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IMF loan restores faith in the stock market

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The IMF deal has been seen by analysts as the key catalyst of recovery in the stock exchange after the revolution

The stock market has fulfilled correction expectations following the conclusion of negotiations with the International Monetary Fund (IMF) on the $4.8 billion loan, however, political instability cast its shadow on the performance.

The EGX30 (EGX’s standard index) which suffered significant losses over the last three days, reversed the trend on Tuesday and continued the uptrend on Wednesday, recording a 100 points gain with the beginning of the session, before starting the decline to close at  5.482 points, 72 points higher than Tuesday.

The market witnessed a considerable fall since the beginning of the week due to the Israeli air offensive in Gaza, political instability and the clashes in Downtown Cairo on Mohamed Mahmoud Street.

The IMF deal has been seen by analysts as the key catalyst of recovery in the stock exchange after the revolution.

Ihab Saeed, Director of the Technical Analysis Division of Osool ESB Securities Brokerage said the IMF loan effect started in the second half of Tuesday’s session and continued in the first half of Wednesday’s session, before the negative impact of the Mohamed Mahmoud Street  clashes took over.

Saeed added “the IMF loan will be witnessed in the long and medium terms, rather than the short term which is mainly dominated by political events like Mohamed Mahmoud.” He also commented on the low transaction volume saying that they are not compatible with the uptrendh. He doubted its sustainability and expected a slight dip with the beginning of Thursday’s session, followed by the return of sideways movement.

 Mohamed Saad, lead analyst with Naeem Holding, sees the decline that occurred in the middle of Wednesday’s session as result of profit taking, “the low transaction amounts failed to sustain the positive trend” the analyst said, he joined Ihab Saeed in expecting the fall to continue in Thursday’s session.

Wael Khalil, technical analyst at EFG Hermes said the impact of the loan on the market is over. It could have lasted longer if the political conditions were better; the clashes in Mohamed Mahmoud and the expected demonstrations next Friday had a negative impact on the market.

Khalil explained the low transaction volume with the lack of buyers, “nobody wants to enter the market in the current circumstances.” He acknowledged that Thursday’s session will be hard, “I don’t know what will happen tonight, and maybe the situation will explode again.” He expected, however, a retreat in the short term, noting that if the index plunges under the 5,300 points level, it will be a serious problem.


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