Today’s Trading Playbook
U.S. equities ended Tuesday with sharp gains in light of a number of positive earnings reports as well as a receding U.S dollar which helped risk assets recover. Moreover, Asian shares joined the recovery early Wednesday on strong U.S. corporate earnings and the expected resumption of Russian gas supply to Europe.
Here at home, Elsewedy Electric [SWDY] will go ahead and write off a total of 13.4mn in treasury shares in order to boost its earnings per share (EPS). This should bode well for the sentiment around SWDY. We note that this is exactly the right thing to do for companies whose stock prices are deeply undervalued in the market, as we have predicted back in our Trading Playbook dated 7 July 2022. Back then, we alluded to the fact that given Egypt's high corporate earning yield (now standing at around 20% based on EGX 30 constituents and exceeding both cash and debt after-tax yields), we thought it was wise to undertake what we called “real share buybacks", where companies end up writing off their treasury shares afterward to further support their EPS, ROE, and hence share prices. Hence, we think we should expect more share buybacks to be announced over the coming weeks.
Now, on to the top news and analysis for the day.