The Egyptian Exchange (EGX) continued its recent downturn, on Tuesday, after a brief pause, negating all its gains for the current year.
Yasser El Masry, Managing Director of Arab African International Securities, noted that the stock exchange’s upward trend, which persisted until March of the past year, has ceased. The market is now trending downwards, with expectations for the main index to approach the 20,000-point mark shortly.
He attributed the stock market’s previous rise to the disparity between official and parallel exchange rates, which concluded with the currency flotation. Additionally, he observed that most companies failed to deliver strong business results as anticipated and distributed minimal dividends.
El Masry also mentioned that the low returns from the stock exchange have led long-term investors to withdraw, alongside short-term investors, in favour of other investment options offering returns near 30%, such as bank certificates.
Amr El Alfy, Chief Equity Strategist at Thndr, compared the high returns on Treasury bills to those of the stock market, emphasizing the importance of sustainable growth. He pointed out that while Treasury bill returns are high, they are likely to decrease with falling interest rates, whereas the stock market’s returns have the potential to increase.
El Alfy also highlighted that numerous stocks in the Egyptian stock market are currently undervalued and stressed the significance of the investment horizon, advocating for the need for medium to long-term investors in the market, which still holds promising growth prospects.
Samah Gharib, Head of the Institutional Clients Division at Arabeya Online, anticipated that the EGX30 would try to recover above the 24,600-point support level during Monday’s session. However, she predicted a test of the 23,800-point level if it fails to stabilize.
Gharib observed that while the medium and long-term trend for the EGX remains positive, with occasional corrective movements, the short-term trend has shifted downwards, particularly after breaching the critical 26,500-point stop-loss level, leading to a pessimistic shift among some investors.
Hany Tawfik, Chairperson of International Investors Group, remarked that the stock market has been used as a store of value, and investments have not mirrored the actual performance of companies. This disconnect was a key factor in the previous year’s index surge, and he noted that investors often overlook the fair values and robust performance of investment companies.
Mohamed Fathallah, Managing Director of BLOM Egypt Securities, suggested that despite the market downturn, it is an opportune moment to establish buying positions in sectors with high growth potential, particularly petrochemicals, fertilizers, and pharmaceuticals.
He asserted that the main index has the potential to climb an additional 10,000 points, presenting a valuable opportunity for medium and long-term investments.
Al Ahly Pharos identified several undervalued stocks, with profit multiples below five times during 2024. These include the Iron and Steel Company, Suez Canal Bank, Cairo Poultry, and several banks and financial institutions. The list extends to Tawfeek Leasing Finance, GB Corp, CI Capital, and various industrial companies, highlighting the investment potential in these entities.
