DUBAI: Egypt’s main share index hit a three-year high Sunday after army chief General Abdel-Fatah al-Sisi gave his clearest signal yet of his interest in becoming president. Gulf stock markets were steady as investors awaited fourth-quarter earnings announcements to determine whether recent gains were justified, with many regional benchmarks hovering around five-year highs.
Egypt’s benchmark rose 2.0 percent to 7,117 points, its highest close since January 2011, when former President Hosni Mubarak was still in power. The index is up 43 percent since the army ousted Egypt’s first democratically elected leader Mohammad Morsi last July.
Sisi is widely expected to seek the top job but has not yet announced plans to run. “If I run then it must be at the request of the people and with a mandate from my army ... We work in a democracy,” he said at an army seminar in Cairo.
“Most of the gains today are because of Sisi – there’s huge support for him to run for president,” said Mohammad Radwan, head of equities at Pharos Securities. “Most local retail investors and institutions are reacting positively.”
Many Egyptians see a strong figure with army links as the best chance, at least for now, for stable politics and good economic management. Also, Sisi’s close ties with Gulf governments appear to guarantee the country access to billions of dollars of aid from the Gulf.
Radwan said the market had scope for further gains, with local investors the main drivers of the rally in the continued absence of many foreign investors. The latter may return as Egypt’s political situation stabilizes, he added.
Egypt is set to hold a referendum on a new constitution Tuesday and Wednesday, a milestone in a road map that would clear the way for presidential and parliamentary polls. Analysts and politicians say it is unlikely Sisi will announce plans to run before the referendum is complete.
The Egyptian stock index faces its next technical resistance at the January 2011 high of 7,248 points. Stronger resistance lies on the April 2010 peak of 7,693 points.
Property developer Talaat Moustafa and Ezz Steel each added 3.5 percent. EFG Hermes jumped 9.9 percent, surging for a second session since the investment bank announced a $144 million share buyback.
Elsewhere, Oman, Qatar and Saudi Arabia made small advances to reach new five-year peaks.
Qatar is the top Gulf performer in 2014, gaining 5.2 percent, while Oman has added 3.8 percent in a week. These compare with a 3.3 percent drop for MSCI’s emerging equities index, which slumped to a four-month low Thursday.
“Omani equities have underperformed during the last year as compared to the other regional markets, especially the UAE, so this is a catch-up rally,” said Kanaga Sundar, Gulf Baader Capital Markets’ head of research. “Oman gives one of the highest dividend yields and valuations are pretty reasonable, while local institutions have pumped in liquidity since beginning of 2014, which is helping support market upside.”
Investors are now waiting for fourth-quarter results to “show if fundamentals support the rally or not.”
“After the UAE led gains last year, we could see Oman, Qatar and Saudi be the front-runners in 2014,” added Sundar. “Valuations are still reasonable compared to emerging markets. Q1 in the Gulf is historically a strong quarter as individual investors and institutions relocate funds to chase dividends.”
Shares in Oman’s Galfar Engineering were flat at 0.31 rials, after rocketing from 0.27 rials in the previous three trading days. The stock had been weak since October, when news emerged of a corruption probe involving some of its executives; Sunday, two Galfar officials were sentenced in the case.
Saudi’s Alinma Bank ended flat to hold at a 21-month high after it posted a 35 percent increase in fourth-quarter profit.