UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next
Author: NileCapital Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 9  
Subject: A Welcome Sign: Egyptian Market Resumes Operatio Date: 4/7/2011 1:46 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
After closing in late January in the wake of political protests that eventually sparked a regime change, the exchange in Egypt re-opened today to strong – and predictable – selling pressure. The market, which had been closed for 38 market days (read our previous post about the closure here), fell nearly ten percent soon after opening, hitting a circuit breaker which caused trading to be suspended for 30 minutes. The market remained lower after re-opening, and individual stocks continued to hit circuit breakers throughout the day.

To us, it is predictable that the Egyptian market will be down over the next few trading sessions, and will remain volatile for some time. There is understandably pressure from investors to pare risk as Egypt sorts out its political affairs, and we believe that the recovery in the market is likely to take time. In our view, the market’s recovery depends on the speed and nature of Egypt’s political and economic reforms, which will determine the course of the country’s economy in the medium and long term. We are however encouraged by the process thus far. On Sunday, a referendum was held on proposed constitutional amendments – among them limits to presidential terms and judicial supervision of the election process – which paves the way for an election this fall. Should the process continue to move forward smoothly it will help to restore confidence in Egypt’s market.

Selling is also expected to vary between sectors, with firms that were strongly tied to the former regime facing additional pressure. Stocks related to consumer goods are thus likely to do relatively better, with those that are tied to political risk – for example Ezz Steel, whose chairman is being investigated for corruption – showing more weakness. In addition, we would expect to see firms with significant ex-Egypt exposure (of whom there are many listed on the Egyptian exchange) do relatively better as a whole in the short term. Because their operations are not necessarily highly dependent on the Egyptian market, their earnings often are not highly correlated to Egypt’s economic growth.

In the long term, our thesis remains strong that Egypt has the potential for significant growth. As we wrote here, we believe that short term volatility is to be expected, but in the longer term macroeconomic conditions are likely to remain favorable. Egypt is a young country, and rising demand for consumer goods, banking products, and affordable housing continues to make it an attractive destination for selective, long term investors.

For more information about investing in Africa, please contact Nile Capital Management at (646)367-2820 or info@nilecapital.com. We know Africa - from Cairo to Capetown
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next

Announcements

Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement