Today's Major Market Move: Egyptian Stock Market Top Gainer in January

With a 13% gain this past week, the benchmark EGX 30 Index is now up 22% for January making it the best performing equity index of the 321 indexes that we track. The other Egyptian equity index, the Egypt Hermes Index, has also performed well and is sitting in third with an 18.1% gain. Here's the top 10:

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Of course when a stock market is as beaten down as Egypt's, the math makes it easier to have higher percentage gains on the way back up. Going back to the January of 2011, when the uprisings started, Egyptian equities were down as much as 40% (the odd shape of the charts is due to the market being closed intermittently during the uprisings).

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Analysts pointed to two positive developments that may have helped fuel the rally: 1) The relatively positive nature of the celebrations of the anniversary of the uprising. Some had feared that many would use it as an occasion to violently protest against the perceived sluggish pace of reform. 2) The IMF agreed to lower the interest rate on a loan that is still in the process of being negotiated. Here's more from the Financial Times:

Indeed, the stock market remains down by more than a third since the start of 2011, and Egypt is still facing an uphill battle to fund itself until international aid arrives. The country needs international “hard” currency loans to bolster its depleted currency reserves – much of which has been burnt away by supporting the Egyptian pound – and to pay for food imports.

The efforts to support the Egyptian Pound so far have been a success. It has only weakened 3.5% against the US Dollar since January, 2011; well below the worst performers like Belarus (177%), Syria (22%) and Bangladesh (19%). However it now sounds like the Egyptian authorities are running low on firepower and hence the request for IMF funds.

Speaking of the IMF, they are still projecting steady GDP growth, despite the economic disruptions. The GDP estimates in the following chart are courtesy of the IMF. If the projections are anywhere close, then the Egyptian equity markets could be a really nice bargain at these levels.

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