 |
Al-Ahram Weekly 10 - 16 June 1999 Issue No. 433 
|
||
Published in Cairo by AL-AHRAM established in 1875 |
| ||
|
Al-Ahram Weekly 10 - 16 June 1999 Issue No. 433
|
||
| Published in Cairo by AL-AHRAM established in 1875 |
| ||
Egypt Region International Economy Opinion Culture Profile Features Books Living Travel Sports Time Out Chronicles Cartoons Letters Lively month on the exchange
By Sherine Abdel-RazekA downward trens dominated the movements of most of the actively traded shares in the market throughout May. Market observers were surprised by the decline in share prices of most of the heavyweight market movers such as MobiNil and Commercial International Bank (CIB), but what took their breath away was their trying to keep abreast of the high level of market activity and developments last month. May was very busy as the number of transactions jumped by 120 per cent, compared to April, to reach 66.7 million transactions worth LE2.4 billion.
Experts attributed this increased activity mainly to the fact that stakes were sold in two listed companies, Nubaseed and Mohandes Insurance Company, and the value of these big agreements has pushed up the overall value of transactions in the market. Foreign demand has also energised the market, jumping during the third week of May to its highest level this year and pushing overall foreign transactions during the first five months of 1999 to LE5 billion. This represents about 40 per cent of total overall transactions of LE13.6 billion, or about four times last year's figure.
On the other hand, bond transactions remained at their normal weak levels, with concerns ignited by a fierce media campaign criticising the banks' underwriting of corporate bond issues. Being underwriters of an issue, banks have to cover it if it is not fully subscribed, and they are committed to repay the debt on its maturity date in case of any company's insolvency. Opponents of this trend say that such a commitment jeopardises bank deposits.
Some Capital Market Authority (CMA) officials have tried to allay these concerns by announcing that the volume of bonds traded in the exchange does not exceed LE4.6 billion, compared to the overall market capitalisation of LE90 billion. In addition, the CMA recently decided to obligate companies issuing bonds to update the credit ratings they must acquire before issuing bonds to show their creditworthiness on an annual basis throughout the lifetime of the bond.
During May, market officials sent encouraging signals to investors. Sameh El-Turguman, head of the Egyptian Stock Exchange, has inaugurated the bourse's first investors' club where investors can have access to business news services such as Dow Jones and Telerate. In addition, investors will have access to all the exchange's periodicals to help them get the data needed to take any investment decision. Once a decision is taken, it is dictated to brokers via the hot line with which the club is equipped.
El-Turguman has also taken an unprecedented step by holding a meeting with senior officials of the most actively traded companies to discuss the problems of trading.
On the privatisation front, a new trend is starting to take shape. After years in which public companies were only partially privatised, with the floating of stakes not exceeding 40 per cent, the sale of majority stakes to strategic investors became the common feature of all privatisation issues announced in May.
Besides the government's offering of five internal trade companies for the first time, including the giant Omar Effendi, Sednaoui and Salon Vert, other sectors such as cement and telecommunications are offering their "crown jewels". However, things are not going as smoothly as hoped for.
The cement sector, one of the main sectors in the market other than banking, has had a lot of negative publicity. Negotiations on French Lafarge's purchase of a 76 per cent stake in Beni Suef Cement are stuck due to differences between the government and the French company on ways to deal with the Egyptian company's debts. Four months of fruitless negotiations do not augur well for other potential investors, especially since two other cement companies, National Cement and Alexandria Portland Cement, are currently offered for sale.
Concerns about the cement sector have negatively affected its market performance throughout the past month so that most of the sector's companies ended the month lower.
The insurance sector, however, was lucky. First came Standard and Poor's selecting three of the sector's companies to be among the best 200 insurance companies worldwide. This could help in making the sector more attractive before transferring ownership of a number of its publicly-owned players to private hands shortly. Topping the list is the Egyptian American Insurance Company with 97 per cent of the shares slated for sale. Hong Kong and Shanghai Banking Corporation (HSBC) was mandated to advise the government on the sale of the company. Arab International Insurance, another publicly-owned company, has received an offer from Allianz Insurance of Germany to increase the latter's holdings from five per cent to 40 per cent.
Moreover, the Egyptian government announced that it will sign agreements with Morgan Stanley and Merrill Lynch to evaluate the assets of other state-owned insurance companies.
One of the most important deals finalised during the month was in the insurance sector. It was the sale of eight per cent of the equity of the Mohandes Insurance Company to the Saudi El-Rajhi Group. Many observers have reservations about the LE7.2 million deal since the company is believed to be underpriced with the agreement being based on a share value of LE21. Market experts believe an artificial intervention, not market forces, kept pushing the price down during the month preceding the deal. The share had been traded at a price which ranged between LE32 and LE46 for the year ending in April.
The presence of Saudi investors was intensive this month with another Saudi investor, Kaaki Group, buying a majority stake in Al-Nubaria for Seeds (Nubaseed) in a deal that added LE103 million to the overall market transactions last month.
The LE103 million figure is quite big but still relatively small compared to MobiNil's weekly transactions. MobiNil was, by all standards, the month's market star. Although it shed one or two per cent of its value from time to time in trading sessions, it was generally the market leader in terms of both the value and volume of market transactions. It cornered at least 25 per cent of the overall transactions each week.
MobiNil shares were shaken throughout May due to intensive media campaigns criticising the bad service of the mobile network. The situation was worsened by the government's demands to stop new subscriptions to the network until the congestion problem is solved. This was offset by the company's announcement of its better-than-expected results for the first quarter. As a matter of fact, this was not the only light in an otherwise gloomy picture that surrounded MobiNil for just a little while. The company's smart decision to exempt its subscribers from monthly subscription fees during May has strengthened MobiNil, although it will cost it LE30 million.
Another busy stock was that of the Commercial International Bank (CIB). The bank is still attracting a lot of attention despite the fact that its shares and twin Global Depository Receipts (GDRs) are losing ground. It seems that those interested in the bank have directed their money to its LE300 million bond issue which ended by being oversubscribed.
