The newly reopened Egyptian stock market “will remain volatile in the coming months”, with Saudi Arabia and the UAE likely to be the main benefactors of this, according to a report by Egyptian investment bank EFG Hermes.
The Egyptian stock market reopened on March 23, after closing on January 27 as a result of the anti-government demonstrations in the country that led to the ousting of former president Hosni Mubarak after three decades of rule.
“In our view, the Egyptian market will remain volatile in the coming months,” fund managers at EFG Hermes said in a report to the Dubai bourse.
Egypt's benchmark index plunged for two days when the stock exchange reopened on March 23 after a suspension of almost eight weeks due to the political turmoil, but rebound by more than ten percent the following week.
“In the GCC, we remain positive on Saudi Arabia, and we believe that the region’s largest market will continue to perform well in the medium term,” the report forecast.
With regards to the UAE, EFG Hermes said the announcement that government-owned Dubai World had signed a final agreement with eight creditors to restructure $25bn in debt would make the UAE even more attractive.
“The country’s consistent stability positions it as a safe haven amid the political unrest in the region,” the report said.
In the five months following the start of the unrest in the Middle East and North Africa, around $160bn was lost on the region’s major stock markets. However, EFG Hermes said it believed “the sell-off in the GCC presented a prime buying opportunity.”
This was demonstrated on Thursday when the Kuwait Investment Authority (KIA), the Gulf state's sovereign fund, announced it will set up a company with $1bn in capital to invest in Egypt's stock market.
"The head of the Kuwaiti delegation visiting Cairo revealed a decision by Kuwait Investment Authority to establish a company with capital of $1bn to invest in the Egyptian stock market," Kuwaiti daily Al Rai quoted Ali al-Ghanim, the head of the chamber of commerce, as saying.
"We affirm of Kuwait's positive position towards Egypt, and we are confident about investing in Egypt," he added.
Kuwaiti investments in Egypt account for about $15bn, according to latest data, Egyptian Ambassador to Kuwait Taher Farahat told the Reuters Arabic service in an interview last month.
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