Foreigners pick up EGP 1.4 bn in local equities as EGX30 gains 5.85% in July

After a full quarter of net selling and a red June, foreign investors turned net buyers of Egyptian equities last month, picking up EGP 1.4 bn in listed stocks, even as local individuals turned net sellers to the tune of EGP 2 bn, according to the bourse’s July monthly report (pdf). The EGX30 rode the shift to a 5.85% monthly gain, closing at 53.4k points, marking its best month since the spring rally and reversing a 4.12% June loss.

We’re not out of the woods just yet, Managing Director and Head of Research at CI Capital Monsef Morsy tells EnterpriseAM. “I think July represented genuine buying and a risk-on mode for Egyptian stocks, but I wouldn’t rule out volatility continuing going forward,” he adds. He says CI Capital is watching foreign activity “month by month” rather than calling a durable trend just yet.

REFRESHER- July marks a reversal from a rough 2Q, when foreign institutions sold a net EGP 4.8 bn and regional institutions sold another EGP 5.1 bn.

Foreign buying at the banks

Foreigners were net buyers of the banking sector to the tune of EGP 1.24 bn. Locals turned net sellers of banks by EGP 1.56 bn over the same period. “Any foreign buying into the market will, of course, go partly into CIB,” as the exchange’s largest stock and sector benchmark, Morsy says, adding that this dynamic “triggers a sector-wide rerating afterward.”

“CIB holds the heaviest weight in the EGX30 index, while also having the largest freefloat among listed stocks. This is the primary criterion foreigners look for when entering stocks, so that they can easily enter in the volumes they desire and exit just as easily,” Sameh Gharib, capital markets expert at Tycoon Securities, tells us. CIB also “underwent profittaking after hitting a peak near EGP 145 per share, pulling back to around 130+, which incentivized foreigners to re-enter CIB,” during July, Sameh says.

CIB typically absorbs between 30% and 40% of the EGX30’s weight, Gharib says, which is why foreign inflows tend to move through it first. He also points to a second potential catalyst still on the horizon: a long-pending Banque du Caire listing or stake sale, whether on the exchange or to a strategic investor. If that transaction eventually prices above the banking sector’s current valuation multiple — and above CIB’s specifically — he says the two developments together “could significantly drive a positive revaluation of the entire banking sector.”

A broad-based rally

The EGX70 jumped 17.61% in July to close at 18.2k points, and the EGX100 added 13.7% to 24k, both outpacing the benchmark. The EGX33 Shariah rose 5.59%, tracking the benchmark, while the Tamayuz index — for small and medium enterprises (SMEs) — gained 11.96%. Investors rotated out of bank stocks and into small- and mid-caps, helping the EGX70 outperform the EGX30, Gharib says.

Total market capitalization rose 7.0% over the period to EGP 3.9 tn. EGX30 constituents added 5.3% in value, EGX70 stocks gained 9.3%, and EGX100 stocks rose 6.5%.

Energy and support services led the month with a 21.7% gain. The rally tracked higher oil prices, which tend to lift margins across the sector, Gharib says. Education services (12.8%) and healthcare and pharma (12.2%) finished second and third. Banks, despite foreign buying, gained a more modest 6.7%, followed by basic resources (5.0%) and trade and distributors (3.7%).

At the bottom, shipping and transportation services closed the month flat, while food, beverages, and tobacco (0.8%) and industrial goods and non-bank financial services (both close to 1%) barely moved. No sector closed in the red.

Turnover value fell 7.85% m-o-m to EGP 2.6 tn in July, even as trading volume rose 13.1%, and the number of transactions climbed 7.63%, meaning July’s activity came in smaller, more frequent tickets.

When retail profittaking kicks in

Local institutions added exposure, while retail pulled back: Local institutions were net buyers in July, picking up a net EGP 1.3 bn in listed stocks (excluding block trades), while local retail investors offloaded a net EGP 2 bn over the same period. Meanwhile, foreign institutions net bought EGP 1.4 bn, while foreign retail activity was negligible, netting a small EGP 24.4 mn sale. Regional investors sold on both sides of the ledger; institutions net sold EGP 697.8 mn, and individuals net sold a smaller EGP 32.5 mn.

The net-net: Institutions overall (local, regional, and international combined) were net buyers of roughly EGP 2 bn, while retail across all nationalities was the mirror-image net seller of the same amount.

Value play

“Most Egyptian stocks still trade at very attractive valuations” compared to regional and global peers and their own historical averages, Morsy tells us, which means new buyers are “buying at attractive valuation and prices,” not chasing a rally that’s already priced in.

There’s more room to run, but not all at once. “We have a very strong upside potential,” he argues, “but the unlocking of this potential will happen gradually,” contingent on the macro backdrop staying stable.

The brokerages league table

Thndr topped the July brokerages league table (pdf) with a 17.9% market share, followed by EFG Hermes’s combined brokerage arms at 11.1% and Mubasher at 5.7%.

YTD- Thndr leads with a 14.6% market share, with EFG Hermes (combined) close behind at 14.0% and Mubasher a distant third at 6.2%, according to the EGX’s YTD ranking of brokerage firms (pdf).