Egypt shares expected to move sideways amid a slump in global markets

Elsayed Solyman
6 Min Read

Egyptian shares were not spared from the drama that afflicted stock markets around the globe last week, as investors embarked on a fresh sell-off streak amid fears arising from another rout in global shares.

“Last week’s trade witnessed excessive selling that was mainly driven by random concerns from investors after a violent correction wave in markets around the globe,” analyst Michael Naguib said in a recent research note.

Last week, the S&P 500 tumbled 5.2% in the week, its steepest slide since January 2016, jolting equity markets from an unprecedented stretch of calm.

At one point, stocks fell 12% from the latest highs, before a furious rally Friday left the equity benchmark 1.5% higher on the day. Still, the sell-off has wiped out gains for the year.

The CBOE Volatility Index ended at 29, almost three times higher than its level on 26 January.

“We could see the market move sideways in the few coming sessions, as investors are awaiting the CBE decision about interest rates. They could also hunt for cheap prices and build new positions in blue-chip stocks,” said Sameh Gharib, head of technical analysis at Roots Stock Brokerage House.

The CBE’s Monetary Policy Committee is scheduled to meet in mid-February.

The benchmark EGX30 will see short-term resistance at 15,200 then at 15,300 points, whereas support is expected at 15,100, Gharib said in a research note.

Meanwhile, the small and medium enterprises’ EGX70 index will see short-term resistance at 773 and 777 points, whereas support will be seen at 765 and 758 points, he added.

The analyst advised investors and traders to closely watch stocks and to consider quick trades between support and resistance levels for stocks seeing a jittery sideways performance.

Meanwhile, Ayman Fouda, head of capital market committee of the African Economic Council, expected the market to move sideways in the few coming sessions until the end of February, awaiting fresh stimulus including from the earnings season of listed companies.

EGX30 retreats for third consecutive week

The Egyptian Exchange (EGX) declined for the third consecutive week.

The benchmark index EGX30 lost 1.11%, or 167.37 points, and closed at 14,921.29 points, while traded values reached EGP 3.4bn with a total volume of 820.9m shares.

Support levels for the main index are now at 14,870 and then 14,468 points.

On the other hand, EGX30 is targeting resistance levels between 15,000 and 15,070 points, the analyst noted.

Market capital lost EGP 8.9bn, and ended the week at EGP 852.5bn, compared to EGP 861.4bn by the end of the previous week.

EGX70 fell by 2.58%, as it reached 848.49 points, while the broader index EGX100 was down 1.53% and ended the week at the level of 2,025 points.

The equal-weighted index EGX50 declined 1.79% and closed at 2,647 points.

Last week,  Remco for Tourism Villages Construction was among the top performers, as the company announced it has started implementing projects at the New Administrative Capital at a total cost of EGP 12bn ($680m).

The projects span 2.3m sqm, which Remco owns in partnership with the Armed Forces Land Projects Agency (AFLPA), the company added in a statement to the EGX.

Total sales of the project stand at EGP 15bn ($850m) to be executed within two years, according to the statement.

The project includes the constructions of 450 villas and 4,000 apartments, in addition to allocating a 7,000 sqm plot for commercial buildings, the company highlighted.

Remco has also dedicated 1,370 sqm and 3,650 sqm plots for administration and services buildings respectively, the company continued.

Meanwhile, Sixth of October for Development and Investment (SODIC)’s revenues are expected to grow by 55.35% year-over-year to EGP 3.7bn in 2018 from EGP 5.6bn a year earlier, CEO Majid Sharif said last week.

The real estate developer has no intentions to distribute cash dividends for 2017 profits, Sharif pointed out, adding that the company is currently seeking to set a clear and fixed policy for dividend distributions in order not to impact its expansions.

He also noted that the US-based Ripplewood Holdings is planning to acquire an additional stake of 10% in SODIC, which is an indicator of foreign investors’ trust and interest in boosting investments in the North African nation.

SODIC is planning to inject EGP 3bn into the projects of East Town, Villette, and SODIC East this year, in addition to finalising work on SODIC West and Seas Bay in North Coast.

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