EGX defies regional slump, but the edge may be mechanical

Egypt appears to be one of the least impacted markets by the Trump-era tariff-driven global volatility amongst its regional peers, with the EGX30 up 4.9% YTD. That’s in sharp contrast to regional peers, with Saudi Arabia’s Tadawul down 3.7% so far this year, the DFM down 2.0%, and the ADX down 1.9%.

The EGX30 is also faring better than some of the markets that wrapped up 2024 with record gains, including the S&P 500, which is now down 8.1% YTD. It is even beating BTC, which closed out 2024 with a staggering 121.3% YTD gain, but is currently down 9.5% since January.

While that’s undoubtedly positive for the EGX, the comparison between the EGX and GCC indexes doesn’t paint the full picture. The divergence has more to do with structural differences than market outperformance in the traditional sense.

The EGX’s relative resilience is largely a function of its investor base. Trading activity remains dominated by local, retail investors — for example, 80.9% of trading activity was done by retail investors and 90.5% by local investors during trading yesterday. These investors tend to be more reactive to local cues and sentiment-driven triggers, such as the recent reaffirmation of Egypt’s commitment to a flexible FX regime.

This means that any sell-off is less likely to spiral, because retail traders account for the lion’s share of turnover in Egypt, EGX board member Rania Yacoub told EnterpriseAM last week. Retail investors tend to be more speculative, and this behavior could underpin a near-term correction rather than a sustained downturn.

In contrast, regional peers like the Tadawul and UAE markets are more exposed to global investor flows. Foreign investors were net sellers on the Tadawul last week, offloading SAR 2.2 bn worth of equities, while local investors bought SAR 2.3 bn. Non-Arab foreigners accounted for 44.5% of turnover on the ADX and 40.9% on the DFM last week.

The EGX’s relatively low liquidity and smaller size also mean it responds more sharply to modest inflows — especially when there’s a local policy trigger. Case in point: Tadawul closed yesterday with a turnover of SAR 6.5 bn — 23x the EGX’s 90-day average.

Crude overhang is also weighing on Gulf markets, as weakness in crude continues to pressure sentiment and the earnings outlook for Gulf corporates, especially state-linked and large-cap names. This pressure is reflected in YTD performances of important market constituents, including Aramco — the Tadawul’s heavyweight — which is down -7.5%, the DFM-listed DEWA in the red -10.3%, and Abu Dhabi’s Taqa at -2.2%.

MARKETS THIS MORNING-

Asian markets are mixed this morning following a tech rally in US markets, with Japan’s Nikkei up 1%, and Hang Seng (Hong Kong) virtually unchanged, while Shanghai Composite is inching down 0.4%. Meanwhile, Wall Street futures are pointing to marginal losses when markets open.

THE CLOSING BELL-

The ADX rose 0.9% yesterday on turnover of AED 1.8 bn. The index is down 1.9% YTD.

In the green: Umm Al Qaiwain General Investment Co. (+14.7%), Americana Restaurants International (+11.6%) and Eshraq Investments (+9.1%).

In the red: Abu Dhabi National Takaful Co. (-7.8%), United Arab Bank (-3.5%) and AD Ports (-1.9%).

Over on the DFM, the index rose 1.8% on turnover of AED 501.7 mn. Meanwhile, Nasdaq Dubai was up 2%.

CORPORATE ACTIONS-

Response Plus Holding (RPM) has approved the distribution of AED 20 mn in final dividends for FY 2024, equivalent to 10% of its share capital, according to a press release (pdf).

Burjeel Holdings has approved a dividend distribution of AED 170 mn for FY 2024, equivalent to AED 0.03 per share, according to an ADX disclosure (pdf). The payout represents 32.6% of the company’s share capital.