Egypt.. Interest concerns, speculation, and forced selling deepen stock market losses

- The Egyptian Stock Exchange continued its decline for the eighth session in a row, at the end of Tuesday’s trading, with continued selling pressure from Egyptian and foreign investors, while Arab trading tended to buy, at a time when market movement showed a decline in the severity of the decline compared to the previous session. The main index EGX30 declined by 0.33% to about 52.3 thousand points, while the market capitalization lost about 15 billion pounds ($287.5 million), closing at 4.076 trillion pounds ($78.1 billion), amid trades amounting to about 7 billion pounds ($134.2 million).

The decline comes after yesterday's session, Monday, which witnessed more severe losses, as the main index fell by more than 1%, while market capitalization losses amounted to about 51 billion pounds ($977.6 million), in an extension of a selling wave that began during the previous week and affected large, medium and small-cap stocks. Managing Director of Alpha Financial Investment Management Company, Mohamed Hassan, said that geopolitical tensions and fears of escalation in the region were among the most prominent factors affecting stock market movement during the recent period, in addition to concerns about rising inflation and interest rates globally.

Hassan added, in exclusive statements to Ofoq News in Arabic, that the rise in oil prices represents an additional factor in market pressures, as the continued rise in energy prices may lead to raising fuel and production costs locally, which is reflected in the profit margins of listed companies. These factors coincided with other pressures within the market, most notably what are known as margin calls, according to Hassan, who explained that the high financing rates pushed some investors into forced sales to reduce their positions, which intensified the selling pressures.

The Monday session, at the height of the selling wave, witnessed the main index falling to about 51.8 thousand points during trading, before purchases by foreign and Arab investors pushed the market to recover and close above 52 thousand points. Hassan believes that Tuesday’s session reflected a continuation of previous selling operations, but at a less severe pace, expecting the market to move during the next short period in a horizontal range between 52 and 53 thousand points, until new buyers emerge and new liquidity enters.

Despite the continued decline, Mohamed Hassan ruled out a drop in market capitalization below 4 trillion pounds ($76.7 billion), indicating the presence of institutions tending to buy and anticipating the entry of new liquidity into the market. The pressures are not limited to external factors, as Vice Chairman of the Board of Directors of Mubasher Capital Holding for Financial Investments, Ihab Rashad, believes that global interest rate expectations have become an influential factor in investors’ decisions, after concerns about interest trends prompted some investors to rearrange their positions and reap a portion of the profits achieved during the last period.

Rashad said that the influence of individual investors has become more evident in the movement of a number of stocks, with some trading relying on the recommendations of online groups, which may lead to sharp movements in both directions, away from the fundamental factors linked to the performance of companies. He explained, in exclusive statements to Ofoq News in Arabic, that some stocks witnessed significant rises over a short period and then sharp declines, considering that speculation had become an influential factor in price movement, which also led to investors stuck in positions formed at high price levels.

Rashad believes that the stock market moves in anticipation of events, as prices often reflect investors’ expectations of what might happen and not just the developments that are already taking place, which may explain the exit of some investment centers before the expected developments are achieved. As the end of the third quarter approaches, Rashad added that some institutions may move to take profits and rearrange their financial positions, which may explain some of the current selling pressure in addition to individual speculation.