EGX witnesses a severe collapse, most stocks exceed maximum decline
margin operations is behind violent decline of EGX
The Egyptian Exchange (EGX) closed Tuesday’s trading session on a negative note witnessing a sever collapse for the first time in 8 months, pressured by Arab and foreign selloffs.
The main EGX 30 index fell by 0.63 percent to 10,471 points, while the EGX 70 EWI plunged by 5.1 percent to 1,822 points.
Likewise, the EGX 100 EWI retreated by 3.72 percent to 2,739 points, whereas the EGX 50 EWI declined by 3.47 percent to 1,923 points.
The market cap value dropped by 7.56 billion Egyptian pounds to close at 633.65 billion pounds on Tuesday down from 641.21 billion pounds on Monday.
Yasser El-Masry, Managing Director at the Arab African International Securities, said the decline began with a profit-taking wave that left a slight decline.
This was then followed by a state of panic by individuals, leading to further declines. This came on the back of the trend set by brokerage firms to close the marginal positions of the Dice stocks, followed by “Margin Call” on the remaining securities.
El-Masry added that this is called the “domino effect”, especially as Dice stocks have acquired a large share of trading in the last period. He pointed out that the vision held by investors is illogical in approaching this sector.
There are other stocks, such as Fawry and B Investments, with the e-payments sector being the racehorse everyone’s betting on in 2021.
The margin system allows the customer to buy a security by paying a part of its value in cash, while the rest is paid by a loan from the brokerage company which deals with a guarantee on the securities. Large number of dealers turned to this system in light of the great decline in liquidity, which prompted the use of the margin purchase mechanism or what is known as “margin”, to finance their trading in the market.
