Will “presidential intervention” restore the Egyptian stock market from its stagnation?

Egyptian financial and business markets are awaiting the government’s steps to get it out of its stumbling block following the presidential mandates to prepare a comprehensive vision for its promotion, after the market lost about five percent of its value in less than five months , which is equivalent. to 25 billion Egyptian pounds (1.3 billion US dollars) of its capital. After the market capitalization of the shares of companies listed in the market fell from 740 billion pounds (about 40 billion US dollars) in Thursday’s session, 29 December (29 December). , the last sessions of 2021 to about 715 billion pounds ($ 38.6 billion) in its last sessions before the Eid al-Fitr holiday Last Thursday, 28 April 2022.

Over the five months, the main Egyptian stock index, “EGX30”, fell by 5.1 percent, while “EGX100” lost about 13 percent of its value, while the “EGX100” index (of equal weights) by about Fell 11 percent.

According to Egyptian Stock Exchange reports, the value of trading in the market during the first quarter of this year (until the end of last March) was about 447.2 billion pounds ($ 24.1 billion), while the trading volume was about 22.11. million papers executed on 2,326 thousand transactions, compared to With a total trading value of 266.5 billion pounds ($ 14.4 billion) and a trading volume of 31.979 million papers executed on 2,623 thousand transactions during the corresponding quarter of last year.

Shares accounted for 14.45 percent of the total trading value within the main market compartment, while the value of bonds traded about 85.55% in the same period.

Egypt’s transactions accounted for 72.7 percent of total listed stock transactions, while foreigners accounted for 17.9 percent and Arabs 9.4 percent, while foreign investors’ net sales amounted to six million pounds ($ 3,425,000). while Arabs recorded net purchases. About one million pounds ($ 54 thousand).

Supports investment attractiveness

Before the end of last February, the Egyptian government launched new sub-indices to boost the Egyptian capital market and improve liquidity. They counted four indices to measure and track the performance of the limited Egyptian treasury securities traded in different markets during different maturities. , and the indices include the most traded securities.

With the launch of the indices, the head of the Egyptian Stock Exchange, Mohamed Farid, said: “The addition of new indices, whether general or subsidiary, reflects the different expiration dates of securities and aims to increase the efficiency of the process of tracking and to measure the overall performance of the government. “

Farid added in an official statement that “the stock exchange’s management seeks to support investment attractiveness, in a way that enhances liquidity efforts and market trading, and diversifies investment options across all categories of current and potential investors.”

The Egyptian capital market did not respond to that move, as it suffered its biggest losses in the current year, less than 40 days after the indices were launched, when it exceeded 43 billion pounds in ten days (about 2.3 billion dollars) lost over five sessions.

The market capitalization of the stock market declined from 739 billion pounds ($ 39.9 billion) in early April to 696 billion pounds ($ 37.6 billion) on the evening of Monday, April 11, before the Egyptian market enters five Emirati transactions has to acquire companies. listed on the stock exchange with a total value of up to two billion dollars.

Signs of presidential orders

After the losses were exacerbated by the negative economic consequences of the local economy following the Russian crisis in Kiev, Egyptian President Abdel Fattah El-Sisi instructed his government to present a comprehensive and integrated vision for the promotion of the Egyptian Stock Exchange. to prepare, as part of a package of assignments on the sidelines of the “Egyptian Family Breakfast”, last Tuesday night.

Following the Egyptian president’s order, the capital market rose by about 21 billion pounds ($ 1.4 billion) at the end of trading on Wednesday and Thursday, and the main market index “EGX30” rose by 3.07 percent.

The Egyptian Stock Exchange’s exit from the dark tunnel and its support in its obstacle “not only require temporary sedatives, but require rapid and radical solutions to treat the endemic crises from their roots,” the analysts expressed their vision for a to develop comprehensive plan for restoring the Egyptian Stock Exchange in their talk with The Independent Arabia. They attributed the arrival of the local market to this bad situation to factors that are not insignificant, some of which are externally related to world events, and most of them are related to the public investment climate in Egypt.

Painkillers will not help

The former adviser to the Financial Supervisory Authority’s chairman, Medhat Nafeh, said painkillers would not work in boosting the Egyptian capital market, “so offering new companies, whether public or otherwise, is not a solution. not.” Considering that it is only a “circulation of capital between the public and the private sector in a closed circle that is useless in view of the chronic diseases from which the capital market suffers.”

Nafeh explained that this rotation “exhausts the savings of institutions with a (temporary) surplus. If companies and the capital market system are not really attractive to local and foreign private investment, it is not necessary to support them with more funds until they is not reformed, because the loss of attractiveness is a dangerous indication of failure that should not be overlooked. “

The Cairo Stock Exchange represents about 11.75 percent of the total gross product, which is 6.4 trillion pounds ($ 347 billion) during the current year, which is a decrease compared to the same percentage in 2016 when it was about 22 percent reached, when the Egyptian GDP was It recorded 3.4 trillion Egyptian pounds ($ 185 billion) in the 2016-2017 financial year.

The market is influenced by the general climate

In turn, the financial analyst in the financial markets, Sherif Sami, said that talking about drawing up a vision to get out of the chronic tunnel that the Egyptian Stock Exchange is suffering from is not happening within a year or two, and explained that “the stock market crisis is not in some of the decisions made here or there, while The crisis is related to the public investment climate in Egypt,” and notes that “the confusion in making economic decisions has a profound impact , whether negative or positive, in the capital market. ” He quoted the “Stock Exchange Gains Tax Act, in addition to the Central Bank’s decision to restrict imports from abroad being an influential factor.”

He emphasized that the promotion of the stock market does not mean a package of decisions, but rather the creation of an economic, investment, financial and monetary climate. “The stock market is a thermometer of economic performance.

At the beginning of the current year 2022, Cairo applied the capital gains tax on stock exchange transactions at a rate of ten percent, while local investors were exempted from the stamp duty after a six-year delay, as it was first applied in 2014, which at the time caused a disturbance in the Egyptian capital market over the method of calculating it The government decided in May 2015 to postpone it for the first time for two years, and with the end of the postponement period it returned to from to postpone it for the second time, but this time for a period of three years with the imposition of a stamp duty instead, and the Corona pandemic put pressure to postpone the tax for the third time until the end of 2021 .

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The pressure increases

On the sidelines of the Spring meetings of the International Monetary Fund and the World Bank, last Wednesday, the president of the International Monetary Fund, Kristalina Georgieva, said that the expected program of lending to Egypt from the International Monetary Fund is aimed at protection system in the country, amid high food and energy prices against the backdrop of the Russian war in Ukraine. .

She explained that the economic pressure in Cairo is increasing amid ongoing overlapping crises, including the war in Ukraine, in addition to the already existing effects of the Corona virus, in addition to the high prices of basic commodities. “Egypt must continue its path of reform to maintain the profits of the first wave of reforms,” ​​she said.

Georgieva stressed that the new program will focus on protecting the country’s economy from the ongoing setbacks caused by the war in Ukraine and will also ensure the protection of social programs in the country.

The fund raised its forecast for the growth of the Egyptian economy to 5.9 percent from 5.6 percent for the 2021-2022 financial year, but it lowered its growth forecast in 2023-2022 to five percent from 5.6 percent earlier.

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