It is clear to everyone that the Egyptian exchange has been going through some serious challenges in the past few months, since the FED started to raise interest rates, which caused a huge outflow of liquidity from the emerging markets, including the Egyptian one, heading to the less risky American fixed income instruments. As a result, this caused most of the Egyptian stocks to vigorously decline.
As per the last FED minutes issued on 25th May, “50 basis point hikes in the target range would likely be appropriate at the next couple of meetings”; some would say: “well, we already know what will happen, just like what happened previously and the stock market will decline again.”
But no, this time, here are 5 reasons why I think the Egyptian stock market will act differently:
1- Huge increase in natural gas revenues by 93% in Q1 of 2022.
This highly increases the USD inflows, which in turn supports the local currency, and consequently induces a kind of stability and trust in the performance of both the Egyptian macro-economy and the publicly-traded companies.
2- Hot money already fled out of the Egyptian market in large amounts (around 20 billion USD), and the rest, that would flow out next, will not have the same impact as previously.
3- The government took some measures that aim to list more companies, encourage indirect and direct investment and rationalize imports to achieve more stability within the market.
4- The Egyptian stocks are already at very attractive levels, they are regarded as a good hedge from inflation, and they are not likely to experience further decreases.
5- Gulf capitals show big interest in the Egyptian stocks, and they already acquired big shares of some of them, like ABUK, ALCN, MFPC and FWRY, which boosts trust in such companies future.
Finally, every challenge encloses an opportunity, and as they say: “Be greedy when people are afraid”, I believe that this is THE time to show some greed (;
This is not investment advice & you should do your own research before making investment decisions.