Stocks edge down from Tuesday’s high

Egypt’s main index dropped slightly from yesterday’s seven-month high, ending Wednesday’s trading session down 0.27 percent.

The benchmark EGX30 index fell to 5,665 points, reversing an upward trend that has been maintained since September 18.

On Tuesday, the market saw a surge that pushed it to 5,680 points, almost reaching the February 5 high of 5,795 points. This makes it the third highest peak of 2013, the first being a positive performance in the first week of January that took the index to 5,804 points.

Fluctuations have marked the stock market’s performance this year, mirroring the political turmoil and uncertainty that began early on and worsened in late June, just days ahead of scheduled mass protests demanding the removal of former President Mohamed Morsi.

Since then, and after he was deposed by a military-imposed ultimatum, an upsurge in sporadic violence around the country has added further strain on the already ailing economy.

The economy has only been propped up by a flush of funding pledged to Egypt from Gulf states who had been averse to the Morsi regime, to the tune of $12 billion.

Egyptians were net sellers while foreign and Arab investors were net buyers on Wednesday, at LE19.4 billion and LE8.2 billion, respectively.

Analysts attributed the trend to profit-taking on the part of local investors, looking to cash in after several sessions witnessed a robust performance of most stocks.

“The index is now close to strong technical resistance at 5,682, its August peak,” Reuters reported earlier this week.

In its note on Middle East markets Wednesday, the UK-based Capital Economics said, “The Egyptian stock market has rallied over the past month…Stocks appear to have been buoyed by an easing of political tensions. Nonetheless, it remains to be seen how long this will last.”

The firm cited Tuesday’s ruling by an Administrative Court banning all activities of the Muslim Brotherhood, which on the one hand may have a negative effect on markets if it prompts more protests by supporters of Morsi and the Muslim Brotherhood. On the other hand, the ruling reassured some investors who see a tough stance against the group as a positive move.

Capital Economics added in its report, “The $12 billion of Gulf funds “allowed the Central Bank of Egypt to undertake a $1.3 billion ‘exceptional’ FX auction earlier this month, on the back of which the pound appreciated by 1 percent (the most in three years).”