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Monday, 16 December 2019

EGX struggles on low trading volumes, lack of new listings

EGX struggles on low trading volumes, lack of new listings: Egyptian equities are struggling to attract investors due to low trading volumes and a lack of new listings, analysts tell Reuters’ Arabic service. The state privatization program, announced 21 months ago with the promise of listing minority stakes in 23 state-owned companies, has so far only delivered a secondary sale of Eastern Company shares. “We have few products with little variety and shares are illiquid,” said Mona Mostafa, trading manager at Arabeya Online Brokerage, adding that domestic investors have lost confidence in the market and its management.

Where we stand: Reuters’ figures show trading volumes have fallen a little over 40% since 2017, and turnover on the bourse yesterday was an anemic EGP 205 mn, more than 70% below the trailing 90-day average. The benchmark EGX30 is up just 3% for the year as of yesterday’s close, and the exchange’s aggregate market cap is down 15% since 2017. “Retail investors are in control of the exchange,” said Mubasher’s Ihab Rashad.

A lackluster start for short selling: Short selling, which was launched on the EGX earlier this month, is yet to take off, with analysts reporting only dozens of trades. Many brokerages simply don’t know how the short-selling system operates, the newswire claims.

Poor IPO flow in 2019: The piece, by Reuters’ Ehab Farouk, notes that of the year’s two IPOs, the first (Fawry) attracted strong interest, while Rameda’s shares fell in their EGX debut and saw corporate founders “exiting rather than increasing the company’s capital.” (The transaction did, in fact, see selling shareholder Greville effectively reinject a portion of the proceeds into the company through a capital increase prior to the start of trading.)

Shares are well-priced right now because retail appetite is low, and the solution is “new stocks in new sectors to spur liquidity,” says Amr Al Alfi, head of research at Shuaa Securities Egypt.

Saudi Aramco’s recent IPO has also hit the EGX, spurring Arab investors to liquidate positions here to buy into Aramco, El Alfi suggests. Trades by Arab investors fell by half in 11M2019, coming in at 5.2% of total trades against 10.3% in the same period last year.

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