CAIRO: The Egyptian stock market tops the list of sectors with regard to losses in the recent economic downturn – the Exchange lost 170 billion EGP (U.S. $28.46 billion) since the beginning of the year. This begs the question: has anyone profited from the dramatic Egyptian Exchange slide? An analysis of recent events and the scale of the losses associated with it reveals that two groups in particular have benefited. The first winners are foreign investors and foreign institutions that sold stocks prior to the January 25 Revolution, which could amount to as much as three billion EGP (U.S. $502.19 million), claims financial analyst and Vice President of the Egyptian Society for the Study of Finance and Investment Adel Mohsen. The second category of beneficiaries is the groups of speculators who make a living trading quickly, a method employed by calculating risk and predicting events. Some claim the widespread speculation led to deterioration in the rhythm of trading. The strategy of speculation during a decline will adversely affect the performance indicators in the market, particularly as increased selling in a time of scant stimulus in the purchasing power of investors, said Mohsen. This increases the rate of decline because investors are reluctant to pump new liquidity into the market to support it. Speculator control and weak institutional investment was the result of such a strategy, Mohsen said, adding that individual speculators did not pay attention to economic fundamentals of finance and investment. Such fundamentals, he added, must reflect the performance of the market and the strength of companies' credit ratings. It also resulted in the sale of random shares of listed companies and leading private companies who enjoy high liquidity. That the sales were random led to a significant decline in the share prices of most listed companies, he added. This contributed to significant investment opportunities for investors in the long term and very good opportunities for speculators who expect prices to return to previous levels once stability and calm return to financial markets. The future of the stock market, particularly in the next few months, will depend on the performance of local investors, individuals, banks, funds and the desire of stakeholders to support the market. Mohsen explain that Egyptian banks play a large role in pumping liquidity into the stock market as private banks learned before others that stocks at their current prices are quite attractive, and that buying now will ensure big profits in the near future. The stock market was transformed by the impact of the political events and the major global economic shock, said Islam Abdel-Aty, a technical analyst. “The current phase in the stock market is characterized by ambiguity on all levels, particularly because the future performance of many key economic sectors depend heavily on Egypt's political future,” he added. “The stock market is extremely sensitive to events, which is unlike previous years, and the concerns of investors have played a significant role in promoting wave sales that dominate the market,” he continued. “Signs of market contraction are expected due to cuts in the national budget.” However, Abdel-Aty said, “this period will be shorter than expected for many reasons: first, the tightening of control by the Stock Exchange and the Financial Supervisory Board will lead to a lack of opportunities for speculation, which ultimately will lead to a shift in foreign capital investment in the mid- and long-term.” “The financial future of Egypt after the revolution will also encourage serious investors to enter the market and seize opportunities the transition period is already showing signs of bringing,” he added.
