Egypt extends rally into third day; banks main drag in Saudi
The Saudi Arabian stock market
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DUBAI: Egyptian stocks rose in early trade on Wednesday, heading for a third straight session of gains after the central bank devalued the currency. Saudi Arabia edged down, dampened by banks after Moody’s cut its outlook for the sector.

Cairo’s main index gained 1.4 percent; it has climbed over 10 percent in the past two days on hopes that the devaluation will draw capital back to the country.

“There is substantial foreign money flowing in from abroad,” said a fund manager at a major Cairo financial firm. “The devaluation immediately made it 15 percent cheaper for foregners to invest.”

The real estate sector continued to rally for a third session with Talaat Mostafa Group and Palm Hills adding 5.3 and 2.4 percent respectively. Investors are allocating funds into the segment as they expect locals will purchase property as a store of value against an expected spike in inflation after the currency dropped.

But the central bank is expected to raise interest rates on Thursday, a Reuters poll showed, in an attempt to defend the Egyptian pound from a further drop. The fund manager said the pound was likely to stay stable while it absorbed the inflows of funds, and that while further devaluation was possible, it was unlikely to happen before July.

The banking sector was the main drag on Riyadh’s index , which edged down 0.1 percent.

Moody’s revised its outlook for Saudi Arabia’s banking system to negative from stable, saying persistently low oil prices and lower government spending would weigh on the sector as credit risk started to rise. The agency sees average oil prices at $33 a barrel in 2016 and around $38 in 2017.

National Commercial Bank and Banque Saudi Fransi each fell 1.5 percent.

The Moody’s action was not surprising after the agency put the Saudi sovereign on review for a possible downgrade earlier this month, but it underlined continuing risks for the Gulf.

“Banks will continue to remain exposed to event risk stemming from high single party exposures,” Moody’s said.

The Saudi petrochemical sector was resilient, adding 0.1 percent with heavyweight Saudi Basic Industries up 0.7 percent.

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