Following MSCI Report, Egypt’s Main Gauge Dives 8% In Week

In a week that coincided with the MSCI’s report on a potential reclassification of Egypt’s index to frontier markets, Egyptian stock market has encountered losses of EGP 25.8 billion.

The capital market has closed at EGP 316.650 billion on Thursday, compared to EGP 342.471 billion a week earlier. The Egyptian Exchange fell almost 2.5% this week.

Egyptian Exchange’s benchmark EGX 30 index dived by 8% this week, representing a decline of 409.26 points, ending Thursday’s transactions at 4651.76 points compared to 5061.02  points at the end of last week.

Regarding current week trading, the index hit its highest point on Sunday closing at 4915.96 points, where its lowest point recorded on Wednesday at 4598.10 points.

Meanwhile, the mid- and small-cap index, the EGX70 sank by 13% closing at 354  points during Thursday’s session, compared to 408 points The price index, EGX100 also pushed down by 10.4% concluding by 627 points during Thursday’s session, compared to 700 points at the end of a week earlier.

Through last week sessions, the trading volume reached 432 million securities on Thursday, compared to 364 million securities a week earlier, worth EGP 1.355 billion, against EGP 1.4 billion a week earlier.

Late Wednesday, the equity index compiler Morgan Stanley Capital International (MSCI) announced that it is closely monitoring the situation in Egypt and in particular the country’s foreign exchange market.

The recent shortage of foreign currency on the domestic foreign exchange market is of great concern to international institutional investors, MSCI noted.

“MSCI may be forced to launch a public consultation with the investment community on a potential exclusion of the MSCI Egypt Index from the MSCI Emerging Markets Index were the situation on the Egyptian foreign exchange market to worsen and result in the inability of international investors to repatriate their funds,” equity index compiler explained.

In addition, this situation may also have a negative impact on the liquidity of the Egyptian equity market which could trigger a review of the MSCI Egypt Index for potential reclassification to Frontier Markets due to the lack of liquid investable stocks.

Following the MSCI’s report, the EGX has lost EGP 10 billion in 3 hours ahead of the closing session of Wednesday. The 3-hour losses raised the terrible specter of the stock market crash during January uprising in 2011. The bourse has concluded sessions on Wednesday with losses totaled up to EGP 13 billion.

Later on Wednesday, EGX Chairman Dr. Mohamed Omran spoke to Bloomberg Television late Wednesday asserting that the country has a fix for the currency issues.

The Egyptian bourse chief has talked Wednesday evening about the possibility that MSCI Inc. may consider reviewing Egypt’s emerging-market status and political turmoil in the country. He spoke with Trish Regan and Adam Johnson on Bloomberg Television’s “Street Smart.”

Dr. Omran is currently paying a visit to the United States to meet with a number of representatives of global financial institutions seeking to encourage them to reconsider the volumes of their investments in the Egyptian market.

During his visit to the United States, the Egyptian stock market Chief has met with representatives of around 30 global financial institutions.

Dr. Omran has reviewed with the representatives the current situation of the Egyptian market alongside a number of pressing topics, notably the recently-imposed stamp tax on the EGX’s daily selling and buying transactions as well as the potential reclassification of the MSCI Egypt Index to frontier markets.

He has referred to the considerable efforts currently exerted by the non-profit capital market societies in an attempt to cancel the stamp tax on the EGX’s dealings.

The bourse chief expressed his optimism about witnessing a breakthrough in the EGX stamp tax file, noting that the Egyptian authorities have shown remarkable resilience in backing down on bank provisions tax.

Furthermore, Dr. Omran has stressed to the global financial institutions representatives the privileges of making investments in Egypt, one of the most populous country in the Middle East, which enjoys promising investment opportunities with as little as possible of political stability that will gradually drive the growth rates to revive.

Companies’ Weekly Performance Highlights:

EFG-Hermes Holding – (HRHO.CA) closed last week at EGP 8, while closed on Thursday at EGP 7.12, dipping by EGP 0.88 (11 %).

Stock highest close during the week came on Sunday at EGP 7.82, while the lowest came on Wednesday closing at EGP 6.97.

On Wednesday, Egyptian Financial Supervisory Authority (EFSA) announced that it approved EFG-Hermes request to call for OGM to discuss increasing issued and paid capital through free distribution with total value of EGP 477.903.750 at nominal value amounting to EGP 5 per share.

Also on Wednesday, EFSA announced that it approved Hermes request to call for an OGM to discuss cutting issued and paid capital through writing off 391.000 treasury stocks with the company with more than a year at nominal value of EGP 5 per share.

Alexandria Spinning & Weaving (SPINALEX) – (SPIN.CA) closed last week at EGP 0.86, while closed on Thursday at EGP 0.71, sinking by EGP 0.15 (17 %).

Stock highest close during the week came on Sunday at EGP 0.84, while the lowest came on Wednesday closing at EGP 0.71.

On Wednesday, SPINALEX announced that a number of workers in Sadat branch started strike and suspended operations in the factory.

The company added, in a release responding to EGX that, news published yesterday in Youm7 newspaper is not accurate as the strike was limited to Sadat factory only and not the headquarter in Alexandria.

On Thursday, SPINALEX denies Sadat factory workers’ salary cut, adding that their strike will has a negative impact on both production and sales.

The company added, in a release to EGX that, media reports about company’s workers protest before EGX Headquarter after cutting their salaries is not accurate as there is no salary cut.

SPINALEX pointed out that, its workers refused cutting their stake in insurance from variable wages.

Investors’ Activity:

Local investors led the market activity all through the week, followed by Foreign and Arab investors respectively.

Foreign investors were the most active buyers this week earning the value of EGP181,513,035.

Arab investors chose also to buy by value of EGP65,719,950.

Local investors were most active sellers this week by the value of EGP247,232,985.