Market reacts positively to Cabinet resignation and talk of new PM

Egypt’s main benchmark index continued its upward trend Monday, a day after it broke a resistance barrier of 8,000 points for the first time since the 2008 global financial crisis.

The EGX30 index ended the day at 8,046 points, 0.46 percent higher than Sunday’s close at 8,009.

On Sunday, the market had surged on the back of buying from investment funds and foreign institutional investors, garnering a total of LE5.8 billion in gains. Overall market capitalization reached LE491 billion.

Meanwhile, the broader EGX70 reached 665 points, its highest peak on record.

Wael Ziada, head of research at regional investment bank EFG-Hermes, told Mada Masr that the surge is a continuation of a trend that has been ongoing for weeks.

“The market is flush with liquidity and investors continue to look at the glass half full,” he said, attributing the liquidity to Gulf financial support pledged to Egypt worth US$12 billion as well as a second stimulus package recently announced by the government.

Despite Prime Minister Hazem al-Beblawi’s announcement early Monday that his government has resigned, the market continued making gains, suggesting that investors regarded the news positively.

Foreign institutions were net buyers on Monday at LE60 million, followed by individual Egyptian investors at LE3 million.

“The market took today’s news well, seeing that a weak government is out and that the incoming one may be perform better,” Ziada said.

Ibrahim Mehleb, the outgoing minister of housing, is expected to be named the new prime minister, according to media reports. With a wealth of experience running Arab Contractors, one of the largest construction companies in the region, Mehleb’s appointment may be a positive indicator for investors.

This is even more relevant when considering Egypt’s plans to spend much of the stimulus package on financing major infrastructure projects.

“Talk of Mehleb’s appointment has been going on for weeks,” Ziada said.

“Beblawi came under criticism for running a government that was not executing,” he added.

Mehleb has been viewed by many as the one minister in the Cabinet representing the executive branch, according to Ziada, making significant decisions and moving important issues forward.