The EGX 30 ended yesterday lower 1.54%, marking a tough break for Egyptian equities. The index performance was harmed by devastating losses in its key blue chips. In particular, CIB [COMI] was the heaviest dragger, ending the day below EGP55/share. We note that COMI’s GDRs had closed at USD3.46 (equivalent to EGP54.3/share) last Thursday on London Stock Exchange.
Given a somewhat stable global atmosphere and the local market adapting to COVID-19, it is only unclear why the market is behaving in such a way. In view of the strong selling pressure experienced yesterday by the majority of stocks, we believe the market sell-off is spouting from certain systematic fears that investors are pricing in. Furthermore, such concerns are amplified by worsening market technicals due to high levels of margin debt, representing a tactical overhang on stocks performance.
We had mentioned earlier in our PRIMETime issued on 23 March 2021 that the EGX 30 in USD terms was about 20% up from its most famous low recorded right after the EGP flotation. We mentioned back then that, hypothetically speaking, if the EGP were to weaken by about 20%, the index would be as attractive as it was back in November 2016. Looking at yesterday’s performance, we find that Monday’s intraday low for EGX 30 in USD terms is only 15% above its EGP flotation bottom, noting that the FX rate is relatively unchanged since the last week of March 2021.