MARKET WATCH — Rebounding from the global hiccup
MARKET WATCH — Rebounding from the global hiccup
STOCK ANALYSIS: Sinai Cement (SCEM)
Written end of August 2024 for Business Monthly - September 2024 Issue
MARKET WATCH
The period from July 15 to August 15 was exemplary of how global markets have become intertwined, more often than not for no specific reason. If some investors got into the market at the start of the period then took off for a vacation on a deserted island, only to come back by the end of the period, they would have been quite happy with the market rising 6% in a month. But had they been trading the market on a daily basis, they could have erred on the side of action by selling way too soon when the market plummeted in the wake of what could be thought of as a global hiccup.
All three major indices ended the period up 6% each. However, if we take the market’s bellwether EGX 30 for instance, it rose as high as 5% by August 1 before it took a nosedive by the following Sunday, August 5 to pare all its gains. This negative performance was instigated by a global-wide panic after the Bank of Japan began to raise rates on the yen, leading carry trades to be unwound. This also coincided with what investors deemed as weak economic data coming out of the United States, specially related to the U.S. labor market. It was like a premonition of an imminent hard landing for the U.S. economy. But after another set of economic data suggesting otherwise, it only took the EGX 30 one week to recoup all its losses and push even higher.
This period also coincided with the second-quarter earnings season, where most EGX-listed companies reported strong double-digit and in other instances triple-digit earnings growth. Meanwhile, company-specific news drove other stocks higher. For instance, Sinai Cement (SCEM) came back in the limelight, rising by 77% in the wake of divesting an investment.
But with the U.S. dollar moving upward slightly closer to the EGP50 mark, Egyptian stocks that are linked to the U.S. dollar may soon come back into play. Meanwhile, investors will await the Central Bank of Egypt’s next move to cut interest rates, which—given the sustainably high inflation rate—may not be any time soon; and even if it was, it will likely not be that much of a rate cut.
STOCK ANALYSIS
Sinai Cement (SCEM)
Over the past decade, shares of Sinai Cement (SCEM) have been in the doldrums with no sign of hope. They have fallen by as much as 89% since mid-August 2014 through mid-May 2020. The stock, which was once followed by many analysts, was no longer covered by any research house. Even trading on the stock stagnated with few shares trading every now and then. But all of this changed after the company said it will divest its 25% stake in Sinai White Cement for EUR 30 million, which is worth more than double Sinai Cement’s market cap at the time. It took the market 4 days before it reacted to the news, after which the stock has risen by 20% a day for the following 7 trading sessions, 3 of which were captured during this period which saw the stock rise by 77% from EGP 10.28 to EGP 18.19. It later hit an intraday high of EGP 45.22 (a 340% move since mid-July 2024) before paring some of its gains.
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