The head of Egypt’s stock exchange is bullish about the prospects for the equity market as the country’s economy turns the corner following several years of stalled growth in the aftermath of a string of political upheavals.
Mohamed Omran told Reuters News at a summit held by the agency that he expects 10 companies to list on the bourse by the end of the year. He did not specify if these would all be initial public offerings, although it is understood that a number of investment banks are working on a handful of IPOs
“Companies are able to acquire, expand and invest to a greater extent in order to achieve profitability and growth,” Mr Omran said. “This will reflect on per-share earnings and in turn on prices in the market. The exchange and the economy can never be separated.
“We have an economy that hungers for investments,” he added. “The major economic projects that Egypt is currently working on will lift the dust off its economy.”
Egypt has been battered by more than three years of unrest after the deposal of the former president, Hosni Mubarak in February 2011 and Mohammed Morsi last year. Following years of economic growth averaging more than 7 per cent, the country’s GDP growth dipped to 2.2 per cent in 2012, according to the World Bank, as receipts from vital hard currency sources such as tourism and foreign investment dried up. In the past year however, there have been signs of improvement in the economy after the president Abdel Fatah El Sisi moved to reduce energy subsidies.
Since Mr Morsi’s exit, the benchmark index has more than doubled. A recent dip in the key stock index has not caused signs of major panic among foreign investors who see the sell-off as being more related to global jitters rather any fears about the future of Egypt. The EGX30 has lost 12 per cent this month.
“The market did suffer from the general negative global market sentiment. Having run up so much, 12 to 16 months, taken in context it’s not such a big drop,” said Sherif Salem, a portfolio manager at the Abu Dhabi-based asset management firm Invest AD. “The market is up well over 100 per cent since June. It’s not really related to anything Egypt specific. It’s the regional and global events.”
Mr Salem said that while many Egyptian stocks are fairly valued, there are also companies such as industrial ones that are undervalued because of their recent earnings being hurt by higher gas prices. These ones look attractive to him in the long run.
Other experts say that Gulf nations will continue to extend the Arab world’s most populous country a lifeline until public finances are shored up and that this will likely be reflected in the fortunes of the stock market.
“We are quite bullish on the market, given a continuation of a stable political transition,” said Salah Shamma, co-head of equity asset management Franklin Templeton Investments Middle East. “We think that the Egyptian market as well as the economy will get enough support from the GCC counterparts to help prop up the economy again and help put it on a sustainable growing trajectory.”
“The GCC support will continue going forward. You will get a lot of foreign direct investment coming into Egypt from the Gulf as well as government aid. It is a big market and it’s one area for Gulf businesses to diversify.”
“We’ve also seen move this year significant reforms in the economy with the subsidies being partially removed. That alleviated many of the stresses that were being put on public finances.”
mkassem@thenational.ae
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