Cairo – Mubasher: Egypt’s market is closing 2025 as the best-performing in the MENA region, surprising positively in the year as it perfectly rode the tide of positive sentiment around emerging markets, according to a report by the EFG Holding Company’s EFG Hermes.
A weaker USD increased the appetite for Egyptian risk assets, while lower oil prices eased concerns over external accounts and projected favorably on the inflation outlook, both forming very positive shocks that uplifted the underlying economic fundamental.
Moreover, the weaker USD was an immediate invitation to higher inflows into the carry trade, which unleashed an appreciation of the USD-EGP. The latter, in turn, boosted local confidence in EGP assets for levels not seen post the floatation, starting a wave of de-dollarisation that is still ongoing as we near the end of year.
The equity market, meanwhile, was a key beneficiary of this trend as reflected in the notable rise in market liquidity, which saw a visible uptrend throughout the second half (H2) of 2025.
The Egyptian market further witnessed a decent rally, with the USD boosted further by the USD-EGP appreciation.
In addition, the market had its own domestic stories that boosted its performance, mainly the sharp rise in cement prices – following adjustments to the domestic quota system – which drove a sharp rally in cement stocks.
To conclude, the Egyptian market’s top five performers year-to-date (YTD) are also cement companies, with returns ranging between 100% to +500%.
Outlook
As for predictions for the coming year, EFG Hermes said: “We see the market still has more to offer in 2026. Stable macro is likely to provide room for healthy earnings growth; indeed, consensus is forecasting 13% CAGR growth over the coming two years.”
It added: “We project the disinflation trend to continue, providing room for the CBE to press ahead with its easing cycle. We project 600-700 basis points (bps) of rate cuts, with policy rates reaching 15% by end-2026. We also expect stable FX conditions, which should be supportive to corporate margins.”
Meanwhile, EFG Hermes has fewer concerns over FTSE’s move to put the market on the watch list for a possible downgrade to a frontier market, with the latest market rally already taking stocks to levels that beat the index providers’ minimum requirement for an emerging market status.
The market, though, will continue to face the challenge of relevance to foreign investors; as Egypt’s weight in global indices remains too small and liquidity too thin to ignite investors’ interest, which was demonstrated this year by continued depressed participation of foreign investors, despite the positive external headwinds and the market’s decent performance.
EFG Hermes stated that foreign investors remained net sellers throughout 2025.
Building on the above constructed view, the report highlighted: “We are ‘Overweight’ on the Egyptian market in 2026.”
The outlook for the consumer sector is positive, with a rebound in volumes ongoing, thanks to stabilising macro conditions, as well as improved access to financing. The ‘Top Pick’ by EFG Hermes, meanwhile, is Edita Food Industries, due to volume recovery, capacity additions and margin expansion. The stock is trading at an undemanding valuation of 11.3x forward P/E.
The report added: “We also continue to like banking stocks, despite the prospects of lower interest rates, as banks are likely to benefit from extended loan recovery. Our Top Picks include Commercial International Bank (CIB) and Abu Dhabi Islamic Bank (ADIB Egypt), given their strong growth profile. We like Crédit Agricole Egypt for its dividend yield c14% for 2026.”
As for the real estate market in Egypt, EFG Hermes said the sector faces affordability concerns, as well as high rates. It stated: “Nevertheless, we like Talaat Moustafa Group (TMG Holding), as it offers a diversified exposure to Egypt’s property and hospitality sectors – with the latter enjoying a strong recovery, thanks to record tourism revenues – as well as providing exposure to regional markets (which act as a hedge to both the local market and FX weakness).”
It added: “We are Neutral on fertiliser names, given limited upside risks to pricing. We do, though, expect an improvement in gas supply issues, which weighed heavily on earnings in 2025.” Valuations have largely bottomed, with companies possessing attractive positions, being cash-rich and high-dividend payers.
EFG Hermes concluded: “We are cautious when it comes to cement stocks for a number of reasons. First, the government has recently taken measures to boost supply in the market, in light of the sharp price rally in the past few months, probably hinting to normalisation in domestic prices. Second, stock prices have seen significant gains in 2025, being the market’s top performers, leaving limited upside, if any, for next year.”
