Optimism rises for EGX in 2019 as sell-off streak could finally come to end

Implementation of IPO programme this year one of key market-boosting catalysts

After shedding a massive 2,000 points last year, in what could be its worst performance in almost 7 years, Egypt stock markets are braced to recuperate in 2019, with analysts expecting a sell-off streak across emerging market (Ems) finally coming to an end.
The benchmark EGX30 index declined by around 1,983.37 points, or 13.21%, at 13,035.77 points in 2018, with a turnover of EGP 188bn traded through 43bn shares.
The Egyptian Exchange's (EGX) market capitalisation retreated by EGP 72bn last year to EGP 749.7bn from EGP 824.92bn in 2017.
The small- and mid-cap EGX70 index fell by 16.16% to 693.83 points in 2018, losing 133.8 points.
Meanwhile, the broader EGX100 index went down by 12.4% at the end of the year to 1,727.21 points, versus 1,971.76 points in 2017.
As for the heavyweight Commercial International Bank (CIB), it plummeted 3.05% to EGP 74.99, with a turnover of EGP 20.6bn.
Noteworthy, the EGX30 index had jumped 21.66% to 15,019 points in 2017, gaining 2,674.25 points, when compared to 2016.
The EGX ended first week of 2019 in green, with the market capitalisation gaining EGP 16.3bn to reach EGP 757.11bn.
The benchmark EGX30 index added 280.49 points, or 2.16%, to 13,264.7 points, while EGX70 index rose 3% to 694.3 points. The EGX100 index went up 2.7% to 1,730.75 points.
In the last quarter of 2018, the benchmark EGX30 index fell 10.8% to 13,035.77 points in the last quarter of 2018, losing 1,580.7 points.
The EGX70 index tumbled by 2.6% to 693.83 points in Q4-18, versus 712.4 points.
The stock of Misr National Steel (ATQA) topped the EGX gainers in 2018, increasing by 262.67% in 12 months, according to bourse data. Citadel Capital's stock (CCAP) came second, rising 180.31% last year.
Sunnier skies ahead
There are many factors that could negatively or positively impact the EGX's performance in 2019, Amr Elalfy, head of research at SHUAA Securities Egypt, said in a research note.
At the level of positive factors, Elalfy projected the Central Bank of Egypt (CBE) to maintain cutting interest rates, which in return will help companies to borrow and accelerate their capital investments.
The implementation of the government initial public offerings (IPO) programme this year is one of the key market-boosting catalysts, he indicated, pointing out that the non-listed firms may attract new investments to the EGX.
He also noted that any decrease in the Egyptian pound value will boost the tourism sector and export firms, which will ease the country's trade deficit.
On the other hand, he highlighted the negative factors that include raising interest rates due to the global landscape, which will consequently affect the country's budget deficit.
For his part, branch manager at Mubasher Financial Services, Safwat Abdel Naeem, forecast the EGX will rise in 2019 if it settles above 13,300 points.
The EGX30 index is likely to test 14,000 points in the first half of this year ahead of launching the state-owned IPOs programme and the restructuring of Global Telecom's stock, Abdel Naeem said.
He expected the index to hover around 14,800 points in February.
The index may rebound from 12,500 points in the first two months of the year if it fails to settle above 14,000 points, he added.
Meanwhile, the indices of the EGX are likely to resume the stable performance amid fresh liquidity.
Saeed El-Feki, CEO of Osool ESB Securities Brokerage, projected that the Egyptian bourse will resume the upward trend after the benchmark EGX30 index broke 13,000 points.
Settling above 13,000 points will push the index to 13,250 and 13,500 points.
For his part, Investment Manager at Royal Brokerage Hesham Hassan said that the EGX could see a negative performance if it closed below 13,000 points.
Quick trading opportunities are still available, Hassan added, pointing out that the local stock market may maintain the bearish trend in the short-term amid the current high risks and the presence of margin trading.
He indicated that the EGX30 index has main support at 12,825 and 12,675 points, while it has resistance at 13,150 points.
In company news, Zahraa Maadi Investment and Development announced that its board of director has agreed to purchase a 20% stake in Nasr Real Estate Development from Heliopolis Company for Housing and Development.
The board has approved the purchase of the stake at a nominal value of EGP 48m, Zahraa Maadi Investment said in a statement to the EGX.
Last Monday, Heliopolis Housing agreed to sell its stake in Nasr Real Estate to Zahraa Maadi Investment.
The real estate firm's stake in Nasr Real Estate represents 20% of the company's EGP 48m capital.
Meanwhile, Global Telecom Holding's (GTH) board has approved the independent financial advisor's report, which set the fair value (FV) for the company's stocks at EGP 5.31 per share.
The value of shareholders' rights reached EGP 25.09bn, distributed over 4.72bn shares at EGP 5.31 per share, GTH said in a filing to the EGX, citing the report.
In December, GTH's board had decided to raise the firm's issued capital to EGP 13.9bn, from EGP 2.73bn, by allowed older investors to subscribe in a rights issue.
The FV was calculated by analysing share price data during the past six months using the average price per share on a weekly basis from the period starting March until 30 September.
The average trading price for GTH's stock during the six-month period was EGP 4.81, the financial advisor said, noting that the total value of changes in GTH's investments was $1.7bn.
GTH last reported incurring a loss of $345.1m in the first nine months of 2018 versus profits of $56.8m in the same period of 2017, while revenues fell to $2.12bn by the end of September, from $2.29bn in the year-ago period.
In other company news, Emaar Misr, the UAE-based Emaar Properties' unit, said that the company's negotiations over getting a land plot in Egypt's New Administrative Capital are still ongoing.
The company is committed to invest in Egypt in the long term and is interested in the new capital project and other projects offered by the Egyptian government, Emarat Al Youm reported, citing Emaar Misr.
Obtaining a land plot requires long-term negotiations and financial evaluations by all related parties, the Egyptian unit of the developer behind the world's tallest tower, the 160-storey Burj Khalifa, said.
This declaration comes to deny all recently reported news by global news agencies that talks between Egyptian officials and the Dubai-based Emaar Properties over the development of a 1,500-acre plot in the New Administrative Capital have stalled.