CAIRO: On the heels of Egypt s latest stock market collapse, investment bank EFG-Hermes recommended buying back into CASE 30 index major constituents, expecting the market to enter a bull run that could continue into the first quarter of 2009.
The recent correction is a short-term event that has set the ground for the CASE to resume its bull trend, the firm noted in its technical focus report.
“We now recommend that investors continue accumulating the CASE 30 index’s major constituents, said Mohamed El-Aasar, senior technical analyst at EFG-Hermes. “Although a short period of consolidation is likely in the medium term, we believe the market is resuming its bull trend.
The Egyptian stock market flashed the red alert at the start of last week – plummeting 5.65 percent in two days – its heaviest decline since its crash on Jan. 21. According to experts, Egyptian shares were reeling from recent global market turmoil, caused by surging oil prices, negative sentiments over inflation, as well as a global slowdown.
Index heavyweights led declines last week, on top of which came big cap Orascom Telecom which plunged a staggering 10.63 percent up to Thursday s close. Shares of El Ezz Steel Rebars slipped 3 percent, while investment bank Pioneers Holdings shed 11.53 percent.
Meanwhile, EFG-Hermes deemed this correction a buying opportunity, as major shares fell to cheap levels. “Now is the time to buy back in, El-Aasar pointed out. “Our short-term outlook for the coming weeks sees the index in a target zone of 9,950 to 10,100 points. Our medium-term target zone, which extends until the end of the third quarter, is in the 10,250 to 10,450-point range.
Traders expect index mainstay Orascom Construction Industries (OCI) to post highest gains this week, boosted by its growing fertilizer and construction businesses. Shares of OCI bucked last week s downtrend and managed to close 0.98 percent higher to LE 380.50. El-Aasar expects the stock to jump to an average of LE 405 this week.
He added that banking shares could also gain momentum this week, led by Commercial International Bank that would find support at LE 73, pushing it up to LE 80 by the end of this week. The stock shed last week 4.12 percent to close at LE 76.42.
The region s biggest investment bank explained that the Egyptian stock market is currently in a short-term correction phase, capping a period of expansion that began in the first half of 2006 until last May. “Around the beginning of the fourth quarter [this year], we expect a period of profit-taking that will prime the market for another wave of growth that should see the CASE 30 break the 10,500-point barrier, stated El-Aasar. “This wave . will be a very strong period of growth that could see the CASE 30 index in the neighborhood of highs of 12,000 points. He foresees this bullish trend to persist to the first quarter of next year.