The Egyptian Exchange (EGX) is expected by analysts to move sideways after the Central Bank of Egypt (CBE) left interest rates unchanged at the December meeting of the Monetary Policy Committee (MPC).
A higher interest rate environment negatively affects stock market inflows, as investors tend to pump cash into banking sector assets.
Ayman Fouda, head of the capital market committee at the African Economic Council, forecasts the EGX to move sideways after the CBE decision.
The EGX’s indices are likely to see sideways-to-declining performance after MPC’s decison, Fouda highlighted, adding that the market is still waiting for positive news that pumps new liquidity into blue chips.
The EGX30 index may test the levels of 15,100 and 15,200 points, and see support at 14,900 and 14,800 points, he pointed out.
Fouda recommends medium-term and long-term investors to monitor stocks well and activate medium-term stop-loss points, in line with keeping the liquidity of investment portfolios to resume buying after the recent correction phase ends and new positive incentives appear after the New Year holidays.
The MPC maintained the overnight deposit rate at 18.75%, the overnight lending rate at 19.75%, the rate of the CBE’s main operation at 19.25%, and the discount rate at 19.25%, according to a press release.
The committee attributed its decision to the decline of annual headline and core inflation in November 2017 for the fourth consecutive month to record 26% and 25.5%, after peaking in July 2017 at 33% and 35.3%, respectively.
“Tighter real monetary conditions supported the decline, which accelerated in November due to a favourable base effect. Nevertheless, inflation was affected during this period by continuous supply shocks related to fiscal consolidation measures, leading regulated price adjustments to account on average for 44% of monthly headline inflation, in addition to indirect effects on core CPI items,” the bank said.
Meanwhile, Mohamed Gaballah, a market analyst at Pioneers Holding, expected the market to move sideways awaiting fresh stimulus after the CBE’s decision.
The benchmark EGX30 index may maintain its upward trend as long as it is moving above 14,800 points, Gaballah noted.
The index has resistance at 14,700 points and an upside potential at 14,900 points, Gaballah added.
The EGX70 index is seeing a sideways performance, which will carry on over the coming period as blue chips attract more liquidity, the analyst noted.
EGX30 hits all-time high
The Egyptian Exchange (EGX) closed last week in the green zone, buoyed by the performance of blue chip stocks.
The benchmark EGX30 gained 2.35%, or 348 points, to close at 15,016.97 points, a new historical peak.
The EGX’s benchmark will move sideways in the short-term, but it is projected to rise in both the medium- and the long-term, Ahmed Thabet, technical analyst at Jazira Securities Brokerage, said.
The main benchmark’s trading volume came in at 512m shares in a week, with a turnover of EGP 1.9bn.
Market capitalisation closed at EGP 825.81bn at the end of the week, compared to EGP 815.46bn a week before.
The Commercial International Bank (CIB) gained 4.66% to EGP 77.46 after 4.9m shares were traded, generating EGP 372.4m.
CIB’s stock sees support at EGP 70 and EGP 71, which it may break above but not in the current period, Thabet continued, noting that the stock may go up to between EGP 75 and EGP 77.
The small- and medium-sized enterprises EGX70 index rose 2.87% to 763.03 points during the week, while the EGX100 index was up 2.35% to close at 1,731.95 points.