CAIRO: Egyptian shares recovered some of their value on Wednesday after three consecutive days of sharp declines triggered by fears of a global economic slowdown.
The CASE 30 index was up 4.28 percent at the close of trading to reach 10,052.18 points after sinking 3.3 percent on Tuesday, 4.2 percent on Monday, and 3 percent on Sunday, wiping away gains from a rally in late December and early January.
The recovery was tied to a move by the US Federal Reserve to make the biggest interest rate cuts in 25 years. The Federal Reserve unexpectedly slashed a key interest rate by a hefty three-quarters of a percentage point on Tuesday, responding to a global plunge in stock markets that heightened concerns of a recession.
The reduction in the federal funds rate from 4.25 percent down to 3.5 percent marked the first time that the Fed has changed the funds rate between meetings since 2001, when the central bank was battling the combined impacts of a recession and the 9/11 terrorist attacks. The Fed signaled that further rate cuts were likely.
Moreover, fears that a sliding US economy could drag other economies down hammered global equities.
According to Reuters, shares from Sydney to London plunged for a second day on Tuesday, pulling commodity prices with them. This promised a woeful start for Wall Street as investors dumped assets exposed to the risk of a global economic slowdown. Habitually in situations like this, international investors change positions and exit emerging markets, as they are considered more risky.
A dip below the support barrier of 9,800 points [in the Egyptian bourse] reflects high volatility and bear power. This is a 2 percent close below the last line of defense, Beltone Financial said in reference to Tuesday s plunge.
The benchmark stock index lost 3.3 percent on Tuesday to close at 9,639.49 points after hitting a low of 9,416 points during the session. The index recorded a turnover of LE 1.7 billion ($307.8million), reflecting the negative mood seen in global markets.
Market declines come in two forms: intense and short-lived or gentle and long in duration. This seems like the first kind, explained Beltone Financial.
Measured from last week’s peak of 11,029 points, the index lost before the Fed’s move 1,390 points, equivalent to more than 10 percent. However, Beltone Financial sees that any dip will eventually reach a minor bottom.
“Potential bottoms are found close to 9,150-9,200 points, 8,500 points and 8,900 points. Risk takers can attempt entering at those levels and sell during the pullback, the company said. “The major trend is still not bearish.
One common definition of a “bear market is that stock indexes need to fall 20 percent from the market s recent peak. The Egyptian market’s small gains on Wednesday after the Fed rate cut could rule out the possibility of a bear market.
Shares in South Valley Cement outperformed the market, jumping 10.95 percent to reach LE 15.60. Big Caps such as Orascom Construction Industries (OCI) and Commercial International Bank (CIB) also managed to move into the green, with OCI soaring 4.53 percent to LE 563.79 and CIB 3.09 percent to LE 85.01.
Orascom Telecom (OT), the fifth largest Arab mobile operator by market value, also scored some gains and edged 1.97 percent upwards to close the day at LE 77 per share. The company tumbled 7.4 percent on Tuesday, hitting its sharpest single-day drop in more than a year.
Bucking the trend were shares in Ezz Steel Rebars, which dipped 1.36 percent to LE 61.51. Shares of Telecom Egypt and Oriental Weavers also moved into the red, slipping 1.13 percent to LE 19.27 and 1.17 percent to LE 66.10, respectively.
