KEY THEMES
For the last five years, the average weekly P/E for the EGX 30 came at around 15x, where it stands now near 10x. Furthermore, if we reversed the index's P/E, we will have what is called its earnings yield. Currently, the index provides us with an earnings yield of c.10% (vs. 5-year average of 7%). Moreover, comparing the EGX 30 earnings yield with key interest rates gives us a very interesting chart. The EGP floatation back in November 2016 was really a big game changer, pushing key interest rates to elevated levels. However, the EGX 30 earnings yield over the past five years never exceeded key policy rates due to the high interest rate environment, all until 2020 when both variables were affected by COVID-19. While interest rates dropped, notably reflecting the CBE's easing measures, the index's earnings yield started to match key interest rates and even crossed over them. As the spread between the two variables widen, we believe this is kind of a reflection on how cheap large caps have become compared to the index's 5-year earnings yield profile