Egypt’s main index plunges to 12-month as margin calls weigh

Big 5

Egypt’s main stock index, EGX 30 sank 3.6 percent on Monday to its lowest level in 12 months, dragged down by weakness in emerging markets and margin calls among local investors.

Twenty-nine of 30 stocks in the Egyptian index fell. It has fallen 15 percent since the end of August, leaving it down 9.4 percent year-to-date. The broader EGX 100 index fared better on Monday, losing only 1.9 percent.

Egypt’s market far underperformed the MSCI index of emerging market stocks, which was down nearly 1 percent. Among big blue-chip losers were tobacco firm Eastern Co, down 4.9 percent.

Exchange data showed Monday’s selling was heavily concentrated among local investors, who were hit by margin calls. Non-Arab foreign investors were net buyers by a considerable margin, the data showed.

“It is a mixture of both emerging market weakness and margin trading, and the closure of some margin trades,” said Radwa El-Swaify, head of research at Pharos Holding said.

Turmoil in emerging markets has fuelled concern about possible capital outflows from Egypt and depreciation of the pound currency. But many foreign fund managers say they remain long-term positive on the market because of an improving underlying economy.

Khaled Abdel Majeed, managing partner at London-based asset manager MENA Capital, said Monday’s drop was due to a combination of profit-taking and emerging market weakness, but he was confident the slide would not continue.

Memphis Pharmaceuticals shed 9.5 percent after its first-quarter loss widened year on year.

Source: Reuters