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Al-Ahram Weekly 18 - 24 February 1999 Issue No. 417 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 18 - 24 February 1999 Issue No. 417
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Special Travel Living Sports People Time Out Chronicles Cartoons Letters Market confidence returns
By Sherine Abdel-RazekPresumably, 1999 will witness the resurrection of the Egyptian capital market after two years of stagnation. An increasing index and enthusiastic trading are not the only elements that triggered relief among market players, but also the introduction of a number of plans and decisions that will inject energy into the market in the coming period.
In January, the market index fared very well recording a 25.8 per cent increase over its January 1998 level. The International Finance Corporation's (IFC) index for the Egyptian market has recorded a 19.46 per cent increase in January compared to its December level. The total number of Egyptian stocks listed in the IFC investable index in December remained the same as in November, while the Egyptian market weighting increased to 4.8 per cent from 4.4 per cent in the same two months.
Transactions of the 10 best performing companies -- at the fore of which are the Commercial International Bank (CIB) of Egypt and Mobinil Egypt -- accountd for 62 per cent of the total volume of trading throughout the month, which came to LE3.08 billion.
The CIB has capitalised on news of its launching a new portfolio management company and its pending new insurance company, with more than 12 million CIB shares changing hands during the month to settle at a price of LE38.46. Similarly, Mobinil has benefited from launching a pre-paid card system. Its improved share performance was also backed by its selection of a group of local and international banks to raise a $750 million loan for the company. The group includes Chase Manhattan Bank, the National Bank of Egypt (NBE) and CIB. The loan is divided into three parts, with a maturity period that extends to eight years.
Other companies fared well too. Cement shareholders were lucky after the local cement sector's investment appeal rose following the announcement of the French Lafarge's LE1.3 billion investment in the Beni Suef Cement Company (BSCC), a move that has revealed international interest in the Egyptian cement sector. The Holding Company for Mining and Refractories, BSCC's mother company, chose Lafarge's bid out of five other international and local ones after Lafarge agreed to direct LE120 million from new investments towards increasing BSCC's designed capacity from 1.4 to 2.8 million tons annually, in addition to repaying the company's debt. Lafarge offered to buy at LE16.5 a share for a 76 per cent stake in the company, which has 33 million shares in total.
Fortunately, the recent fall in cement prices to reach LE197 a ton did not dampen the enthusiasm. The decline was attributed to cold weather, which makes cement storage difficult, after the summer heat had raised its price to LE300 a ton.
BSCC was not the only privatisation deal that attracted attention in January. Greven's, a London-based investment group, bought 38.2 per cent of Paints and Chemical Industries' (Pachin) shares for LE332.7 million.
Moreover, investors' lengthy anticipation for the privatisation of public insurance companies seems to have come to an end as the companies' evaluation process conducted by A M Best was completed. The US-based Merrill Lynch and Morgan Stanley are currently preparing the booklets of terms for the sale.
The tourism sector has also witnessed important developments. The Holding Company for Housing, Tourism and Cinema is currently negotiating a deal with a Kuwaiti company to buy 49 per cent of Sheraton Heliopolis hotel. The government is planning to offer 68 per cent of the Nile Hilton and Nile Hotel's shares for sale. A group of local investors had offered to buy the Nile Hotel last year but pulled out because of the holding company's condition that the buyer cannot construct a building exceeding nine stories in the hotel's place.
January also witnessed the selling of 15 per cent of Remco for Construction and Touristic Villages' equity. The company's offering of 1.5 million shares was fully subscribed at a selling price of LE25 per share.
During the coming period, shares will probably not be the market's only boast. In a symposium held by the American Chamber of Commerce in Egypt, Abdel-Hamid Ibrahim, head of the Capital Market Authority (CMA), said that 1999 will witness a transformation in the bond market, not only for government bonds, but for corporate bonds as well. Abdel-Hamid said that the government will launch LE3 billion worth of government bonds with a 10-year maturity period during February. The volume of bonds transactions in January reached LE152.2 million, which is equivalent to six per cent of the overall market transactions. Abdel-Hamid asserted that this year will see the entry of market makers who are specialised in bonds dealings, in addition to the establishment of the first brokerage company specialised in bonds transactions.
