Egypt stocks jump to 5-month high

DUBAI: Egypt’s bourse surged to a five-month high as signs that supporters of deposed President Muhammad Mursi might be willing to compromise with the interim government raised hopes for a political resolution after weeks of street violence.
A spokesman for a pro-Mursi delegation said it wanted a solution that would “respect all popular desires,” a sign that supporters could be backing away from demands to reinstate Mursi.
Also, the weekend passed without major violence.
Many investors had been concerned there could be more bloodshed if the army took action against Mursi supporters protesting on the streets; security forces shot dead 80 of them a week ago.
“There has been a slight fall in the political temperature in the past couple of days — we haven’t seen really serious clashes such as those of early July,” said Simon Kitchen, strategist at EFG-Hermes in Cairo.
“The investment outlook on Egypt is improving but remains volatile.”
Cairo’s benchmark index rose 2.9 percent to 5,530 points, its highest close since Feb. 26, making its largest one-day gain in nearly four weeks. Trading volume spiked.
The market may get a boost this week from the buyout of Orascom Construction Industries (OCI).
OCI, previously Cairo’s largest stock by market value, was removed from the main index last week after Dutch-listed OCI acquired more than 97 percent of the Egyptian firm in a cash-or-shares tender offer.
OCI NV said the offer would be settled on Aug. 5; some of the money may go back into the stock market.
A surprise cut of the main official overnight interest rate in Egypt by 50 basis points late on Thursday also supported investor sentiment.
Egypt’s pound continued to strengthen marginally in the wake of the rate cut, though it was unclear how much the central bank was engineering the appreciation as a confidence-boosting measure.
Billions of dollars in Gulf aid promised since the army overthrew the president have begun to trickle into the currency market, easing pressure on the pound.
“Currency concerns have decreased for the short-term, but you won’t see foreigners pile in,” Kitchen added.
Local investors were net buyers of Egyptian stocks on Sunday while foreigners were sellers, bourse data showed.
The index appeared to stage a clean break of major technical resistance around the 5,450-point area, which capped it in May and July. The next major resistance is at the January peak of 5,884 points.
In Kuwait, the index slipped 0.7 percent, trimming its 2013 gains to 35.4 percent. Investors are booking some profits from the rally, but many see the choice of a new cabinet, after last month’s parliamentary elections, as positive.
Elsewhere, underpinned by strong second-quarter earnings, Dubai’s measure rose 1.1 percent to a fresh 56-month high, while Abu Dhabi’s index gained 0.2 percent.
Dubai engineering and maintenance firm Drake and Scull rose 2.6 percent in active trade.
The firm was expected to post earnings later on Sunday or on Monday; five analysts polled by Reuters forecast a quarterly profit of AED49.5 million, a 90 percent jump from a year earlier.
Doha’s index climbed 0.6 percent to its highest close since September 2008.