Egypt’s shares are expected to move sideways amid a sell-off streak to book gains with the main benchmark index hovering around its lowest level in 2018.
The market saw a negative performance in the second week of July, with mounting pressures rising from investors’ concerns regarding the Global Telecom deal.
Global Telecom Holding (GTH) recently announced that it has received an offer from VEON Ltd to purchase its assets in Jazz—part of the Veon Group, an international communications and technology company—and associated operations for $2.55bn.
The main index EGX30 fell 1.52% and ended the week at the level of 15,879.81 points.
Market analyst Michael Mamdouh of Arabeya Online said that the Egyptian Exchange (EGX) has continued the correction wave below the level of 16,000 points amidst fluctuations for the benchmark index.
The correction is led by Global Telecom, leading EGX30 to break the support level of 15,781 points, especially with a correction movement in the housing sector, Mamdouh explained, noting that the current support levels will be between 15,781 and 15,500 points, while resistance lies at 16,100 points.
Meanwhile, the small and medium enterprise index EGX70 lost 3.1% and ended the week at 775.1 points, while the broader index EGX100 dropped 2.15% to close at the level of 1,990.09 points.
EGX70 is also seeing a correction movement below 800 points and has been seeing negative performances since March, with support levels now between 767 and 750 points, and resistance at 800 and then 820 points.
The equal-weighted index EGX50 slipped 0.38% and closed on Thursday at 2,708 points.
The market capital lost EGP 8.5bn and reached EGP 889.9bn by the end of the week.
Telecom sector experts believe the VEON offer for GTH is 25% higher than the market price, with fair value evaluation for the stock now at EGP 6 per share, as well as an expected dividends distribution at EGP 3.5 per share.
Shares in Global Telecom Holding were in a free fall since April after majority shareholder Veon withdrew an offer to buy the rest of the Egyptian-based company and said it would not make another offer.
Amsterdam-based Veon, which owns about 57% of Global Telecom, had made an offer for the remaining 42.3% of the company in November at EGP 7.9 per share.
Veon said that it has notified the Egyptian Financial Regulatory Authority that, given the lapse of time and absence of approval, it is withdrawing the mandatory tender offer (MTO) and does not intend to proceed with another MTO at this time.
GTH is one of just three stocks that make up the MSCI Egypt Index, an index that measures the performance of large- and mid-cap stocks on the Egyptian bourse.
The benchmark EGX30 index is hovering around 16,000 points due to the downward trend seen by blue-chip stocks recently, mainly the heavyweight Commercial International Bank (CIB), said Saeed El-Feki, branch manager of Osool ESB Securities Brokerage.
Blue chips are projected to see another wave of profit-taking, he added, pointing out that some liquidity will be added to blue-chips stocks.
The EGX30 index has support at 16,500 points, El-Feki indicated, projecting that the index would not break this level even during the anticipated profit-taking.
Hesham Hassan of Acumen noted that it is normal that the market witnesses a correction movement after its historic gains.
The head of research at El Marwa for Securities and Brokerage, Mohamed El-Naggar, expected the main index to return next week to targeting the 19,000-point level.
Foreign investors were sellers, netting EGP 93.6m, while Egyptians and Arabs were buyers, netting EGP 47.3m and EGP 46.3m, respectively.
The majority of the EGX’s leading shares ended last week in the red, led by Qalaa Holding, which dropped 5.24%, followed by Egyptian Resorts Co and Emaar Misr with 5.15% and 4.45%, respectively.
In other market news, Eastern Co raised the prices of its cigarettes by a minimum of 150 piasters per pack, Chairperson Mohamed Osman Haroun said.
This increase in prices comes in regards to the new health insurance law, which imposes fees on cigarettes, Al Masry Al Youm reported, citing Haroun.
Moreover, sources said that the Egyptian tobacco firm will raise the price of six brands by EGP 1.5 to EGP 3.
Sources added that Eastern Co is expected to generate around EGP 3bn in proceeds from the increase in prices, according to Al Borsa news.
Meanwhile, Egytech Cables A1, a subsidiary of Elsewedy Electric Co, has signed an EGP 439m contract with the Egyptian Electricity Transmission Company (EETC) to supply and install ground cables.
Upon the deal, the company will supply and install 220-voltage ground cables and optical fibre cables at Zahraa El Maadi’s substation, Elsewedy Electric highlighted in a filing to the EGX on Wednesday.
Notably, the Egyptian cable maker holds a 99.98% stake in Egytech Cables.
The Arab world’s largest listed cable company announced that two of its units had signed a deal with the Industrial Development Authority (IDA) to develop 4m sqm land plots at a combined value of EGP 880m.
Elsewedy Electric had reported a 7% year-over-year profit decline for the first quarter of 2018, recording EGP 1.4bn from EGP 1.53bn, including minority shareholders’ rights.