Today’s Trading Playbook
Egyptian equities started off H2 2022 on the wrong foot, with EGX 30 closing down 2.4% and extending its ytd loss to c.25%, closely followed by EGX 70 EWI which is down c.23% ytd. While such performance is not illuminating by any means, it is not in isolation of global markets. Similarly, MSCI Emerging Markets (-19%) and MSCI Frontier Markets (-23%) indices are also down in double digits on a ytd basis. Granted, this is not an ideal environment for equities, especially in emerging markets that are net importers at a time when global commodities are inflated and the interest rate on the USD is rising. Even such circumstances did not leave U.S. markets unscathed, with both the S&P 500 and Dow Jones Industrial Average down 20% and 14% ytd, respectively.
So, where to go from here? We still stand by our view that we voiced out in our annual strategy note STANDPoint published on 30 January 2022 that the Egyptian stock market is home to mergers & acquisitions (M&A) activity at such low valuation levels, a trend that has manifested itself throughout H1 2022 and will likely to continue for the remainder of the year. The stock market lacks liquidity which we highlighted before. In other words, this is not a traders’ heaven. Indeed, for markets to reflect fair stock values, liquidity is a must, and the lack thereof means persistent mispricing, which is always good for long-term investors and hence M&A stories.
Now, on to the top news and analysis for the day.