Today’s Trading Playbook
KEY THEMES
Last Wednesday, the market witnessed the debut of e-finance [EFIH] which dominated the market’s trading activities at its first appearance. Such show-stealing performance was borderline expected, yet the state of how the rest of the market behaved came more in an improvised fashion. Liquidity was violently taken out of the EGX 70 EWI stocks, feeling the heavy recoil that arises from remapped investor preferences. If it’s not for altering the circuit breaker limit to 10%, instead of 5% l, for the EGX 100 EWI, trading could have halted for 30 minutes for the second session in a row. On the other hand, the EGX 30, while enduring some losses, remained safe from the aforementioned recoil, slipping only 0.56% by close (vs. 2.72% for the EGX 70 EWI). We attribute the scene that took place last Wednesday to the snowball effect caused by margin trading, which tends to amplify the EGX70 EWI movement, overshooting both on the way up and the way down. We do not think the EGX 70 EWI performance on Wednesday is an actual liquidity migration to the large cap universe, yet it’s a very strong indication that such migration is imminent. Hence, we encourage buying dips under the possibility of any future contagion effect hitting large caps in general.
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