(MENAFN- Daily News Egypt) Egypt's stock market is expected by analysts to extend its sideways move this week, after the Central Bank of Egypt (CBE) left interest rates unchanged at the November meeting of Monetary Policy Committee (MPC).
A higher interest rate environment negatively affects stock market inflows, as investors tend to pump cash into banking sector assets.
The head of the capital market committee at the African Economic Council, Ayman Fouda, forecasted the EGX to extend its sideways move after the CBE decision.
The EGX's indices are likely to see sideways-to-declining performance after the CBE's Monetary Policy Committee (MPC) decision, Fouda highlighted, adding that the market is still waiting for positive news that pumps new liquidity into blue chips.
The EGX30 index may test the levels of 14,100 and 14,200 points and see support at 13,960 and 13,780 points, he pointed out.
The EGX70 is seeing a sideways-to-declining performance, he indicated, noting that it has resistance at 773 and 777 points and has support at 758 and 750 points.
Fouda recommends medium-term and long-term investors to monitor stocks well and activate medium-term stop-loss points, in line with keeping the liquidity of investment portfolios to resume buying after the recent correction phase ends and new positive incentives appear.
The MPC maintained the overnight deposit rate at 18.75%, the overnight lending rate at 19.75%, the rate of the CBE main operation at 19.25%, and the discount rate at 19.25%, according to a press release.
The committee attributed its decision to the decline of annual headline and core inflation, to 30.8% and 30.5%, respectively, during October 2017.
'This comes as a result of the moderation of monthly headline inflation rates between August and October 2017 to around 1.1%, compared to an average of 1.6% in the corresponding months in 2016,' the CBE added.
Egypt's economic activity continued to improve with real gross domestic product (GDP) rising by a revised 5% in the fourth quarter of 2016/2017, averaging 4.6% in the second half of 2016/2017, growing at the fastest pace since 2009/2010, the central bank said.
'The baseline inflation outlook remains consistent with achieving the CBE's inflation targets of 13% (+/- 3 percent) in Q4 2018, and single digits thereafter,' the bank added, noting that its MPC would continue to closely monitor all economic developments and will not hesitate to adjust its stance to achieve its mandate of price stability over the medium-term.
Meanwhile, Mohamed Gaballah, a market analyst at Pioneers Holding, expected the market to extend its sideways performance, awaiting fresh stimulus after the CBE decision.
The benchmark EGX30 index may maintain its upward trend as long as it is moving above 13,950 points, Gaballah noted.
The index has resistance at 14,200 points and an upside potential at 14,600 points, Gaballah added.
The EGX70 index is seeing a sideways performance, which will carry on over the coming period as blue chips attract more liquidity, the analyst noted.
The economist and market expert Safaa Fares said in a research note that the EGX30 index has resistance at 14,100 points and has an upside potential at 14,400 points.
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