The holy month of Ramadan is set to begin in the Arab World on Monday, and in Egypt this year it arrives with a somewhat unique trading cocktail of post-revolution political ambiguities and global economic uncertainties. It may be the worst performing emerging market so far this year (down 29.7 percent), but that never stood in the way of profitable equity strategies.
In the past Ramadan has been fairly straightforward when it comes to investor sentiment. A case in point: For economists, the month is synonymous with a notable rise in consumer spending. So lots of food, lots of gifts, and for retailers it’s one the best opportunities of the year to give those sales figures a bit of a boost.
But the enduring political rollercoaster in Egypt still leaves traders uneasy. Then there’s the fragile security situation, evidenced on Saturday by the fifth attack this year on a pipeline supplying gas to Israel.
Amr Elalfi, Co-Head of Research at CI Capital Holding, sees the volatility continuing in the next few weeks. He also told CNBC that the lack of clarity, both from an economic and political perspective, “puts a ceiling on the market”.
If you’re willing to take some risk he says, take a closer look at high-yielding stocks with government ownership like Telecom Egypt.
Analysts have told CNBC that despite the country’s tough transition, food and pharmaceutical stocks are likely to outperform the market in August.
Other stocks foreign investors should take a look at include Juhayna as well as Cairo Oils and Soaps. A similar play, Misr Oils and Soap, was among the top performing stocks last week, gaining over 5 percent.
Osama Mourad, CEO of Arab Finance Brokerage, further believes that the economy could witness a pickup from the traditional summer slowdown. Still, risk events remain close-by, with persisting doubts about whether the former Egyptian President, Hosni Mubarak, will be tried on Wednesday.
“I think it will not happen. And there seems to be a wide consensus about that,” Mourad added.
Bringing former regime officials to trial has been a chief component of protestor demands. Further delays to Mubarak’s trial could spark further demonstrations across the country, and heighten distrust about the intentions of the ruling military.
Meanwhile, as part of a regular review, nine companies will be switched on Egypt’s stock exchange benchmark, the EGX30, effective Monday. Stepping into the arena are among others Al Baraka Bank Egypt and Sidi Kerir Petromchemicals.
If you are going to settle on some Egyptian stocks in Ramadan, remember that the trading hours will be shorter, a custom practice for most of the region. Now the market will be open from 0830-1130 GMT. It got off to a positive start on Sunday, with the benchmark EGX30 edging 0.27% higher.