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Al-Ahram Weekly 13 - 19 April 2000 Issue No. 477 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 13 - 19 April 2000 Issue No. 477
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Books Features Travel Living Sports Profile People Time Out Chronicles Cartoons Letters A time of correction
By Sherine Abdel-RazekDespite high levels of foreign interest and reduced inter-bank rates, capital markets continued their downward trend, a corrective movement that appears to be the price exacted for earlier over-optimism.
While 41 per cent of purchases over the past month were made by foreigners - up from 22 per cent in February - the bulk of these transactions was accounted for by the Portuguese company Cimpor's acquisition of Ameriya Cement, in a deal worth LE1.7 billion.
Otherwise, dealings in the shares of MobiNil, Media Production City (MPCC) and Commercial International Bank (CIB) dominated the market, to the detriment of other traded companies. Indeed, last month saw the ludicrous situation emerge in which trading of these three companies' shares accounted for more than 80 per cent of overall market turnover.
MPCC alone, dethroning MobiNil as the market leader, saw LE1.5 billion worth of share dealings. Despite a general consensus that the shares are overvalued, MPCC continued to attract investors.
"Although little information is available on the company's fundamentals, investor confidence in its future prospects seems to be more than sufficient to fuel its upward trend," commented Prime Securities' weekly report. MPCC ended March at LE72, making it the second most highly capitalised company on the market.
News that Morgan Stanley Capital International (MSCI), which produces indices widely used by fund managers to allocate assets, is reviewing Egypt for possible inclusion in its emerging markets index was greeted less positively than might be expected. Inclusion, should it be decided upon, will come into effect only after several months. Meanwhile, MSCI officials said the review would focus on several economic and financial indicators in addition to studying the accessibility of equity markets and other regulatory and operational factors.
Any negative impact on the market caused by Robert Flemings negative assessment of macro-economic factors in the Egyptian economy was lessened by its apology to the Egyptian government for what it conceded was an inaccurate assessment of some out-dated economic indicators coupled with the fact that the increase in inter-bank rates, one of the report's main concerns, has now been reversed. Inter bank rates now stand at 8 per cent compared to 17 per cent a month earlier.
Surprisingly, only three weeks after launching its report in which it recommended that investors reduce Egypt's weighting in portfolios from neutral to underweight, Flemings announced that its asset management activities in Egypt would be merged with Flemings CIIC, the joint investment banking group involving Flemings, CIIC and CIB. The merger will create Egypt's biggest asset management group. CIB itself at last reversed a downward trend to close the month six per cent higher at LE41.87, following the decision by the bank's general assembly to distribute a dividend of LE3.50 per share for the fiscal year 1999. The decision came despite the demands by some of the bank's foreign shareholders not to distribute cash dividends this year. The general assembly rejected the request, fearing that it would impact negatively, not only on the bank's own share price, but on the market overall.
The government's announcement that any further privatisation in the cement sector would be suspended for the time being saw cement company prices collapse. Helwan and National Cement, previously believed to be next on the privatisation list, shouldered the largest falls, losing 17 and 32.8 per cent of their share value respectively.
And last month the Egyptian Stock Exchange itself made news as it delivered its financial results for the first time. A press release stated that the Exchange recorded LE10.45 million in profits last year, a 38 per cent increase from 1998. Revenues in 1999 were LE26.7 million.
