KEY THEMES
The existence of a performance divergence between the EGX30 and EGX70 is no longer a size related matter. The next four names achieves literally a mere zero in top line, yet their average price return between 19 March 2020 and today is a whopping 1368%! Such names are El Nasr for Manufacturing Agricultural [ELNA], National Real Estate Bank [NRPD], Gulf Canadian Real Estate Investment [CCRS], and New Ismailia Urban Development [IDRE].
Furthermore, you have actual travelers from small cap territory to the unfortunate land of large and medium caps. For example, a rare life case of Speed Medical [SPMD] traveling all the way from the Nilex space to EGX 30. Also, Zahraa El-Maadi Investment & Development [ZMID] is the now the third largest in terms of market cap amongst the real estate sector, crossing names like Palm Hills Developments [PHDC], SODIC [OCDI], and Orascom Development Egypt [ORHD].
The above facts tell us this is becoming less and less about size attractiveness and more of a liquidity trade. Given the repercussions of a very weak participation from certain type of investors (e.g. foreign investors), local liquidity—particularly retail—had to cover such a role, resulting in where we stand today. In such situation, the cheapening of large caps will not serve as a proper catalyst in our case. However, it is rather the return of foreign liquidity at a certain tipping point that will bring balance once again to the scene.