Why did the stock market lose 60 billion pounds in 16 days?

Economy and stock exchange

The market capitalization of the Egyptian bourse has lost about 59.7 billion pounds since the beginning of May. The main index has fallen more than 7.4 percent, reducing its gains since the beginning of the year to 5.9 percent. Shuaa Capital responds to the losses.

Amr Al-Alfi, director of research at the Investment Bank, attributed the reasons for the decline to four reasons:

1 – Global unrest: fears that the development of trade war between the United States and China to reduce global trade, and recently, there has been an increase in geopolitical risks, where the United States sent a warship to the Middle East as a precautionary measure for any action by Iran, such events Not only affected the regional markets but also the global markets that made investors avoid risky assets.

2. Uncertainty at the local level: The market is not in favor of uncertainty. Many state-owned companies listed on the Egyptian stock exchange, which were allocated in the government's prospectus program, are losing their stock performance because of lack of clarity and thus uncertainty about their future.

For example, the Egyptian Aluminum Company has no clear map of the cost of electricity – the main element in the costs of its activities – how much it will be during the current year, not to mention the coming years, and Sidi Kerir Petrochemicals begins a large project to produce propylene and polypropylene, The amount of funds required is clearly part of the capital increase process, which would create value for the company, yet investors found such a move to be negative although it would create value for the company.

3. Marginal margin debt: Margin buying is a double-edged sword, which can be turned into a major driver for market performance, especially at a time when liquidity is low. With stock prices falling, sales are made to cover open positions, triggering further selling. .

4. Lack of new catalysts or products: Two factors that can drive market performance and liquidity in the near term are catalysts that may be specific to specific companies and introduction of new products that can stimulate trading.

For example, short selling can help investors gain from falling markets, creating a purchasing power as investors cover their short positions. Short selling is like the other side of a currency versus margin buying .

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