Egypt shares rebound on foreign investor interest

A view from the Egyptian stock market in Cairo November 26, 2012. (REUTERS/Mohamed Abd El Ghany)

DUBAI: Egypt’s bourse bounced from a nine-day low Thursday, as foreign investors’ buying interest continued to support stocks despite political instability and economic worries. Gulf markets were mixed amid a lack of positive catalysts.

Cairo’s benchmark index rose 2.2 percent and closed very near its intra-day high, extending its 2012 gains to 49.6 percent.

Shares in Telecom Egypt climbed 3.1 percent, after the Egyptian regulator said it would grant the land line monopoly a license by mid-2013 to provide mobile services.

“Telecom Egypt is a good story, especially after the universal license by 2013 H1 – Egypt is a rich market,” said Reda Gomaa, portfolio manager at Mashreq.

Palm Hills Development and Orascom Telecom climbed 4.7 and 3.0 percent respectively. El Saeed Contracting added 1.7 percent; the trio were the most active stocks on the index.

The market’s rise was particularly striking because it occurred as the Egyptian pound continued to edge down to fresh eight-year lows, amid talk that authorities might devalue it or bring in fresh capital controls. The possibility of more controls has prompted some depositors to move funds into dollars.

But many regional investors remain interested in the stock market because of its longer-term potential. For them, market dips due to political turbulence can seem like buying opportunities.

Arab and non-Arab foreigners were net buyers Thursday, while Egyptians were net sellers, bourse data showed.

“I would increase my [investment] weight whenever I see more signs of political stability. In the short term there will be a clash between the government and opposition when the new parliamentary polls are due – that will cause panic, and will be a good opportunity for Arabs and other fund managers to enter the market,” Gomaa added.

This month’s passage of a new constitution for Egypt, while bitterly controversial, paves the way for parliamentary elections in about two months, and the election of a parliament could allow the country to address economic problems more effectively.

When the previous parliament was elected last, the market began rallying strongly, and some investors will be hoping for a repeat performance.

In the Gulf, Dubai’s small-caps helped the bourse extend gains as retail investors dominated, but other regional markets were mixed. There was little institutional activity as many investors were away on holidays.

Deyaar Development and Ajman Bank rose 2.9 and 3.0 percent respectively. Dubai Financial Market, the Gulf’s only listed bourse, advanced 3.7 percent.

Shares in Shuaa Capital closed 2.1 percent higher at 0.595 dirhams after wild trading which saw them soar as high as 0.67 intra-day. The stock surged 15 percent on Wednesday.

The company declined to comment on the share price move and traders said they knew of no major, fundamental news behind it; instead, they said, short-term traders appeared to be speculating with the stock in response to the volatility.

This month the stock dropped as low as 0.49 dirhams, near this year’s multi-year low of 0.43 hit in January, and this may have seemed a good base for a rally to some speculators.

Dubai’s index climbed 0.4 percent on Thursday and 0.6 percent this week. Abu Dhabi’s measure advanced 0.3 percent, edging up 0.2 percent from last Thursday’s close; the index failed a test this week of chart resistance at 2,640 points, which was support in mid-October and late November.

In Doha, the index slipped 0.2 percent to its lowest close since July 31. The market, down for a fifth straight session, went as low during the day as chart support at 8,308 points, its intra-day low on Dec. 13.

“Recently most markets have been range-bound due to the lack of local catalysts and the fact that the earnings season will start very soon,” Al Masah Capital said in a note.

European shares were steady and the euro edged higher on Thursday, as U.S. lawmakers prepared to resume negotiations to avoid a fiscal crunch.

Elsewhere in the Gulf, Kuwait’s benchmark slipped 0.2 percent, while Oman’s index climbed 0.3 percent, halting a three-day dip.

A version of this article appeared in the print edition of The Daily Star on December 28, 2012, on page 5.




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