EGX relies on Fawry IPO to recover, break out of sideways range

Alyaa Stohy
5 Min Read
Traders work near the exchange bell at Egypt's Stock Exchange (EGX) in Cairo July 3, 2013. Cairo's benchmark dipped 0.3 percent, slipping off a three-week high and extending 2013 losses to 9 percent. Bourse data showed that foreign investors were sellers but Egyptians remained net buyers on hopes a military intervention would put an end to the Islamist president's rule. REUTERS/Mohamed Abd El Ghany (EGYPT - Tags: BUSINESS)

While the capital market is looking for positive stimuli to drive stock prices and trading volumes to recover, Fawry IPO will play out, following the activation of VEON acquisition of Global Telecom, which will provide at least EGP 10bn of liquidity in the market.

Most of this liquidity will come from Fawry IPO which is expected to energise the Egyptian Exchange (EGX), increasing the chances of profit through the expected rise in stock prices.

Ehab Saeed, a member of the EGX board and head of Technical Analysis at Osoul for Security Brokerage, said that offering Fawry on the EGX will be a positive incentive to the market’s upward movement during the coming period and will attract new liquidity to the market, particularly with the implementation of VEON’s acquisition of Global Telecom.

It is expected that Fawry IPO will support the EGX performance in the coming months, along with the package of government IPOs expected to follow, which will beat investors’ appetite for government debt instruments, particularly foreigners, given that Deutsche Bank stated two days ago that there is an upcoming reduction in interest rates worldwide, with a shift toward cautious approach from the European Central Bank and the Federal Reserve System.

The German bank sees central banks in emerging markets as following the cautious approach of European central banks.

Most of the shares closed at their lowest levels in the last session, reflecting the trend of selling, which is expected to shift after the announcement of Fawry prospect for the EGX to be tested this week as traders interact with Fawry IPO, pushing the index to break out of sideways and move up.

Mohamed Othman, head of technical analysis at Pharos Holding, said the benchmark EGX30 in its fourth attempt was unable to get through the secondary resistance level at 13,760 points, which represents the upper limit of the cross-movement that has been in the scene over the past seven sessions, adding that we need to see a clear break of the resistance level with the recording of relatively high volumes and improved market health indicators, which in this case may set the stage for a temporary rebound toward levels of 13,900 – 14,000 points.

He pointed out that according to the current market performance and weak purchasing forces, we keep our conservative vision until the market proves the opposite.

The possibility of completing the rebound attempts remains standing with the execution of Fawry IPO as long as the trading session is at the highest support level at 13,370 points.

The EGX30 index closed at 13,510.06 points, recording a decline of 1.17%. EGX70 index posted a 0.19% gain concluding the period at 532.96 points, while the S&P index declined by 0.97% and concluded the period at 2,103.37 points.

The EGX30 index capped declined by 1.49% and concluded at 16,545.73 points, while the EGX100 index declined by 0.02% and concluded the period at 1,375.77 points.

The total value traded recorded EGP 6.4bn, while the total volume traded reached 489m securities executed over 55,000 transactions last week.

For the week before last, the total value traded recorded EGP 10.6bn, while the total volume traded reached 719m securities executed over 75,000 transactions.

Stocks trading accounted for 27.45% of the total value traded of the main market, while the remaining 72.55% were captured by bonds over the week.

Egyptians represented 64.0% of the value traded in listed stocks after excluding deals during the period. Foreigners accounted for 27.7%, while Arabs captured 8.4%. Foreigners were net sellers, with a net of EGP 71.8m, and Arabs were net sellers, with a net of EGP 97.9m, after excluding deals in listed stocks. Since the beginning of the year, Egyptians represented 66.7% of the value traded in listed stocks after excluding deals, foreigners accounted for 24.3%, while Arabs captured 9.0%. Foreigners were net sellers by EGP 1,436.9m, and Arabs were net sellers by EGP 781.1m, after excluding deals in listed stocks during this year since it started.

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