The EGX30 fell 4.3% y-o-y in 2Q2019, the Egyptian Bourse said in its quarterly report (pdf). Total market capitalization came in at EGP 756.1 bn at the end of the period, falling 7.4% y-o-y during the quarter. The total trade volume for the quarter was EGP 50.8 bn, down from EGP 91.9 bn in 2Q2018 and from EGP 82.6 bn in 1Q2019.

Banks are leading the pack: Banking stocks rose 5.3% during the quarter, making them the biggest winners, followed by telecoms (which rose 1.5%) and healthcare and pharma stocks (up 0.9%). The biggest losers were construction material stocks, which fell a whopping 27.2%.

GTH dispute had a hand in this drop: “The prolonged dispute with Global Telecom Holding (GTH) has impacted sentiment and trust among investors and caused trading volumes to fall,” Sherif Shebl, vice president of GCC sales at Pharos Holding, told Enterprise. Veon subsidiary Global Telecom Holding (GTH) ended its long, drawn-out tax dispute with the government last week, signing a USD 136 mn settlement agreement. Shebl added that the performance of state companies was not good during the quarter, with some reporting losses, coupled with a slowdown in the real estate sector, whose shares fell 8.8% y-o-y in 2Q2019.

Global headwinds, monetary policy had an impact as well: CBE monetary policy and global economic headwinds also hit the market during the quarter, Shuaa said in a report last week (pdf). The CBE’s decision to hold off on rate cuts in May, the appreciation of the EGP against the greenback, and a pickup in flows to Saudi Arabia and Argentina reduced inflows into Egyptian equities. Trade friction between the US and China and political tensions in the Arabian Gulf also had an impact on investors’ sentiment, Shuaa said.

What does this mean for the state privatization program? When looking at the results, it is perhaps unsurprising that there has not been a move in the state privatization program since Eastern Tobacco sold a 4.5% stake back in early March. Public Enterprises Minister Hisham Tawfik said companies selected to IPO under the program could begin listing as early as September, but noted that investment banks advising on the program would still need to determine when market conditions would be right for companies looking to pull the trigger on an additional share sale. With the GTH dispute settled, things are looking like they are moving forward, however. Advisers on the share sale by state-owned Alexandria Containers and Cargo Handling Company (ACCH) have concluded roadshows in Dubai and London, while preparations are underway to kickstart the bookbuilding process of a 30% stake sale in Sidi Kerir Petrochemicals (Sidpec).

Golden ticket for those seeking cheaper valuations: Based on 2019 price-to-earnings ratio projections, Egypt is the sixth-cheapest among global markets in terms of valuations and is the third regionally behind Oman and Dubai, Shuaa says. Based on current market prices and earnings estimates for 2019, EGX30 is trading at a PtE of 9.6x, or 26% less than the MSCI EM index’s 13.0x, and is 15% below its 6-year historical average of 11.4x. “The heat on local equities, however, opens the door for global or regional investors who are looking to buy the dips,” Shuaa said.