News

EGX30 index forecast to hit 14,000 pts

Ahmed Kamel

The main index may test 14,000 points this week as the bull market continues, spearheaded by non-Arabs.

Egypt’s big caps, led by Commercial International Bank (CIB), are forecast to continue their uptrend amid selective buying and high volumes, one technical analyst said.

“[However], a fast profit-taking trend may drag the EGX30 index down to around 13,000 points before resuming its uptrend,” said technical analyst Saeed el-Feqy.

He forecast the benchmark index to target 13,600 points after the profit-taking.

The EGX30 surged 399.58 points, or 3.12 per cent, closing at 13,223.9 points last week. The broader EGX 70 and EGX 100 indexes gained 1.9 and 3.71 per cent to 473.1 and 1154.37 points respectively.

Volume totaled LE8 billion ($421 million) last week, up from LE6.2 billion the previous week. Market capitalization rose by LE 14.9billion, or 2.4 per cent, to LE629.7billion, market data showed. Volumes averaged LE1.5 billion last week, according to bourse data.

“Blue chips led last week’s gains amid massive foreign buying. Shares in EFG Hermes reached as high as LE29.16. Talaat Moustafa hit LE9.8 per share,” el-Feqy said.

The market’s heavyweight blue chip – CIB – jumped 2.74 per cent to LE 75.84 per share. CIB’s turnover totaled LE 456.4million, according to market data.

CIB weighs roughly 40 per cent of the EGX30 index, market data showed. The nation’s top big caps also include Global Telecom and Madinet Nasr for Housing and Development.

 Locals, Arab and non-Arabs accounted for 79.4, 8.42 and 12.18 per cent respectively last week.

Arab and non-Arab investors made net purchases worth LE 2.54 million and LE 260.49 million respectively, market data showed.

Non-Arabs have made net purchases worth LE 601.36 million since the beginning of the year. Arabs have made net selloffs worth LE 29.79 million, bourse data showed.

Institutions, which accounted for 28.26 per cent of last week’s trades, made net purchases worth LE15.5 million.

As for the mid caps, el-Feqy said the EGX70 index to target 500 points this week.

“The blue chips have outperformed the broader indexes. Small and mid caps are expected to get a strong push in the coming period,” he noted.

A number of financial analysts ascribed the historic stock market gains to “speculation” on a steeper decline in the Egyptian pound, which has plummeted by more than 100 per cent since the currency float on November 3, 2016.

The Central Bank of Egypt free floated the pound in a bid to eradicate a foreign exchange black market that created two rates of the greenback in the local market.

The US currency has shot up from LE8.78 to around LE19 at a number of local banks last week.

“Non-Arab investors resumed their bullish buying after the New Year holidays. The blue chips are the most favorite for non-Arabs. The small and mid caps took a sideways trend last week,” said Ehab Saeed, managing director of Cairo-based Osoul Securities.  

A snappy corrective trend will affect most shares in early trading this week, but the uptrend will resume shortly, Saeed added.

IPOs banking on stock market leaps

Ahmed Kamel

Taking advantage of the stock market gains over the past two months, Banque du Caire plans an initial public offering (IPO) by April-May, one source has said.

The source, on condition of anonymity, said a joint committee of representatives from the Central Bank of Egypt (CBE) and the Finance Ministry “is working on” a timetable of the IPO with the lead underwriters: EFG Hermes and HSBC.

“The IPOs will boost trading on the Egyptian Exchange by attracting more investors to pump cash into newly listed stocks,” said technical analyst Saeed el-Feqy.

“The move will have a positive impact on the stock market and the national economy as a whole,” he noted.

Currently, there are 270 listed companies and around 500,000 investors on the Egyptian Exchange, according to market data. 

Last year, the central bank revealed plans to list stakes in two banks — Arab African Development Bank and Banque du Caire — on the stock market in a bid to increase their capital by up to 20 per cent.

The state owns National Bank of Egypt (NBE), Banque Misr, Banque du Caire, the United Bank, 50 per cent stake in Arab African International Bank and 20 per cent stakes in Alexbank, Housing and Development Bank, Industrial Development Bank, Export Development Bank, Development and Agricultural Credit Bank and Egyptian Arab Land Bank.

“The IPOs will bank on recent stock market leaps. This will increase volumes in the medium term and help companies boost their financial positions,” said financial analyst Ahmed Abdel Hamid.

Egypt’s benchmark index EGX30 index surged 5,339 points, or 76.2 per cent, in 2016 on the back of the currency float on November 3.

Analysts called for a fair assessment of state-owned companies as part of a clear-cut plan for IPOs.

“A good assessment of companies is a must before going public. Weak and hasty evaluation may lead to bad results like what happened to Misr Fertilizers Production Company (MOPCO),” Abdel Hamid said, referring to the company’s overpriced IPO value.

Trading on MOPCO started in September 2016. The company fell from LE50 to below LE30 per share one month later. 

Telecom Egypt and Sidi Kerir, which were listed in 2005, marked the nation’s most successful IPOs over the past 15 years, analysts say.  

 Investment Minister Dalia Khorshid has unveiled plans to list Engineering for the Petroleum and Process Industries (Enppi) and Alexandria Mineral Oils Company (AMOC) on the stock market.

She said the move would be a “fundamental means” for luring foreign and local investments. The government expects to lure investments worth $5 billion-$10 billion over the coming five years from the flotation of public-sector assets.

Five IPOs worth LE2.3 billion were launched through the Egyptian Exchange in 2016, according to bourse data. 

 

IPOs banking on stock market leaps

Ahmed Kamel

Taking advantage of the stock market gains over the past two months, Banque du Caire plans an initial public offering (IPO) by April-May, one source has said.

The source, on condition of anonymity, said a joint committee of representatives from the Central Bank of Egypt (CBE) and the Finance Ministry “is working on” a timetable of the IPO with the lead underwriters: EFG Hermes and HSBC.

“The IPOs will boost trading on the Egyptian Exchange by attracting more investors to pump cash into newly listed stocks,” said technical analyst Saeed el-Feqy.

“The move will have a positive impact on the stock market and the national economy as a whole,” he noted.

Currently, there are 270 listed companies and around 500,000 investors on the Egyptian Exchange, according to market data. 

Last year, the central bank revealed plans to list stakes in two banks — Arab African Development Bank and Banque du Caire — on the stock market in a bid to increase their capital by up to 20 per cent.

The state owns National Bank of Egypt (NBE), Banque Misr, Banque du Caire, the United Bank, 50 per cent stake in Arab African International Bank and 20 per cent stakes in Alexbank, Housing and Development Bank, Industrial Development Bank, Export Development Bank, Development and Agricultural Credit Bank and Egyptian Arab Land Bank.

“The IPOs will bank on recent stock market leaps. This will increase volumes in the medium term and help companies boost their financial positions,” said financial analyst Ahmed Abdel Hamid.

Egypt’s benchmark index EGX30 index surged 5,339 points, or 76.2 per cent, in 2016 on the back of the currency float on November 3.

Analysts called for a fair assessment of state-owned companies as part of a clear-cut plan for IPOs.

“A good assessment of companies is a must before going public. Weak and hasty evaluation may lead to bad results like what happened to Misr Fertilizers Production Company (MOPCO),” Abdel Hamid said, referring to the company’s overpriced IPO value.

Trading on MOPCO started in September 2016. The company fell from LE50 to below LE30 per share one month later. 

Telecom Egypt and Sidi Kerir, which were listed in 2005, marked the nation’s most successful IPOs over the past 15 years, analysts say.  

 Investment Minister Dalia Khorshid has unveiled plans to list Engineering for the Petroleum and Process Industries (Enppi) and Alexandria Mineral Oils Company (AMOC) on the stock market.

She said the move would be a “fundamental means” for luring foreign and local investments. The government expects to lure investments worth $5 billion-$10 billion over the coming five years from the flotation of public-sector assets.

Five IPOs worth LE2.3 billion were launched through the Egyptian Exchange in 2016, according to bourse data. 

 

Luxury housing seen ‘trump card’ for developers

Ahmed Kamel

The outlook of the nation’s property market is unclear this year with land prices jumping 25-30 per cent on the back of the currency float, analysts say.

The construction sector has taken a blow after the pound flotation by the Central Bank of Egypt (CBE) on November 3, 2016. Property developers said spiraling prices of building materials have sent shockwaves across the market, citing declining supply of units for the poor and the lower medium class.

However, demand for residential units in up-market districts has shot up over the past two months with the Egyptian currency dipping versus the greenback.

Egyptian expatriates and foreigners have stoked demand for properties in districts like El Tagammoa, El Khames, Hadayek El Ahram, Maadi, Sheikh Zayed and October 6th City, one real estate expert said.

“The pound flotation will help the property market stand on its feet again as Arab developers can make feasibility studies based on lower foreign exchange risk. Demand will shoot up more and more as people consider real estate a store of wealth,” said Hossam Moustafa, head of Egyptian Engineering for Development & Real Estate Investment.

However, completion timetables of projects under construction will be delayed due to unexpected spiraling cost of building materials, another real estate expert said.

 “The property sector has been the most affected by the new value added tax (VAT) as all construction materials are taxed. Prices will inevitably surge in 2017 in the wake of higher costs,” said real estate expert Ibrahim Aref.

Analysts say developers will focus only on luxury housing at the expense of low and medium-cost apartments. High-end real estate projects will the ‘trump card’ after the currency float.

The currency float will highly unlikely affect demand, which is expected to remain high, said real estate analyst Salah Hegab.

“Demand for housing units will remain high whether prices surge or not. But the market will face a number of obstacles with regard to the low-cost housing. Prices of low-cost apartments are expected to leap by 40 per cent in Q1 2017,” Hegab said.

Real estate experts estimate the current gap in housing supply at two million units in addition to roughly 600,000 units each year due to growing population, which has hit 91 million people, according the state-run Central Agency for Public Mobilization and Statistics (CAPMAS).

“Egyptian expatriates accounted for roughly 90 per cent of demand for housing units over the past months. Prices of these units averaged LE1.2 million-LE1.5 million,” said real estate agent Mahmoud Sallam.

Egyptian expatriates aged 35-50 seek to own 150-180 sq. meter apartments in El Tagammoa, El Khames, according to Sallam.

The Housing Ministry has facilitated procedures for foreign and local investors to get land through regular auctions. The government is focusing on New Administrative Capital, New El Alamein and Port Said East Port city.

The government said it would rely heavily on the private sector to pump investments into the property sector to create housing units for the low-income citizens.

“The picture is unclear. The only fact is that prices have surged and they will never edge down again,” Sallam added.