EGX ranks third best performing Arab stock market amid expectations of continued progress

The Egyptian Exchange (EGX) ranked third among the best Arab bourses during the first half of this year, with a rise of 9%. The Kuwait Stock Exchange (KSE) was the top gainer during the period, rising over 18%, followed by Bourse de Tunis (BVMT) with a 14% increase.

There has been economic improvement, such as increased foreign investment rates—marking foreigners net purchases of EGP 7bn—in spite of the repercussions of the bold measures of the economic reform programme, such as the rise in inflation rates, the increase in the cost of foreign exchange and, hence, the cost of production in most economic sectors, the issue of the capital gains and stamp taxes, and hiking interest rates on deposit and credit in Egyptian banks.

The appetite of foreign investors in the market for buying has increased since the decision to liberalise the exchange rate last November, supported by the decline in the local currency rate by about 100% and the higher attractiveness of stocks in the EGX supported by lower prices.

According to the EGX indicators and the turnover in the first half the current year, the market capitalisation of the listed companies’ shares was approximately EGP 91.9bn, up by 15.27%, after rising from EGP 601.5bn in December 2016 to EGP 693.4bn in June 2017.

Analysts and traders expected the EGX indicators to continue climbing in the second half of the current year. The managing director of Al-Ahly Company, Essam Khalifa, said that the EGX is nominated to perform better in the coming period, in conjunction with reaping the fruits of the economic reform programme, the continued inflow of foreign direct investments, and the expected improvement in tourism revenue—hence the foreign exchange.

He added that the prices of companies listed on the EGX are still trading at low prices, which is making them attractive for Arabs and foreigners, as well as funds and investors, especially as many companies show promising growth potential.

As for losing markets, the list included the Qatar Stock Exchange (QSE) on top of the list across Arab and Gulf markets and second globally, registering a drop of 13%. This was due to the severing of diplomatic and commercial relations between most Gulf and Arab countries with Qatar. The ranking showed the Muscat Securities Market and Iraq Stock Exchange (ISX) with an 11% drop.

The Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange were the 11th and 12th losing markets across the world and 5th and 6th in the Arab region, with a decline of 4% and 3% respectively.

In general, Arab and Gulf stock markets were affected during the first half of 2017 with several international events—notably the extension of the Organisation of the Petroleum Exporting Countries (OPEC) agreement resolution by the member states to lower production to balance supply and demand for an additional nine months ending in March 2018.

They were also affected by the drop in oil prices by 16% to under $50 per barrel because of fears of oversupply, despite the extension of OPEC’s decision to reduce daily production. Oil prices have also been negatively affected by the increase of US oil production and the continued increase in the number of oil drilling platforms in America for 23 consecutive weeks this year, in addition to the Fed’s decision to increase interest rates for the second time in the first half of 2017 on the back of the improvement of the US economy, pushing interest by 0.25% to 1.25%, which is the highest since the 2008 global financial crisis.

On the performance of global markets, the Venezuela Stock Market (IBVC) topped the list, up by 289% since the beginning of the year, followed by the Latvian Riga Stock Exchange (now Nasdaq Riga), up by 32%. No Arab countries were listed on the top performers globally.

As for Russia, the Moscow stock index was the lowest in the world markets during the period, decreasing by 16%.