Positive outlook for Egyptian stocks in 2020

An improving macro backdrop coupled with attractive valuations and a looser monetary policy should boost Egyptian equities

  
The Egyptian Exchange bell is seen at the stock exchange in Cairo, Egypt February 6, 2018. Image used for illustrative purpose.

The Egyptian Exchange bell is seen at the stock exchange in Cairo, Egypt February 6, 2018. Image used for illustrative purpose.

REUTERS/Amr Abdallah Dalsh

The outlook for Egypt’s stock market remains positive in 2020, Salah Shamma, Head of Investment, MENA at Franklin Templeton Emerging Markets Equity told Zawya.

“The recent Egyptian protests have not changed our investment case for the country. Egypt's economy is at the tail end of a successful three-year International Monetary Fund (IMF) $12 billion funding program, which we think should help Egypt return to sustainable growth,” Shamma said.

“Bold, but much-needed policy reforms in past years have stabilized the currency and put the economy on more sustainable footing,” Shamma added.

The Executive Board of the IMF approved in 2016 a three-year extended arrangement of $12 billion to support the Egyptian authorities’ economic reform program. The arrangement is aimed at helping Egypt restore macroeconomic stability and promote inclusive growth.

“Valuations for Egyptian equities also remain attractive to us, and the earnings growth prospects lead us to believe the country could cultivate an encouraging investment environment. We think that corporations should continue to benefit from the central bank's easing policies, which should likely continue into next year,” Shamma said.

Egypt’s blue-chip index EGX30 gained 6.2 percent during the 11 month-period to November 2019.

Shamma believes that an improving macro backdrop coupled with attractive valuations and a looser monetary policy should bode well for Egyptian equities and the overall liquidity in the market in 2020.

“The long-awaited privatization program led by the IPO of one of the biggest banks in the country, Banque du Caire, could attract international investors and help improve overall liquidity,” he said.

The Egyptian government had announced in 2016 its intention to sell stakes in state-owned enterprises to increase public finances and draw more investors to the Cairo exchange. Banque du Caire will sell 30 to 40 percent of its shares on the Egyptian stock market in the first quarter of 2020.

Egypt also cut subsidies and floated its currency back in 2016; measures that meet key demands by the IMF in order to secure the $12 billion loan.

The IMF projects Egypt's economy will expand 5.5 percent this year, up from 5.3 percent in 2018, and grow 5.9 percent in 2020.

(Writing by Gerard Aoun; editing by Brinda Darasha)

( gerard.aoun@refinitiv.com )

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 2019

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