Egypt.. Concerns over Interest Rates, Speculation, and Forced Selling Deepen Stock Market Losses

- The Egyptian stock exchange continued its decline for the eighth consecutive session, at the close of trading on Tuesday, amid ongoing selling pressures from Egyptian and foreign investors, while Arab transactions leaned towards buying. At the same time, the market movement showed a decrease in the intensity of the decline compared to the previous session. The main index EGX30 fell by 0.33% to about 52.3 thousand points, while the market capitalization lost about 15 billion Egyptian pounds (287.5 million dollars) to close at 4.076 trillion pounds (78.1 billion dollars), with trading volumes reaching about 7 billion pounds (134.2 million dollars).

This decline follows Monday's session, which witnessed sharper losses, as the main index dropped by more than 1%, while the losses in market capitalization reached about 51 billion pounds (977.6 million dollars), extending a selling wave that began the previous week and affected large, medium, and small stocks. Mohamed Hassan, the managing director of Elfa Financial Investment Management, stated that geopolitical tensions and fears of escalation in the region were among the most significant factors affecting the stock market's movement recently, along with concerns about rising inflation and interest rates globally.

Hassan added, in exclusive statements to Afaq News in Arabic, that rising oil prices represent an additional factor in market pressures, as the continued rise in energy prices may lead to increased fuel and production costs locally, which reflects on the profit margins of listed companies. These factors coincided with other pressures within the market, most notably what is known as margin calls, according to Hassan, who explained that the rising financing ratios pushed some investors to sell forcibly to reduce their positions, which intensified selling pressures.

During Monday's session, at the peak of the selling wave, the main index dropped to about 51.8 thousand points during trading, before purchases from foreign and Arab investors pushed the market to recover and close above 52 thousand points. Hassan believes that Tuesday's session reflected a continuation of previous selling operations, but at a less intense pace, predicting that the market will move in the short term within a range between 52 and 53 thousand points, until new buyers appear and new liquidity enters.

Despite the ongoing decline, Mohamed Hassan excluded the possibility of the market capitalization dropping below 4 trillion pounds (76.7 billion dollars), pointing out that there are institutions moving towards buying and expecting new liquidity to enter the market. The pressures are not limited to external factors, as Ihab Rashad, Vice Chairman of Mubasher Capital Holding for Financial Investments, believes that global interest rate expectations have become a significant factor in investors' decisions, after fears regarding interest rate trends prompted some investors to rearrange their positions and take profits that were achieved during the past period.

Rashad stated that the impact of individual investors has become more evident in the movement of several stocks, as some trades rely on recommendations from online groups, which may lead to sharp movements in both directions, away from the fundamental factors related to company performance. He explained, in exclusive statements to Afaq News in Arabic, that some stocks have witnessed significant increases over a short period followed by sharp declines, considering that speculation has become a significant factor in price movements, which has also led to the presence of investors stuck in positions formed at high price levels.

Rashad believes that the stock market moves in anticipation of events, as prices often reflect investors' expectations of what may happen, not just the actual developments. This may explain the exit of some investment positions before the expected developments materialize. With the end of the third quarter approaching, Rashad added that some institutions may move towards taking profits and rearranging their financial positions, which may explain part of the current selling pressures alongside individual speculations.