Cairo, Egypt (CNN)– Foreign investors continued to leave the Egyptian Stock Exchange and recorded net sales of 7 billion pounds (378 million dollars) since the beginning of the year, which negatively affected the performance of market indices.
Analysts attributed the reasons to external factors, most notably the tendency of foreign funds and institutions to exit emerging markets, including Egypt, and the repercussions of the Russian-Ukrainian war, and internal factors, including administrative decisions related to stopping dealer codes and canceling operations on some stocks, and most importantly, the slowdown in the implementation of the government’s proposals program.
The Egyptian Stock Exchange is suffering from a sharp decline at all levels, whether at the level of market value, which lost 71.5 billion pounds ($3.9 billion) since the beginning of the year until Tuesday’s session, or in terms of the performance of indicators, where the main index (EGX30) fell by 10.6% to lose 1267 points, and the index of medium and small companies (EGX70) decreased by 17.64% to lose 388 points.
Hanan Ramses, an expert in financial markets, said that the stock market has witnessed a remarkable selling wave of foreign dealers since the end of last year and extended during the first quarter of this year, and attributed the reasons to first the investment climate in the Egyptian capital market, adding that foreign investors are afraid of administrative decisions related to canceling operations. On shares and stopping the codes of some dealers from buying, and there is another reason which is the opportunity cost in the neighboring markets, referring to the Gulf financial markets, which achieved a positive performance after the rise in oil prices and the diversification of investment alternatives in front of foreign dealers.
Ramses indicated, in exclusive statements to CNN in Arabic, that the selling wave of foreign dealers was reflected in the performance of the international depository certificates of Egyptian companies, which suffered severe losses affected by the global inflation wave and the Russian-Ukrainian war, in addition to the exit of institutions and major investment funds from the stock markets in general, and the trend to Safe havens.
Hanan Ramses pointed to the high rate of foreign sales on the Egyptian Stock Exchange during the current period, as a result of foreign investors’ precaution before the start of the week-long Eid al-Fitr holiday, as foreign investors prefer to exit the Egyptian capital market before any vacation for a long time, and retain liquidity for fear of any events occurring during The holiday period negatively affects their exit after the resumption of trading, adding that foreign investors tend to trade quickly, and search for alternative opportunities in the neighboring financial markets.
The Egyptian government has set the Eid al-Fitr holiday from Saturday, April 30, until Thursday, May 5, 2022.
On the impact of the depreciation of the pound exchange rate on foreign investments in the stock market, the financial market expert said that the decision contributed to revitalizing the money market in an instant, as the indicators rose on the first day to reduce trading, but the narrowing of dealing in dollars and news of the existence of a parallel price to the dollar negatively affected the dealers again Foreigners on the stock exchange, stressing the importance of resuming the government’s offering program to attract new liquidity and dealers, noting that postponing government offerings more than once negatively affected the program’s transparency to foreign investors.
And the Central Bank decided suddenly, last March, to raise the interest rate by 1% in an exceptional meeting, followed by a reduction in the exchange rate of the pound against the dollar. This decision caused the stock exchange to achieve 31 billion pounds ($1.7 billion), which is the highest daily profit rate. achieved by the stock exchange in its history.
And Wael Enaba, an expert in financial markets, said that foreign investors’ transactions on the stock exchange recorded net sales during the past three years, even before the new Corona virus pandemic, due to the tendency of foreign funds and institutions to exit emerging markets in general, including Egypt, which had the effect of this exit due to weak volumes. Trading which negatively affected the performance of the indices.
Enaba added, in exclusive statements to CNN in Arabic, that the wave of foreign sales on the stock exchange rose this year at a higher rate with the state’s announcement of the application of capital gains tax on the money market, pointing to the importance of local investment funds entering the money market to reassure foreign dealers, by activating President Abdel Fattah’s initiative Sisi invested 20 billion pounds in the stock market by the Central Bank, of which only the purchase of shares worth 1 billion pounds was executed.
Wael Enaba linked the return of foreign dealers’ purchases on the stock exchange to the resumption of indirect foreign investment in government debt instruments, and the latter leads their movements in the money market, and so far, foreigners have not decided to return to investing in the government debt instruments market in Egypt, despite the Central Bank’s decision to raise the interest rate by 1 %.