MIDEAST STOCKS-Egypt soars in massive volume after currency devalued; Gulf weak – Reuters

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* Egypt rises 6.7 pct; heaviest trade in over seven years

* Raises hopes that longstanding FX shortage could ease

* Banks, real estate firms may be among top beneficiaries

* But more currency weakness possible

* Petchems drag on Saudi

By Celine Aswad and Andrew Torchia

DUBAI, March 14 Cairo’s main stock index soared
6.7 percent on Monday, its biggest jump since Islamist president
Mohamed Mursi was toppled in July 2013, after the central bank
devalued the currency, raising hopes that Egypt’s foreign
exchange shortage might finally be resolved.

The central bank said it had devalued the Egyptian pound to
8.85 per U.S. dollar at a special foreign exchange auction. It
had previously set the average bid price at its regular and
exceptional auctions at 7.73.

The Cairo index rocketed to 7,004 points, near technical
resistance on this year’s peak of 7,114 points, in the heaviest
trade since at least 2009. It had already risen 7.8 percent last
week on signs authorities were moving to ease a foreign exchange
shortage that has plagued the economy for years.

“Markets are rallying quickly to reprice Egyptian assets
after the devaluation,” said Simon Kitchen, head of regional
strategy at Cairo’s EFG Hermes.

A lower Egyptian pound, and a sense that the currency is no
longer overvalued, could attract fresh capital flows into the
country from Egyptians abroad as well as foreign investors. For
years, the risk of a devaluation deterred foreigners from
putting money into Egypt.

“When the rate differential between the spot foreign
exchange market and the black market narrows, this entices
foreign buyers to return to the stock market,” said Ashraf
el-Ansary, chief investment officer at London-based Exante

There are still plenty of risks for the stock market, so
some traders said it might soon fall back. Many analysts think
the central bank will hike interest rates to fight inflation
fuelled by the devaluation.

But the devaluation may not be over; JPMorgan predicted that
after Monday’s 13 percent devaluation, the central bank would
gradually weaken the currency further, bringing the total drop
to 35 percent by the end of 2016.

Investors focused on Monday on the positives. One big gainer
was Commercial International Bank, the largest listed
bank, which surged 7.1 percent; JPMorgan said the bank’s
management had previously indicated that a devaluation would
have a net positive impact on its bottom line, with a neutral
impact on its foreign exchange asset-liability balance.

Real estate developer Talaat Mostafa surged 9.8
percent; a cheaper currency could lure some regional investors
to buy real estate, and Egyptians to put money into the sector
as a store of value.

Exporters and tourism companies may also benefit from the
devaluation if Egypt can reassure foreign tourists on the issue
of security. Arabia Cotton Ginning, which exports
textiles and other products, jumped 5.2 percent and Egyptian
Resorts added 6.9 percent.

Brokerage Pioneers Holding soared 10 percent after
reporting a 73 percent jump in net profit for 2015.

JPMorgan said it expected Egypt to agree with the
International Monetary Fund on a loan programme before the end
of the fiscal year in June.

This would be a politically difficult step for the
government; for this reason, Egypt has not committed itself to
an IMF programme in the last several years. But the devaluation
may have satisfied a key policy condition demanded by the IMF,
and an IMF loan would be welcomed by foreign investors.


In the Gulf, Riyadh’s index fell 1.3 percent as
Brent dropped back below $40 a barrel, prompting a
sell-off in the petrochemical sector. The sector’s sub-index
dropped 2.7 percent.

The insurance sector, favoured by local individual
speculators, was also hit, with many shares falling more than 3

Dubai’s index dropped 1.5 percent as traders booked
profits, with Dubai Parks losing 5.6 percent, erasing
some of its 14.3 percent gain on Sunday. Arabtec fell
2.9 percent and Emaar Properties dropped 1.4 percent.

But Abu Dhabi’s largest listed stock by market value,
Etisalat, jumped 3.1 percent in the heaviest trade
since November, helping lift the index 0.8 percent.

Etisalat had been falling sharply since Thursday, when it
said chief executive Ahmad Julfar had resigned and that it would
restructure by the end of June. International index compiler
FTSE Russell has said it will add Etisalat to its All-World and
other indexes after the close of business on March 18, so
investors may now be positioning for that.

Doha’s index slid 0.1 percent as Gulf International
Services, the oil drilling rig provider, fell 1.6



* The index jumped 6.7 percent to 7,004 points.


* The index fell 1.3 percent to 6,288 points.


* The index dropped 1.5 percent to 3,351 points.


* The index added 0.8 percent to 4,499 points.


* The index edged down 0.1 percent to 10,318 points.


* The index dropped 0.9 percent to 5,240 points.


* The index edged down 0.2 percent to 5,298 points.


* The index slipped 0.04 percent to 1,151 points.

(Editing by Robin Pomeroy)

MIDEAST STOCKS-Egypt soars in massive volume after currency devalued; Gulf weak – Reuters}