Today’s Trading Playbook
KEY THEMES
A 7-day losing streak left EGX 30 down 7.2% since 14 March 2021. For EGX 70 EWI, it was even worse! The index lost some 17% over the same period. As usual, at market sell-offs, investors look for a scapegoat to blame, when it is investors and speculators themselves are the ones to blame. Many market participants have become complacent as the market (as measured by EGX 70 EWI, retail investors’ gauge) continued to trade north regardless of any fundamentals or technicals for this matter. Extended margin trading has added fuel to the fire, further exacerbating the market sell-off. Almost a year back, the market sold off in view of COVID-19 implications. However, since then, the Egyptian market (as measured by EGX 30, which includes the market’s large caps with relatively good analyst coverage) continued to trade lower. A year ago, EGX 30 was trading at a slight premium to MSCI EM and FM indices in terms of price-to-book value (P/BV) ratio. Today, it is trading at a 30% and 14% discount to both indices, respectively. As for forward price-to-earnings (P/E) ratio, EGX 30 further extended its discount from 36% and 23% a year ago to 46% and 39% today, respectively.
Yesterday, EGX 30 continued the dive, recording an intraday low that was last seen in July 2020. The violent trading session ended with index closing 1.5% above its session low. Many names ended the day at interesting levels, which triggered another round of share buybacks after prices dropped too much. If you are a fan of high dividend yield stocks, now could be a good time for cherry picking as price slippage will amplify dividend yields (for ideas, check our EGX Valuation Multiples). At this point of time, it is important to be extra careful to decide where to cut your losses and where to hold and wait, as stocks will pretty much vary in their bounce back action.
Now, on to the top news and analysis for the day.