BY THE NUMBERS
USD CBE auction (Tuesday, 04 Oct): 8.78 (unchanged since 16 March 2016)
USD parallel market (Monday, 10 Oct): 14.15 (from 14.00-14.25 on Sunday, 09 Oct, Amwal Al Ghad)
EGX30 (Monday): 8,364 (-0.9%)
Turnover: EGP 675.4 mn (55% above the 90-day average)
EGX 30 year-to-date: +19.4%
THE MARKET ON MONDAY: EGX30 bucked its latest gaining trend and fell for the first day after a 4-day winning streak that was buoyed by speculation of an imminent devaluation. The index’s largest constituent, CIB, dragged the index down by closing at a loss of 1.4%. The selling wave hit all of the EGX30’s constituents except for Elsewedy Electric and Edita. The worst performers of the day were Domty, Arabian Cement and Qalaa Holdings. Market turnover was EGP 675.4 mn with regional investors the sole net buyers of the day.
Foreigners: Net short | EGP -11.3 mn
Regional: Net long | EGP +23.1 mn
Domestic: Net short | EGP -11.8 mn
Retail: 63.9% of total trades | 68.1% of buyers | 59.7% of sellers
Institutions: 36.1% of total trades | 31.9% of buyers | 40.3% of sellers
Foreign: 20.5% of total | 19.6% of buyers | 21.3% of sellers
Regional: 8.7% of total | 10.5% of buyers | 7.0% of sellers
Domestic: 70.8% of total | 69.9% of buyers | 71.7% of sellers
Petroleum aid from Saudi stops, raising doubts on Saudi deposit transfer
Reports that Saudi Aramco has informed Egyptian General Petroleum Corporation earlier this month that the supply of refined oil products to Egypt would be halted — without a reason or timeline given for the suspension — raises question marks about the USD 2-3 bn in deposits Egypt awaits from Saudi Arabia, according to a note by Pharos to be published this morning.
With Saudi Arabia having to undergo its own austerity measures and with expectations of weak growth in the kingdom due to depressed oil prices, the halt or temporary halt of oil product supply to Egypt is not surprising. The issue here is the critical time in which this is happening, when Egypt is accumulating USD liquidity in preparation for devaluation. The crucial question is whether Egypt would still receive the USD 2-3 bn deposit from Saudi Arabia within the next two weeks, which is much needed for the buildup of net international reserves and to secure enough USD liquidity within the banking system pre-devaluation.
Strategy: Buy the dips in high value stories. We have always reiterated our view that the market will continue to trade within the 7,900-8,500 range, with extremely high volatility to news flow, especially with regard to news that come below expectations. We continue to flag undervalued banking sector stocks like CIEB and HDBK. EFG Hermes and EK Holding still offer good value at these levels. Infrastructure spending beneficiaries such as SWDY and ORAS, along with real estate players TMGH, PHDC and MNHD are among our picks, as is ORWE.
Rearranging the Egyptian fiscal puzzle
Also this morning: Fiscal position, not only monetary policy, is another cornerstone of the IMF agreement. Egypt awaits this month the approval of the IMF Executive Board on a three year USD 12 bn financial support package, according to a note published by Pharos on Monday. While all eyes have been on monetary policy and the movement in exchange rate, we believe another cornerstone of the IMF agreement is bringing down the budget deficit as a percentage to GDP down to single digits. Click or tap here to read the report “Rearranging the Egyptian fiscal puzzle” (pdf).
WTI: USD 51.27 (-0.16%)
Brent: USD 53.14 (+2.33%)
Natural Gas (Nymex, futures prices) USD 3.27 MMBtu, (-0.31%, Nov 2016 contract)
Gold: USD 1,261.00 / troy ounce (+0.05%)
TASI: 5,574.2 (+1.2%) (YTD: -19.4%)
ADX: 4,387.3 (+0.6%) (YTD: +1.9%)
DFM: 3,358.6 (+0.3%) (YTD: +6.6%)
KSE Weighted Index: 346.2 (-0.3%) (YTD: -9.3%)
QE: 10,405.2 (+0.5%) (YTD: -0.2%)
MSM: 5,686.6 (-0.1%) (YTD: +5.2%)
BB: 1,130.3 (-1.3%) (YTD: -7.0%)