Traders at Egypt’s stock market in Cairo.
DUBAI: Egypt’s bourse rose yesterday after Gulf countries pledged billions of dollars in aid but gains were capped in muted trade due to the onset of Ramadan.
Thin trading volumes plagued regional markets with activity in Saudi Arabia and Kuwait falling to its lowest this year.
After Tuesday’s close, Saudi Arabia announced $5bn in aid for Egypt, including central bank deposits, energy products and cash, while the UAE offered $3bn in grants and loans.
“The market did not react as expected; the money from the UAE and Saudi Arabia was a surprise, but it’s the first day of Ramadan and people are slowly digesting the news,” said Mohammed Radwan, director of international sales at Pharos Securities. Aid had been expected, but the packages are large enough to buy Egypt at least several months’ time to try to fix its state finances and restore enough political stability to resume attracting private capital.
Beyond the size of the packages, the announcements signal that the Gulf countries feel they have a strong political interest in keeping Egypt afloat.
Meanwhile, the appointment of Hazem El Beblawi as interim prime minister before elections was positive because it showed authorities are pressing ahead with a transition back to civilian rule, despite the turmoil since the military ousted president Mohammed Mursi last week.
Beblawi has a long record in economic management — he served briefly as finance minister — and personal contacts in the Gulf.
Radwan said the steps towards forming a government would gradually be factored into share prices.
Cairo’s benchmark index gained 0.7 percent, trimming 2013 losses to 2.5 percent, following a rise of 3.3 percent in the previous session on optimism over a swift plan for parliamentary and presidential elections.
The positive sentiment was also reflected in the Egyptian pound, which strengthened at a central bank sale of foreign exchange on Wednesday for the third time since the military removed Mursi. The pound was also steady on the black market.
In Kuwait, retail investors sold shares to book gains from an early-year rally but volumes slumped. The index shed 0.7 percent to cut 2013 gains to 32.6 percent. It hit a 53-month high on May 28 and has been in a correction phase since.
“Some stocks are still in the profit-taking venue; the bulk of the decline is a few retail investors trying to avoid any pitfalls in Ramadan,” said Fouad Darwish, head of brokerage at Global Investment House.
“There’s no fundamental reason for the market to slide; Q2 earnings expectations are bullish.”
Elsewhere, Dubai’s measure climbed 1 percent with three stocks — Dubai Financial Market, Dubai Islamic Bank and Dubai Investments accounting for more than half of all trading on the bourse.
Abu Dhabi’s benchmark added 0.6 percent. Abu Dhabi Commercial Bank accounted for half of all trades after an early-session bulk trade.
Traders are hopeful activity may pick up in the UAE after companies report second-quarter earnings later this month. In Saudi Arabia, the region’s largest market was little moved and volumes slumped to its lowest since August 2011.
Reuters
