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Monday, 5 April 2021

GERD, uncertainty on market regs brings EGX down 1.5%

Did the EGX 100 drag the rest of the market down? The benchmark EGX30 lost 1.5% today, recovering slightly after falling 2.5% in intra-day trading. This followed a 5% plunge in the broad-based EGX100 that triggered an automatic suspension of trading. Trading was light, with total turnover of EGP 872 mn. (38.7% below the 90-day average) Foreign investors were net sellers.

In the green: Abu Qir Fertilizers (+4.9%), Eastern Company (+2.1%) and ElSewedy Electric (+2.0%).

In the red: Pioneers (-8.6%), MM Group (-6.4%) and Orascom Financial (-6.4%).

So why did the markets spaz out today? The EGX first took a hit from pessimism among foreign investors over ongoing GERD negotiations, says Prime Holding head of research Amr Hussein Elalfy. Foreign Minister Sameh Shoukry said yesterday that today is the “deadline” to bring negotiations back on track, which Elalfy suggests means that foreign investors will sit on the sidelines and ride out the coming period of uncertainty.

The drop then triggered a series of margin calls that snowballed the selling pressure, this time from local retail investors, adds Elalfy, who highlights the need for a fully operational short-selling mechanism that could have curbed the impact.

New margin trading regulations and potential limits are also causing a stir as investors, brokerages and banks involved will be required to settle their positions to meet the new regs, says Sigma Capital head of equity research Abou Bakr Emam.

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