Egypt Stocks Surpass Pre-Currency Float Levels as Rally Advances

CAIRO (Capital Markets in Africa) – Egyptian shares extended their rally this year to push the benchmark index beyond its pre-currency float level, boosted by speculation that economic reforms will continue to benefit local companies.

The EGX 30 Index rose 1.5 percent in Cairo, extending its gain in the past two sessions to 3.7 percent. In dollar terms, the gauge has now recovered all of its losses since November 2016, when the country allowed the local pound to float as it attempted to end a shortage of hard currency. Stocks have since risen steadily, and gained 22 percent last year, the best performance in the Middle East and North Africa.

Foreign investor interest in Egyptian shares has surged since authorities embraced a bold economic reform plan that also includes subsidy cuts and the introduction of value added tax. The measures have helped the nation secure a $12 billion loan from the International Monetary Fund. Foreign investors were net buyers of about 60 million Egyptian pounds ($3.4 million) worth of shares on Tuesday, according to data on the stock exchange website.

“The current levels are a reflection of better macroeconomic indicators and that the economy is in a much better position compared to before the float,” said Karim Khadr, managing director and head of brokerage at CI Capital in Cairo. “However, the market is still offering growth and there is value. When I look at the next five years, that’s what I see.”

The best performer among the 30 members of the index this year is Abou Kir Fertilizers & Chemicals, up 56 percent. Egyptian shares are trading at 11.8 times their estimated earnings in the next 12 months, compared with a 12.6 times for the MSCI Emerging Markets Index.

While valuations as measured by estimated earnings are viewed as attractive, the gauge’s 14-day relative strength index finished for a sixth straight day on Tuesday above 70, a level seen by some technical traders as indicating the benchmark may be overbought and poised to drop.