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Monday, 27 June 2016

BY THE NUMBERS

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USD CBE auction (Tuesday, 21 June): 8.78 (unchanged since Wednesday, 16 March)
USD parallel market (Wednesday, 22 June): 11.07-11.10 (compared to 11.05-11.08 on Tuesday 21 June, local press)

EGX30 (Sunday): 6,852 (-5.5%)
Turnover: EGP 533.2 mn (22% above the 90-day average)
EGX 30 year-to-date: -2.2%

THE MARKET ON SUNDAY: The repercussions of the United Kingdom’s exit from the European Union extended to the Egyptian stock market as the EGX30 ended Sunday’s session 5.5% down on the heels of global and regional indices. GB Auto, Qalaa Holdings, and Oriental Weavers were particularly hit, while index heavy­weight CIB suffered a relatively mild decline of 2.2%. At a market turnover of EGP 533.2 mn, foreign investors were the sole net buyers of the day.

Foreigners: Net long | EGP +26.3 mn
Regional: Net short | EGP -1.0 mn
Domestic: Net short | EGP -25.3 mn

Retail: 56.1% of total trades | 57.6% of buyers | 54.6% of sellers
Institutions: 43.9% of total trades | 42.4% of buyers | 45.4% of sellers

Foreign: 6.0% of total | 8.5% of buyers | 3.5% of sellers
Regional: 7.3% of total | 7.1% of buyers | 7.3% of sellers
Domestic: 86.7% of total | 84.4% of buyers | 89.2% of sellers


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PHAROS VIEW

Macro Thoughts on Brexit: Vulnerability elongates road to recovery rather than triggers a steep decline

Egypt’s external sector is exposed significantly to the UK/EU

  • 30-35% of imports and exports are accounted for by trade with the EU
  • 50-75% of tourist nights are spent by European tourists (versus 15-30% for Middle
  • Eastern visitors)
  • 15% of remittances are sourced from Europe (versus c.30% for the USA and c.50% for the GCC)
  • 40-50% of FDI stems from EU investors

Egypt’s external sector has already been hit, which means that the Brexit hit should not be massive, but Egypt’s road to recovery could now take longer

  • Imports and exports will be affected, but since Egypt’s exposure to Europe is almost 30% of trade, the net effect on the trade balance should be expected to be minimal
  • Egypt has already been hit by lower tourism receipts, and European visitors to Egypt have already been diminished in total by rising numbers of Middle Eastern and Asian visitors
  • Suez Canal revenue might suffer a potential reduction of c.25%, but it has been hovering around the EGP 4.0-5.0 bn over the last 10 years
  • Remittances, which have been very important since the revolution in 2011 are only 15% exposed to Europe, and are mostly secured from the GCC (although they are under pressure from the effects of lower oil revenues)
  • Portfolio investments are almost non-existent
  • GCC aid was estimated to level off anyway due to lower commodity prices
  • 50% of FDI stems from European investors but are mostly within the oil and gas sectors, which we believe will continue to receive some inflows. However, FDI is already 50% below their peak, limiting the downside.

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WTI: USD 47.35 (-3.07%)
Brent: USD 48.41 (flat)
Natural Gas (Nymex, futures prices) USD 2.64 MMBtu, (-1.12%, July 2016 contract)
Gold: USD 1,330.50 / troy ounce (+0.61%)

TASI: 6,478.6 (-1.1%) (YTD: -6.3%)
ADX: 4,416.7 (-1.9%) (YTD: 2.5%)
DFM: 3,258.2 (-3.3%) (YTD: 3.4%)
KSE Weighted Index: 349.7 (-1.3%) (YTD: -8.4%)
QE: 9,842.9 (-1.2%) (YTD: -5.6%)
MSM: 5,762.2 (-0.6%) (YTD: 6.6%)
BB: 1,111.1 (-0.7%) (YTD: -8.6%)

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