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|13 December, 2018

Egypt's blue-chip index rebounds and outperforms the region this week

Egypt's stock market added 4.48 percent this week, supported by a rebound in heavy weighted stocks

Egypt's blue-chip index rebounds and outperforms the region this week

Egypt’s blue-chip index EGX30 was the top performer among its peers in the region this week, as the stock recovered from last week’s sharp drop.

EGX30 has added 4.92 percent since the start of the week as heavy weighted stocks boosted the index.

“The Egyptian market has recovered this week supported by heavy weighted stocks like Commercial International Bank (CIB), Global Telecom and El Sewedy Electric due to corporate actions on the stocks,” Ahmed Helal, senior financial analyst at Okaz Stockbrokers and Investments Consultants, told Zawya.

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Shares in Global Telecom rose 21.07 percent during the week, as the company called for a capital increase from 2.73 billion Egyptian pounds ($152.4 million) to 13.92 billion Egyptian pounds.

Shares in El Sewedy Electric rose 19.05 percent during the week, as the company announced that it has signed an agreement worth $500 million with African Export–Import Bank to fund its future projects in Africa.

“CIB was affected negatively by the new taxation on t-bills and high volatility in global markets and fell below 70 level down from 80s in the last couple of weeks and it seems that the stock is in a correction now after such a free fall,” he said.

Helal added that positive economic indicators on inflation rates and shifting budget deficit to surplus have also helped CIB.

In late November, Egypt’s cabinet gave preliminary approval to a proposed amendment to the way bank taxes are calculated. Shares in banks like CIB dropped on concerns over the proposed law.

“The country’s cabinet has given the preliminary approval to remove deductions on treasury income from Egyptian government securities, effectively raising the tax rate,” Vijay Valecha chief market analyst at Century Financial Brokers, told Zawya.

“Stocks of Egyptian banks had fell sharply after removal of tax deductions on treasury income, since most were having huge exposure to the treasuries. However, the selloff appears to have abated for the time being as stock prices now discount the future income,” Valecha added.

A Thomson Reuters index that covers the banking sector in Egypt shows that Egyptian banks had dropped 5.66 percent last week.

“Egypt’s largest bank (CIB), is now trading at less than 10 times 2019 earnings and this is cheap for a blue chip stock of its stature. On top of that, Egypt’s annual consumer price inflation in cities fell to 15.7 percent in November from 17.7 percent in October and is expected to decline further in coming months.”

Valecha added that this is a huge positive for CIB as the bank will witness increased capital gains as treasury prices will rally when inflation rate comes down.

CIB gained 5.57 percent this week and has ended the day at 73.6 Egyptian pounds, wiping off most of the 6.97 percent loss incurred last week.

Elsewhere in the region, Dubai’s index added 0.73 percent during the week, Abu Dhabi’s index dropped 0.31 percent, Saudi Arabia’s index gained 0.88 percent, Qatar’s index fell 1.26 percent, Kuwait’s premier market index fell 0.88 percent, while Bahrain’s index was mainly flat and Oman’s index dropped 2.21 percent.

(Reporting by Gerard Aoun; Editing by Shane McGinley)

(gerard.aoun@refinitiv.com)

Our Standards: The Thomson Reuters Trust Principles

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2018

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