DUBAI: Cairo’s bourse fell to a new 2013 low Wednesday as foreign investors sold stocks on fears that Egypt’s currency would be further devalued.
The Egyptian pound has fallen sharply against the dollar on the black market in the last few days, due to dwindling supply of the U.S. currency. A further decline is expected unless more hard currency enters the market.
The value of the dollar is 17 percent higher Wednesday than the official rate said Mohammad Radwan, director of international sales at Pharos Securities.
“The dollar has shot up dramatically on the black market – that’s why people are selling on devaluation worries – they want to get out before FX losses get higher,” said Radwan.
Cairo’s benchmark dropped 2.2 percent to 4,926 points, its lowest level since Dec. 6.
The index broke the 5,000 psychologically critical level, also sparking selling by investors that follow technical indicators.
Large-caps tumble with Commercial International Bank losing 4.3 percent. Orascom Construction Industries fell 2.6 percent and Orascom Telecom shed 2 percent.
In Saudi Arabia, the index ticked up 0.08 percent as investors hesitated to increase risk ahead of the weekend due to uncertainty on the global front.
“We’re still being driven by sentiment from Europe and the U.S. and unless we see something positive coming out of there, it’s getting difficult to see a rally in the short term,” said Mohammad Faisal Potrik, research analyst at Riyad Capital.
“Even with earnings season almost starting, we haven’t seen a major push in the market – the drag could be from the global news flow.”
European shares eased Wednesday as investors awaited this week’s policy decisions by the Bank of Japan and European Central Bank followed by U.S. employment data.
In Dubai, bargain hunters helped lift the market after a recent correction.
Small-caps dominated trade with mortgage lender Tamweel surging 9.1 percent and insurance companies also seen a rise.
Trading and momentum has slowed in recent sessions as investors await first-quarter earnings to justify increasing risk after an early-year surge. UAE companies are expected to post results in late April.
The emirate’s index climbed 0.6 percent, extending 2013 gains to 14.6 percent and up for a second day since Monday’s two-month low.
Abu Dhabi’s index gained 0.5 percent, but remains in a tight trading range since the last four weeks.
In Qatar, the bourse added 0.2 percent, extending gains since Monday’s near four-week low. Investors bought blue chips ahead of first-quarter earnings.
Qatar National Bank and Industries Qatar advanced 1.2 and 0.9 percent respectively. Masraf Al Rayan climbs 1 percent.
“Foreign institutional investors are building positions in these stocks for Q1,” said a Doha-based trader who asked not to be identified. “Local investors are speculating on smaller-cap stocks for quick gains.”