Egypt shares likely to keep rally alive as foreign investors build new positions

Elsayed Solyman
5 Min Read
A trader works at the Egyptian stock exchange in Cairo April 1, 2014. Egypt's Central Bank said on Tuesday it had covered the entire backlog of dollars owed to foreign investors seeking to repatriate funds from the country but did not say how much money was involved. In a push to restore confidence in the economy, authorities opened a repatriation scheme in March 2013 guaranteeing foreign investors in Egyptian stock and government bond markets access to dollars despite the severe shortages of the U.S. currency. REUTERS/Mohamed Abd El Ghany (EGYPT - Tags: BUSINESS POLITICS) - RTR3JGN1

Egypt’s shares are likely to keep a rally alive this week, with foreign investors building new positions in blue-chip stocks after a sell-off streak in the past few weeks to book gains.

Analysts surveyed by Daily News Egypt expected foreign investors’ purchases to support the market’s performance in the few coming weeks.

The benchmark EGX30 index is likely to retest the levels of 13,960 and 14,100 points on the back of foreign purchases in blue-chip stocks, analysts forecast.

The main indices of the Egyptian Exchange (EGX) may resume testing new resistance levels, in line with the continuous momentum of investing in blue chips, said Ayman Fouda, head of the capital market committee of the African Economic Council.

The EGX30 index may retest resistance levels of 13,960 and 14,100 points if it settled above 13,850 points, while it may see support at 13,780 and 13,640 points, Fouda added.

The small and medium-sized enterprises (SMEs) EGX70 index has a short-term resistance at 765 and 777 points, while it has support at 750 and 744 points, he indicated.

Fouda recommended short-term investors and quick traders buy active stocks on margin.

“Foreign investors are likely to build new positions in defensive stocks like banks and real estate stocks,” Fouda added.

Heavyweight Orascom Construction reported last week a 19% year-on-year drop in consolidated profits for the third quarter (Q3) of 2017, due to lower revenues.

Net profit amounted to $23.5m in the three months ending in September 2017, compared to profits of $29.2m in the prior year, the company highlighted in a filing to the EGX.

Revenues stood at $805.4m in Q3 2017 from $962.1m in Q3 2016.

In the first nine months of 2017, consolidated profits rose 6% to $82.3m, up from $77.7m in the corresponding period of 2016.

Meanwhile, Mubasher Trade Research modified Orascom Construction’s price target (PT) on the EGX to EGP 139.39 per share from EGP 140.31 in the previous study.

The research firm also downgraded recommendation on the stock to “sell/moderate risk” from “buy/moderate risk” due to the cancellation of 1 million treasury shares by the company, according to a research note.

As for the company’s stock on NASDAQ Dubai, the research firm adjusted the stock’s PT to $7.88 per share from $7.82, while downgrading its rating to “hold/moderate risk” from “buy/moderate risk”, the study revealed.

EGX 30 rises 1.87% in a week

Meanwhile, the EGX’s indices closed the week ending Thursday 23 November in the green zone, backed by foreign and local buying.

The main benchmark index EGX30 surged 1.87%, or 258.8 points, to hit 14,106.17 points, registering its second-best performance during November.

The EGX30 index’s trading volume stood at 902.8 million shares, generating EGP 3.26bn.

On a weekly basis, market capitalisation gained EGP 18.6bn, closing at EGP 789.6bn, compared to EGP 771.03bn.

The EGX70 index grew 1.25%, reaching 772.59 points, while the EGX100 index increased 3.13% to reach 1,786.11 points.

The equal-weighted EGX50 index levelled up 0.78%, reaching 2,464.92 points, with a turnover of EGP 3.8bn.

The Commercial International Bank’s (CIB) stock rose 0.2% to reach EGP 73.61, after 4.04 million shares were exchanged, with a liquidity of EGP 297.08m.

Egyptian investors were net sellers at EGP 1.2bn, while foreign and Arab investors were net buyers with EGP 961.6m and EGP 245.7m, respectively.

Economist and capital market expert Safaa Fares said that for the benchmark EGX30 index to continue rising, it should receive a boost from Egyptian and foreign institutions, as well as forming financial positions in the leading stocks.

The main EGX30 index has a resistance level of 14,300 points, while its support level is at 13,860 points, and breaking down this level, it will fall to 13,700 points, Fares added.

Regarding the EGX70 index, Fares concluded that its resistance is at 785 points, while exceeding this level it will rise to 800 points, with its support level at 764 points, and breaking down it will tumble to 752 points.

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