Today’s Trading Playbook
KEY THEMES
U.S. equities ended the week on a mixed note, yet it was clear that stocks bounced off their intra-day lows after a week full of red sessions. On the other hand, oil prices closed the week in the green territory, with Brent oil price above the level of USD112/bbl, after a tug of war between the notions of demand destruction led by China’s zero COVID-19 policy, and previously perceived supply concerns. Meanwhile, bond prices appreciated, where the yield on U.S. 10-year government bond dropped 5% to 2.79% last week.
Moreover, we published last Thursday our MACROView note, summarizing the event of the Government Economic Conference held on 15 May 2022. In summary, the five key takeaways from the conference, in our view were: (1) Lowering Egypt’s import bill, (2) Reviving EGX activity, (3) Inflation-reduction measures to ease hardship, (4) New energy investments to boost economic growth, and (5) A more investor-friendly environment. For more details, check out our MACROView note from Thursday.
Elsewhere, the MPC meeting last Thursday resulted in hiking the CBE overnight deposit rate, overnight lending rate, and the rate of the main operation by 200bps to 11.25%, 12.25%, and 11.75%, respectively. A decision that is theoretically bad for equity markets. However, we argue that the implication of the interest rate hike on the stock market to be a bit more on the lighter side. We believe so in light of (1) the market is sort of hanging around oversold territories, (2) despite the hike, the existence of a high yield 18% p.a. CD since March 2022 renders Thursday’s decision for retail investors is not new, and (3) higher interest rate will actually bode well fundamentally to some of the heavy weight constituents of the EGX30, such as CIB [COMI], Abu Qir Fertilizers [ABUK], and Eastern Company [EAST].
Top News & Analysis
MACRO NEWS
Egypt plans to achieve food security and self-sufficiency of commodities. (Mubasher)
Egypt’s tourism revenues will reach USD10-12bn in the current fiscal year, up from USD4.9bn a year earlier, according to Finance Minister. (Enterprise)
Ukraine has offered to send Egypt wheat cargoes through Poland via railway. (Enterprise)
CORPORATE NEWS
Orascom construction [ORAS] reported its Q1 2022 financials with a bottom line of USD13mn (-45% y/y), while the company reported revenues of USD980mn (+20% y/y). (Company Press release)
GB Auto [AUTO] reported net income after minority of EGP229mn (-23% y/y) in Q1 2022 mainly due to higher SG&A-to-sales ratio (+182bps y/y) and higher interest expense of EGP338mn (+130% y/y). (Company disclosure)
Madinet Nasr Housing & Development [MNHD] reported its Q1 2022 standalone financials with a marginal increase of 3.7% y/y in net profit to EGP120.2mn despite revenue surging to EGP818.4mn (+82% y/y) vs. EGP449.2mn in Q1 2021. (Company disclosure)
EFG Hermes Holding’s [HRHO] OGM has agreed to raise its paid-in capital by EGP973mn from EGP4.8bn to EGP5.8bn (Company disclosure)
Public Investment Fund of Saudi Arabia is looking to acquire The United Bank, which is fully owned by the CBE. (Hapi)
Saudi Savola is interested to acquire the Egyptian Belgian Company for Industrial Investments, the manufacturer of the brand "Ole". (Hapi)