Ukrainian crisis

Cairo, Egypt (CNN) – The Egyptian Stock Exchange achieved record levels during the last week’s sessions, as the main index rose by 7.61% to exceed the level of 23 thousand points for the first time in its history, rising by 59.35% since the beginning of the year, and the market capitalization gained 116 billion pounds. ($3.8 billion), concluding the week’s trading at 1.6 trillion pounds ($51.4 billion), and trading volumes in the last two sessions exceeded 5 billion pounds ($161.8 million).

Financial market experts attributed the reasons for this record rise to expectations of a decline in the exchange rate of the pound against the dollar, and the entry of new liquidity from individual investors to hedge against the decline of the local currency.

At the same time, the government is close to selling the United Bank, as part of its plan to sell government assets to the private sector to increase the dollar proceeds, and is submitting major financial institutions to conduct a due diligence examination of the bank, with the sale being completed before the end of this year, according to a bank official.

Dalia Al-Sawah, a member of the Egyptian Stock Exchange’s Board of Directors, said, “The main index of the Stock Exchange succeeded in breaking the historical level of 18,500 points to record a new record level exceeding 23,000 points at the end of this week’s trading,” attributing the reasons for this rise to expectations of a decline in the Egyptian pound against the dollar, explaining. Any expected decline in the exchange rate is preceded by a high rise in indices so that the value of stocks matches the expected decline in the pound.

Local media quoted traders as saying that the exchange rate of the pound against the dollar fell in the parallel market after news of the government resuming the economic reform program agreed upon with the International Monetary Fund, which includes implementing a flexible exchange rate system in exchange for obtaining the remainder of the value of the loan amounting to $3 billion. .

Al-Sawah believes, in exclusive statements to CNN Arabic, that “the local and global economic conditions require that the state move toward complete liberalization of the exchange rate, to eliminate the parallel market for the dollar and provide foreign exchange in banks,” recalling the Central Bank’s decision in 2016 to float the pound, which resulted in the elimination The gap between supply and demand for foreign exchange, the application of a free market for currencies, and the availability of foreign exchange in banks to facilitate the import of production requirements and spare parts.

The exchange rate of the pound against the dollar has decreased by 50% since March 2022 due to the foreign exchange shortage crisis in the country, as a result of the Ukrainian war and the rise in global interest rates, which resulted in the exit of more than 20 billion dollars in indirect foreign investments, and an increase in the import bill.

Dalia Al-Sawah explained her opinion on the necessity of completely liberalizing the exchange rate of the pound against the dollar in light of the situation that the global economy is witnessing, with a rise in interest rates in the United States of America and Europe to unprecedented levels, and an increase in inflation rates to record rates, which puts pressure on the Egyptian economy and affects the sources of foreign exchange flows, and necessitates the necessity of Implementing a flexible exchange rate system to eliminate the parallel market.

Last June, Egyptian President Abdel Fattah El-Sisi confirmed, during a youth conference in Alexandria Governorate, his refusal to implement a flexible exchange rate system for the pound, “so that this does not cause an increase in prices, which may conflict with the country’s national security,” he said.

However, Al-Sawah pointed to another reason for the record rise of the Egyptian financial market, which is the entry of new liquidity into the stock exchange, especially from individuals, in order to achieve high profit rates that exceed the return achieved from bank certificates and within a shorter period of time, especially since the profitability multiplier of Egyptian stocks is much lower than the market value of companies. Which achieves an accumulated return for investors that is better than other savings vessels.

The Egyptian Stock Exchange recorded a record number of new investors, reaching more than 313,000 new investors during the first nine months of 2023, bringing the total number of investors in the financial market to 839,000 investors.

Regarding the sectors with the highest rise in the stock market, a financial markets expert and member of the board of directors of the Egyptian Stock Exchange said, “The sectors that have dollar sources of income recorded the highest rate of rise in the stock market during the last period, which are the shipping, petrochemicals, fertilizers, and gas sectors,” noting that individual investors focus on investing. In stocks that are witnessing momentum in trading volumes, it is expected that the stock market will continue its upward trajectory until it reaches 25 thousand points before it goes through a strong correction phase by the end of the year.

All indices of the Egyptian Stock Exchange sectors rose during this week’s trading, led by the real estate sector by 32.4%, followed by educational services by 13.3%, followed by building materials by 12.4%.

For his part, financial markets expert Wael Enaba said, “The fertilizer and chemicals sectors led the first wave of rise in the Egyptian Stock Exchange, with the main index breaking the historical barrier of 18,000 points, and then liquidity moved to the real estate sector, which leads the second wave of rise, with the index exceeding the level of 23,200 points, for the first time.” Driven by the entry of new liquidity from investors, it is expected that the main index of the stock market will continue to rise, targeting the level of 25 thousand points.

Anba stated, in exclusive statements to CNN Arabic, that “the rise in the exchange rate of the dollar against the pound in the parallel market to levels of 48 pounds is the cause of violent speculation by a number of traders, which will return to calm during the next week,” referring to the government’s role in managing foreign exchange and paying its international obligations through… Renewing Gulf short-term deposits, and exchanging debts with China by using debts and their installments for China to finance development projects in the local currency to ease its international obligations.

On the sidelines of Egypt’s participation in the Belt and Road Forum this month, the Ministry of International Cooperation signed a memorandum of understanding in the field of debt swaps with the Chinese International Development Cooperation Agency, making Egypt the first country to conclude this agreement with the agency.

In a related context, an official in the management of the United Bank said, in special statements to CNN Arabic, that a number of major financial institutions have begun due diligence procedures to acquire the entire 99.99% share of the Central Bank in the United Bank, ruling out the difficulty of estimating the value of the deal, provided that it is completed. Completion of the deal before the end of this year.

The Egyptian government had previously announced the selection of 32 companies to sell shares or all of their shares until the end of the first quarter of 2024. The list includes companies operating in 18 activities, including 3 banks and two companies affiliated with the army. It then added 3 new companies to the list: Eastern Company and Telecom Egypt. And Izz Al-Dakhila.

According to official data, the government has already sold shares in companies worth $5 billion during the period from March 2022 until July 2023, and it is expected to sell new assets of the same value before next June, including power plants and two army companies.

2023-10-26 21:00:54
#Egypt. #stock #market #reaches #record #level #driven #expectations #devaluation #pound