Egypt’s stocks may rebound on EM rally – Renaissance Capital

Strong rebound in equity inflows to emerging markets could spill over to Egypt leading to robust inflow recovery, Renaissance Capital’s head of MENA research Ahmed Hafez said in a note yesterday.

This could reverse the trend of foreign outflows seen in 2020 as foreign institutional investors were net sellers every month in 2020 on the Egyptian Exchange (EGX), Hafez noted.

Egypt is yet to reap the benefits, but valuations could prove attractive: “While we are neutral [on] Egypt in our allocation as it does not benefit from the same currency rebound story as other EMs, some inflows could still find their way to the market … on the back of what seems like the widest valuation gap in years,” Hafez says.

Thus, Foreign investors had snapped up 606 million pounds-worth of stocks in Egypt by the end of the first two weeks of January, he noted.

This comes after a not-great year for foreign inflows to the EGX: Foreign investors were net sellers every month last year, offloading 18.9 billion pounds of stocks over the 12 months. This took foreign holdings down to the lowest levels seen in years, falling from $ 2.87 bn (6.1% percent of market cap) to $ 1.2 billion (2.7 percent) as of September 2020.

The benchmark EGX30 is up just over 6 percent year-to-date.