Lower inflation and interest rates herald green week on EGX

Market lack of response to lower operating costs and lower gas and gasoline prices adds some caution to the upward outlook

Despite the positive decisions taken by the Egyptian government at the end of the previous week to re-price natural gas, it did not whet the dealers' appetite at the Egyptian Exchange (EGX), where it witnessed a weak performance during the last week's trading sessions. However, some listed companies, such as Ezz Steel, Al Ezz Dekheila Steel Co (EZDK), and Egypt Aluminum, said they benefitted from the recent government decisions.
The re-pricing of natural gas included reducing the sale price of all three types of petroleum products in the local market by 25 piasters per liter, and reorganising the non-commercial risk insurance fund, known as the Investor Protection Fund, whereby the fees on trading operations were cut by 50%.
With the Central Bank of Egypt (CBE) announcing last Thursday that the annual inflation in Egypt has dropped to 2.6% in September, and its expectations of lower interest rates, the EGX derived more positive news that should contribute to boosting volumes and confirming the upward trend of the market.
Mohamed El-Aasar, head of technical analysis at Aman Securities, said that the EGX is likely to break the ice this week and penetrate the resistance level at 14,700 points during trading this week. If high volume trading occurs, it could push the index beyond 15,000 points next week, and would be supported by the positive EGX news, such as lower gas prices, lower inflation, and expectations of lower interest rates, coupled with news on the government IPO programme.
Meanwhile, Mohamed Othman, head of research at Pharos Holdings, said that most of the shares that reached their resistance level last week are unable to go beyond and closed on Thursday at their day-lowest, indicating a decline in purchasing power momentum.
He stressed the need for the first support level to be at 14,140 points, which is an important level, where traders can place short-term profit protection orders below, and leave the following support level at 13,850 points.
Othman added that we need to see a clear breach of the resistance level set at 14,520 points in order to enter the market with confidence.
EGX30 index closed at 14,302.27 points, recording an increase of 0.59%. EGX70 index posted a 1.35% gain concluding the period at 529.36 points, while the S&P index declined by 1.28% and concluded the period at 2,073.08 points.
EGX30 index cap rose by 0.35% and concluded at 17,195.57 points, while EGX100 index rose by 0.88% and concluded the period at 1,408.54 points.
Total market capitalisation reached EGP 719.4bn at end of period, representing an increase of 0.79% over the last week.
The total value traded recorded EGP 7.8bn, while the total volume traded reached 1.392bn securities executed over 92,000 transactions last week.
For the week before last, the total value traded recorded EGP 8.3bn, while the total volume traded reached 1.59bn securities executed over 130,000 transactions.
Stocks trading accounted for 36.6% of the total value traded in the main market, while the remaining 63.40% were captured by bonds over the last week.
Egyptians represented 74.7% of the value traded in listed stocks after excluding deals during the period. Foreigners accounted for 16.2%, while Arabs captured 9.1%. Foreigners were net sellers, with a net of EGP 72.2m, and Arabs were net sellers, with a net of EGP 32.2m, after excluding deals in listed stocks.
Since the beginning of the year Egyptians represented 66.6% of the value traded in listed stocks after excluding deals. Foreigners accounted for 24.4%, while Arabs captured 9.1%. Foreigners were net sellers by EGP 1.8568bn, and Arabs were net sellers by EGP 548.9m, after excluding deals in listed stocks since the beginning of the year.