for real-estate developers, with the sector being the most actively traded in the stock market during the first half of 2024.  

Food industries also fared well despite uncertainty in the foreign-exchange market during the first quarter and the increased cost of borrowing, with the Central Bank of Egypt (CBE) upping interest rates by a total of eight per cent since January.  

Dairy and juice producer Juhayna adopted price increases as well as increasing exports as techniques to cope with various economic problems. In the first quarter, it logged a 41 per cent increase in its net income to LE479 million on sales of LE6.8 billion.

“The volatile economic landscape in Egypt and the unavailability of foreign exchange at the beginning of 2024 led to a consumer shift towards lower-priced products,” the company said in a statement.  

In March, the company cut the prices of its dairy products and juices by 18 and 15 per cent, respectively, after the government agreed with producers, distributors, and vendors of food products to cut prices by 15 to 20 per cent.  

As for the industrial sector, the last few days of the first half of the year witnessed its investors divesting a 20 per cent stake of Elsewedy Electric to Abu Dhabi-based electrical equipment manufacturer Electra Investment Holding for $449 million.  

Interest in the company stems from its sound financial performance and the expansion of its operations.

The company’s net profits in the first quarter came in at LE4 billion, which is partly attributed to increased revenue and a foreign-exchange gain from the revaluation of receivables from international operations.

The company’s sales in the first three months of 2024 came in at LE45 billion.

* A version of this article appears in print in the 11 July, 2024 edition of Al-Ahram Weekly