The steepest decline for Egypt’s benchmark EGX 30 Index in almost seven months is attracting foreign investors as locals dump shares ahead of planned anti-government protests.
Non-Arab foreign investors are net buyers of shares valued at about 236 million pounds ($34 million) this month, according to data compiled by Bloomberg. The EGX 30 tumbled more than 14 percent in the period, entering a so-called bear market yesterday after losing 23 percent from a September peak. The investors were net buyers of less than 30 million pounds of stocks last month, when the index rose 4.7 percent.
Egyptian shares have lost the most in the last 10 trading days since a similar stretch in November as anti-government activists prepare for nationwide demonstrations at the end of the month. MSCI Inc. (MSCI:US) warned this week it may review Egypt’s 12 year-old emerging-market status for a possible cut if the nation’s currency shortage worsens.
Foreign investors are “trading the risk, banking on high returns,” Tarek Abaza, executive director for sales at Cairo-based Naeem Brokerage, said by phone. “Prices are highly depressed, you can make a huge return. The political situation has prevented them from coming into the market more heavily.”
The EGX 30 is trading at 1.1 times net assets compared with a multiple of two for Saudi Arabia’s Tadawul (SASEIDX) All Share Index and 2.1 times for Morocco’s MADEX Free Float Index, according to data compiled by Bloomberg. The measure advanced 1.2 percent to 4,651.76 at the close in Cairo on volume of 68 million shares, compared with a one-year average of 126 million shares.
The central bank said in March it took steps to “ease the exit of foreign investors” by providing banks with foreign currency on the same day they receive orders from those investors in Egyptian equities and debt.
“Foreigners still see opportunities to invest in Egypt,” Mohamed Omran, chairman of the Egyptian Exchange, said in an interview at Bloomberg headquarters in New York yesterday. “Prices are going down aggressively, and they’re taking advantage of that.”
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