The EGX30 sprint to 60k is likely to take longer than some market participants initially expected as market sentiment shifts to “neutral” on Egyptian equities, marking a retreat from one of the year’s most ambitious targets. Al Ahly Pharos research head Hany Genena tells us that while the investment bank previously held a target of 60k — upgraded from an original 50k — the current landscape requires a change in posture.

Al Ahly Pharos is now advising clients to “hold incremental buying activity” and move to “increase the cash component in your portfolio.” This shift isn’t just a reaction to regional tensions or local volatility, but a response to a fundamental change in the global landscape where, for the first time in a long period, the USD is regaining its role as a safe-haven asset.

“The risk to Egypt’s capital market is two-fold,” Rumble Chief Equity Strategist Amr El Alfy tells us. El Alfy notes that a “risk-off mode will mean foreign investors will likely exit emerging markets, including Egypt, if tensions linger,” while simultaneously, “higher risk premiums across the globe will mean lower valuations for both stocks and fixed-income instruments.” This pressure is already manifesting in the behavior of foreign and Arab investors, who have turned into net sellers.

El Alfy identifies two distinct cohorts driving this exit — those who view the conflict as short-lived and may remain in “EGP-denominated [banknotes] or Treasuries,” and a second group that may “opt to exit the market altogether for the time being” to park capital in “gold or US Treasuries.”

Both strategists agree that regional alternatives offer little protection in the current climate. Genena notes that “Saudi Arabia is not a safe haven at all,” adding that despite efforts to diversify, it remains an “oil-dominated economy.” El Alfy concurs, stating that “all GCC countries, including Saudi Arabia, are in the line of fire during this conflict.” He warns that even if oil prices remain elevated, the “closure of the Strait of Hormuz will limit Saudi Arabia’s oil exports, depriving it [of] any windfall.” This leaves investors with few regional hedges, as even the Gulf’s largest markets are likely to “feel the brunt of investors turning into a risk-off mode.”

El Alfy expects asset and portfolio managers to “underweight the market’s high-beta stocks” and pivot toward “low-volatility stocks to ride the current volatile wave.” Genena similarly suggests that those who must remain in the market should focus on equities “classified as blue chips [...] large caps and liquid and financially stable.” In the fixed-income space, the preference is shifting toward “short-duration instruments,” particularly if the market believes the CBE will “pause its monetary easing cycle in the coming MPC meeting.”

Despite the immediate gloom, there’s a shared expectation that the current period of high friction will be relatively brief, with Genena anticipating it to end within “two, three, four weeks.” Once the geopolitical dust settles, he anticipates a dramatic shift in energy markets. Due to a massive global oversupply of “3 to 4 mn barrels” per day, Genena expects oil prices to “crash, not fall” after the tensions are over.

For an energy-importing nation like Egypt, this eventual collapse in crude prices would provide significant relief, allowing the country to “maintain its momentum throughout the rest of the year.”

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