The Egyptian Stock Exchange ends a turbulent week amid liquidity pressures and anticipation of recovery

The Egyptian Stock Exchange witnessed a week of sharp fluctuations, after its indicators declined strongly at the beginning of the week, before recovering part of its losses in the last sessions, without succeeding in compensating for its decline compared to the previous week. The main index EGX30 closed at 49.6 thousand points, down by about 2.85% on a weekly basis, amid liquidity pressures, institutional sales and geopolitical tensions.

The Egyptian Stock Exchange began the week with sharp losses, as the main index, the EGX30, declined by 3.56% in the session on Sunday, October 25, and the market capitalization lost about 171 billion pounds (about 3.05 billion dollars). Then the index fell by 1.66% in the next session, while the indices rebounded strongly on Tuesday, with the EGX30 rising by 3.49%, and the EGX70 by 6.97%. And the EGX100 rose by 5.97%, before declining again on Wednesday. At the end of the week, the EGX30 index rose by 0.64% to 49.6 thousand points, the EGX70 rose by 2.77%, and the EGX100 rose by 2.27%, while the market value gained about 32.8 billion pounds (about 585 million dollars) to reach 3.893 trillion pounds (about 69.42 billion dollars).

Member of the Board of Directors of Al-Sak Securities Trading Company, Mohamed Atta, said that the fluctuations witnessed by the stock market during the week were the result of the intersection of geopolitical tensions with pressures on liquidity, as it increased investor anxiety and affected trading trends, especially those with short-term investments known as hot money, to reduce their investments in emerging markets and head to safer markets, especially the rise in US bond yields as the attractiveness of investment instruments increases, thus putting pressure on money flows to emerging markets. The financial markets expert said in exclusive statements to the Arabic-language Ufoq News network that the coincidence of new IPOs, including the IPOs of “Halan” and “Banque du Caire,” increased the pressure on the liquidity available on the stock exchange, as some of investors’ funds moved from one IPO to another instead of returning to purchasing traded shares, in addition to the proximity of IPO dates withdrawing liquidity from the market at a time when it needs new inflows to absorb selling pressures.

Liquidity pressures coincided with the return of IPO activity during October, with the listing of MNT Halan shares and the offering of Banque du Caire, while the market awaits the offering of Misr Life Insurance Company. Atta believed that the rises recorded at the end of the week are not enough to confirm a reversal of the market trend to the upside, and he said that the main index needs to restore the level of 52 thousand points, in conjunction with the rise in trading values ​​to a range between 12 and 14 billion pounds (about 214 to 250 million dollars), until more clear indicators of the restoration of the upward trend appear.

He explained that trading values ​​during the rebound sessions remained in the range of 6 to 8 billion pounds (about 107 to 143 million dollars), compared to levels that ranged between 12 and 14 billion pounds (about 214 to 250 million dollars) during the period from June to September. Therefore, the rise in indicators without a tangible increase in liquidity is not enough to confirm the continuation of gains. Atta pointed out that the EGX70 index fell from about 22 thousand points to approximately 14.5 thousand points, a decline of more than 35%, while some stocks lost more than half their value, which encouraged individual investors to buy stocks at low price levels, with the aim of achieving quick gains from the price rebound, which explains part of the stronger performance of small and medium-sized stocks compared to blue-chip stocks.

Regarding next week’s transactions, Atta expected that the Central Bank of Egypt’s decision to raise interest rates by 1% would affect the market at the beginning of the week, but he pointed out the possibility that the performance of the banking sector, especially the shares of the Commercial International Bank, would limit some of this impact. Atta said that geopolitical developments will remain a major factor in determining the direction of the market, especially since the decline in tensions may help stabilize trading and return upward momentum, while their escalation may lead to continued investor caution and their preference to retain liquidity, pointing out that increasing liquidity remains necessary to transform the current rebound into a sustainable upward trend.

Financial markets expert, Hanan Ramses, said that the stock market witnessed a sharp decline during the week, followed by attempts to rebound, in light of the continuing selling pressures and lack of liquidity, stressing that the gains of the last session alone are not enough to determine the end of the wave of decline. Hanan Ramses explained that the sales of local and foreign institutions, especially on blue-chip stocks, were one of the main factors behind the decline in the main index, explaining that the decline in prices prompted some investors who use the margin buying mechanism to settle their positions, which led to increased sales and deepened pressure on the market.

Ramses pointed out that successive IPOs, including the IPO of Banque du Caire, captured part of the liquidity that could have been directed to trading in stocks, and estimated that the value of daily trading did not exceed about 6 billion pounds (about 107 million dollars), noting that the succession of IPOs in close periods of time limits the liquidity available in the market, even with the importance of new offerings in expanding the base of listed companies and increasing investment options for dealers. She added, in special statements to the Arabic news channel, Ofoq News, that the US Federal Reserve’s decision on interest rates, along with the rise in yields on US debt instruments, may prompt foreign investors to reduce their investments in emerging markets and turn to the more attractive US instruments.

In her explanation of the market's rebound at the end of the week, Ramses said that refunding the subscription amounts at the Banque du Caire allowed some investors to recover part of the liquidity, which helped return purchases to stocks whose prices had declined significantly, explaining that some traders aimed to benefit from the decline in prices and achieve quick gains with the rebound in indicators. Ramses believed that the return of these purchases contributed to the rise of the EGX70 index at a greater pace than the main index, as individual investors turned to small and medium-sized stocks that suffered significant losses during the decline, but she stressed that this performance does not necessarily mean that the market has regained its upward trend, especially with continued pressures on liquidity and the possibility of continuing sales operations.

Ramses warned that the succession of new IPOs may continue to put pressure on the liquidity available for trading, even though the increase in IPOs expands the market and gives investors additional opportunities, explaining that recovery requires an increase in trading values ​​and continued gains over several sessions, and not just a temporary rise after sharp declines. Ramses expected the possibility of an improvement with the beginning of the new month, but she expected continued fluctuations in light of the anticipation of new IPOs and geopolitical developments, noting that the return of liquidity from local institutions may support the leading stocks and the main index, in addition to the results of companies’ operations and interest in stocks with high profitability and good dividends.