The Egyptian Exchange (EGX) will be put to the test this week, after the National Bank of Egypt (NBE) and Banque Misr announcement of investing EGP 3bn. On Thursday, EGX turned green rising by 5% following the banks’ announcement, after tumbling for weeks amid coronavirus fears.
Will the rally continue supported by the two banks announcements and the government’s amendments to the stamp duty and capital gains tax?
Traders’ opinions differed on the matter, some suggested that the market rebound will continue, albite in a slower manner during the first sessions of the week. However, some believe the fear among investors about the novel coronavirus pandemic and its devastating impact isn’t going away. Investors are worried about the possibility of bit more aggressive moves towards lockdowns in Egypt, or a reduction to working hours.
Mohamed El-Aasar, head of the technical analysis department of Aman Securities, believes that as long as the EGX remains above 9,200 points a further collapse can be avoided. However, El-Aasar believes that if EGX plunges below 9,000 points it would be at risk of collapse.
Abu Bakr Imam, head of equity research at Sigma Capital, believes that the effect of these stimuli would be temporary, adding that markets will likely remain volatile as the coronavirus continues to spread. Imam said that the current price levels of the large-cap stocks are attractive and expected to achieve good capital gains for the long-term investor when the coronavirus crisis ends.
Pharos research sees the “cash is king” in this period in which we suffer from fears of the rapid development of the spread of the coronavirus. Pharos added that in light of the recent selling pressure witnessed on EGX, some stocks have started to trade at or close to the net cash per share, including Hermes, SODIC, AMOK, Misr Bani and Suif Cement, whose stocks look highly attractive, since current price is the net cash position.
For its part, the Financial Regulatory Authority (FRA) issued a package of precautionary measures on Thursday to cushion coronavirus impact on non-banking financial institution sector (NBFI), including allowing the Investor Protection Fund to purchase listed securities by up to 10% of its total funds.
Blue-chip index EGX 30 closed at 9,205.58 points, recording a decline of 17.76% on Thursday, while EGX 70 index posted 23.33% loss concluding the period at 840.47 points.
