MARKET WATCH — Large caps continue to lag
STOCK ANALYSIS: Arabian Cement Co. (ARCC)
Written end of May 2025 for Business Monthly - June 2025 Issue
MARKET WATCH
The period from Apr. 15. to May 15 saw EGX 70 EWI further outperform EGX 30, widening their gap to more than 8 percentage points on a year-to-date basis. Rising 4.9% for the period, EGX 70 EWI (well above the 9,000 level) is now up 15.7% since the start of the year compared to only 7.4% for EGX 30 which rose only 2.4% for the period. EGX 30 is said to be trying to set the 32,000 level as a floor to move higher, but it has so far been lagging EGX 70 EWI.
Overall, advances outnumbered declines by a ratio of 5 to 2 during the period. However, it was a story of opposites. On the one hand, top gainers included many small-cap names, the likes of Golden Coast (GOCO), Unipack (UNIP), Creast Mark for Contracting & Real Estate Development (CRST), and Copper for Commercial Investment & Real Estate Development (COPR) – all above more than 45% for the period. On the other hand of the spectrum, top losers included some small-cap names like El Obour Real Estate Investment (OBRI, down 19%) and Gulf Canadian Real Estate Investment (CCRS, down 16%) but also included large-cap names like Juhayna Food Industries (JUFO, down 12%) and Sinai Cement (SCEM, down 11%). However, many of the underperformers during the period are still up on a year-to-date basis.
Meanwhile, companies continued to report their first-quarter results which for the most part showed strong year-on-year performance in terms of recurring earnings, excluding gains from foreign currency movement. This is notwithstanding some of the windfalls that companies reported in the year-ago quarter following the Egyptian pound devaluation of Mar. 6.
Still, some companies like CIB (COMI, up 5.7%) reported 39% year-on-year higher earnings, reaching EGP 16.6 billion, its highest ever quarterly earnings on record and the highest among all EGX-listed companies. This helped the stock move up beyond the EGP 80-a-share level, allowing its market capitalization to flirt with the EGP 250-billion mark.
Elsewhere, some companies have benefited from its sector dynamics as well as macroeconomic drivers. For instance, Ibnsina Pharma (ISPH, up 1.1% for the period, up 35.7% year-to-date) reported first-quarter earnings growth of 85%. The drug distributor continues to benefit from higher drug prices and very soon will benefit from lower interest rates which started to come down in late April.
Furthermore, after the end of the period, the Central Bank of Egypt (CBE) cut interest rates for the second time in 2025 in its third meeting of the year. Having cut rates by 100 basis points on May 22, the CBE has so far cut rates by a cumulative 325 basis points in 2025. This leaves five more meetings all of which will be held in the second half of the year. With two consecutive rate cuts, the CBE looks determined to push ahead with its easing cycle. The only question that remains is how low would it go?
STOCK ANALYSIS
Arabian Cement Co. (ARCC)
Arabian Cement Co. (ARCC), the most valuable cement company trading on the EGX, rose 14.4% during the period, raising its year-to-date performance to 67.5% since the start of the year. Since the third quarter of last year, cement prices in Egypt have been on the rise. This goes back to July 2021 when a quota system was introduced in the Egyptian cement market with the blessing of the Egyptian Competition Authority (ECA) as cement producers were suffering from low cement prices and rising costs. In an effort to contain the rise in cement prices, ECA suspended the quota system for May and June, the first time since its introduction.
