DUBAI: Egypt’s bourse surged Tuesday after the government announced plans to increase spending in an economic stimulus package by a third to 29.6 billion Egyptian pounds ($4.3 billion) and to implement a minimum wage scheme in January. Cairo’s benchmark index rose 1.8 percent to 6,201 points, its highest level since January 2011 and it posted its sixth consecutive daily gain.
This week the index broke above major technical resistance at 6,025 points, the September 2012 peak; that leaves no major chart barrier before 7,248, the January 2011 peak hit ahead of the revolution that toppled Hosni Mubarak. The market is up 74 percent from its post-revolution low, reached in late 2011.
“The sentiment on the market has improved in the last three months – the news of increased spending and minimum wage feeds into that,” said Simon Kitchen, director of regional strategy and research at EFG-Hermes in Cairo.
“My problem with the stimulus package and minimum wage increase is how this will be financed. It’s not clear how they will bring the deficit down and find finances for the spending and the minimum wages.”
Saudi Arabia, Kuwait and the United Arab Emirates promised a combined $12 billion in loans, grants and fuel shipments after the army, prompted by mass protests, overthrew the country’s first democratically elected president Mohammad Morsi on July 3.
The Finance Ministry said Monday the expanded stimulus plan would not increase the budget deficit beyond 10 percent of gross domestic product due to the Gulf aid and economic reforms.
But Kitchen said the funds might still fall short of all of Egypt’s financial needs.
“There’s too much positivity in the market, which is not being particularly skeptical. I can’t say the move on the market will continue at this rate for much longer, although foreigners are beginning to show more interest,” he added. The market is up 13.5 percent year-to-date.
Shares in Telecom Egypt rose 2.5 percent, and gained as much as 5 percent intraday, after Bloomberg reported that Vodafone had expressed interest in buying Telecom Egypt’s 45 percent stake in Vodafone Egypt; it said no offer had been made and that the Egyptian government had not decided how it would respond to one.
The idea of Vodafone buying out Egypt Telecom has been considered sporadically for many months, and a source familiar with the situation told Reuters that there was no reason to expect any breakthrough given the uncertainty in the Egyptian industry. “It’s likely we could still be here in six months’ time or a year or two and still nothing’s happened.”
Egyptians and Arab regional investors were net buyers of Egyptian shares Tuesday while foreigners were sellers overall, bourse data showed.
In Saudi Arabia, shares in Saudi Basic Industries Corp (SABIC) rose 1 percent after a second subsidiary posted estimate-beating earnings for the third quarter.
Yanbu National Petrochemical Co. reported a doubling of its third-quarter net profit. But its shares ended 0.8 percent lower after an intraday surge, which took the stock to its highest level since January 2008. The main Saudi stock index eased 0.01 percent.
In the United Arab Emirates, shares in Dubai telecommunications operator du gained 2.2 percent to 6.5 dirhams, a near two-month high. The stock rose to 6.7 dirhams intraday on unconfirmed market talk that a significant shareholder might sell its stake at a higher-than-market price. A du spokesperson said the company, now in a silent period, would not comment on market rumors.
Dubai’s index advanced 0.5 percent to 2,924 points, its highest level since November 2008. It is nearing the psychologically important level of 3,000 points, which may provide resistance.
“Valuations are close to those of emerging markets and for the time being, the re-rating of the UAE compared to other markets has been done,” said Ali Adou, portfolio manager at The National Investor.
“We have to look at earnings growth for the next quarter, but it’s time for a breather right now.”
Doha’s heavyweight Industries Qatar fell 1 percent after the company reported a drop in third-quarter net profit and missed analysts’ forecasts.
The Qatar index eased 0.08 percent; it has traded in a 20-point range since early October despite several major earnings falling short of estimates.