MARKET WATCH: Volatility, the name of the game
STOCK ANALYSIS: Tanmiya for Real Estate Investment (TANM)
Written for Business Monthly - February 2022 Issue
MARKET WATCH
Volatility, the name of the game
Last year ended on a dramatic note. The EGX 30 index staged a late comeback, ending the year up 10.2%, while its small-cap counterpart EGX 70 EWI rose only 2.6%. Interestingly, the EGX 30 beat EGX 70 EWI in 2021 after the latter had risen 43% for the year by early September. The EGX 30, on the other hand, had fallen as much as 10% by mid-June. In other words, the EGX 30 had recovered all its losses and added another 10%. Meanwhile, the EGX 70 EWI lost almost 94% of its gains. As for the Dec. 15 to Jan. 15 period, both indices rose, with the EGX 30 up 3.4% and EGX 70 EWI up 5.7%. Advances outnumbered declines by a ratio of almost three to one. However, on a year-to-date basis, the EGX 30 was up 0.5% by mid-January and the EGX 70 EWI by 1.5%. In a nutshell, the market has become distorted, with no clear direction. Both indices can give conflicting signals. One day the EGX 30 might be up and the EGX 70 EWI down, or vice versa. Even when the indices share the same direction, the magnitude of their performance can differ widely. The reason could be market segmentation in terms of individuals and institutions. During the period, Egyptian individuals were net sellers. On the other hand, Egyptian and Arab institutions were net buyers, while foreign institutions were net sellers. Some small-cap stocks outperformed their large-cap counterparts, with no significant catalysts. Sharm Dreams for Tourism Investment (SDTI) jumped 34.5% during the period, and General Co. for Ceramic & Porcelain Products (PRCL) 32.8%. Meanwhile, other large-cap stocks rose, albeit to a lesser extent. MM Group for Industry & International Trade (MTIE) rose 20.9%, anticipating an imminent initial public offering for Ebitkar, one of its subsidiaries. Egypt Aluminum (EGAL) rose 18.9% after aluminum prices broke the $3,000-a-ton mark again. Similarly, QNB Alahli Bank (QNBA), Egypt’s second-largest private-sector bank in terms of market cap, rose 18.3%, despite its limited free float. The bank was the first to report its 2021 results, with earnings marginally higher year on year. For the coming period, stock performance should be driven in part by fourth-quarter results. On the macro level, the Central Bank of Egypt will kick off its monetary policy meetings in early February. Most economists expect the CBE to maintain interest rates at their present level, especially since the U.S. Federal Reserve is not likely to raise its rates before March. However, volatility will likely be the name of the game, given the political tensions involving Russia, NATO, and the United States.
STOCK ANALYSIS
Tanmiya for Real Estate Investment (TANM)
Tanmiya for Real Estate Investment (TANM) is a new spinoff of Industrial Engineering Co. (ENGC). ENGC spun off unutilized real estate assets into TANM, which started trading on June 17. Since then, the stock has been up 48% from its post-spinoff adjusted price of EGP 1.96 to close at EGP 2.90 on Jan 13. TANM rose 26.6% during the period but was down 39% off its all-time high of EGP 4.74 on Aug 9. Although TANM’s market cap stands at more than EGP 350 million, earnings have yet to measure up.