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Al-Ahram Weekly 22 - 28 June 2000 Issue No. 487 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 22 - 28 June 2000 Issue No. 487
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Focus Opinion Culture Features Travel Living Sports Profile People Time Out Chronicles Cartoons Letters Failed expectations
By Sherine Abdel-RazekShifting back and forth from bullish to bearish, the market's performance was uneven in May. The zigzag was expected because of the disillusionment felt by market players as government announcements took their usual wobbly course. The impending sale of Egypt Telecom, the government's announcement that it had referred a draft mortgage law to parliament, and promises of a quick resolution of the liquidity problem are but some of the announcements which triggered an enthusiasm that faded quickly into uncertainty as none of these plans materialised.
The promised sale of a 20 per cent stake in Egypt Telecom has been delayed until the end of the year. Many investors, anxious to see the sale go through, were frustrated by the postponement. Besides being the sole operator of Egypt's fixed line phone network, the company is licensed to set up the country's third mobile phone system at the end of 2002, when the exclusivity period the government has given its two existing mobile phone operators -- MobiNil and Click -- expires.
The disappointment over deferral of Egypt Telecom's privatisation was partially offset by official promises that the long-awaited mortgage law would be discussed during the then "current" round of the People's Assembly. The law is believed to be the panacea for the currently stagnant real estate market, clearly reflected in the performance of housing and cement stocks on the capital market.
But the parliament closed its session at the end of May, without a word in the draft mortgage law being discussed. The persistent liquidity problem still hangs over market transactions. The government has so far not been able to secure funding sources for the monthly LE2.5 billion it promised to inject over an eight-month period.
The market's swinging pattern was not due to internal factors only. Morgan Stanley's quarterly review MSCI index for emerging markets also added to the market's concerns. Investors had anticipated Egypt's inclusion in the index. Unfortunately, officials from Morgan Stanley confirmed that it is yet under consideration for inclusion in the November 2000 index.
The announcement resulted in a quick depreciation in most stocks targeted for MSCI inclusion: MobiNil, CIB, Suez Cement, Orascom Construction Industries and Misr International Bank.
May's market figures mirrored these setbacks. The capital market index has witnessed a very marginal increase of 0.76 per cent. Market capitalisation decreased by 0.85 per cent from April to reach LE129 billion. But transactions doubled, with the market's main leaders -- MobiNil and Media Production City Company -- cornering 67 per cent of overall transactions.
Both companies have witnessed important developments during the month. MobiNil has become the first mobile phone operator in the Middle East to offer its subscribers the Wireless Application Protocol (WAP) service, through which they are given access to Internet web-sites via their mobile phones.
Egypt's Media Production Company increased its current shareholder capital form LE1.45 billion to LE1.72 billion. Commercial International Bank's (CIB) popular shares posted a 9.3 per cent increase in its first quarter profits, reaching LE95.3 million compared to LE87.2 million in the same period in 1999.
The Misr Duty Free Shops case also has resurfaced. A year after the company was slapped with government decisions limiting its activities and stripping it of the bulk of its revenues, the cabinet approved a compensation plan for its shareholders. According to this plan, the company's Employee Shareholders Association (ESA) will buy back company stock from its current shareholders at the price of LE34.56 a share, as opposed to the LE31.56 price of 7 June 1999 (prior to the day the government announced its decision, after which the shares depreciated by more than 40 per cent). Officials from the Ministry of Public Enterprise say that the company's ESA will acquire a loan from the ministry's Restructuring Fund with which to repurchase the shares. The company's ESA will reimburse the loan in annual installments over a 10-year period. The move assuaged government critics who charged it had mishandled the interests of private investors who had bought Duty Free shares upon the company's privatisation three years ago.
There was also a flurry of privatisations in the joint-venture banks, with a consortium comprising the National Bank of Kuwait and the Egyptian Kuwaiti Holding Company acquiring 100 per cent of the Egyptian American International Bank at LE531 a share. The bidder's list included the French Credit Agricole, which offered to buy 100 per cent of the bank at LE420 a share. The lowest bid came from the United Bank of Egypt, which offered to buy a 51 per cent stake at LE350 a share. This was not the first time for the bank -- whose shares' nominal value is LE100 -- to go on sale. In 1997, financial authorities received a number of bids, which were all rejected for being too low.
More is anticipated in privatisation. Sales of the long-awaited-for power companies are in the pipeline. The government has decided to turn the Egyptian Electricity Authority into a holding company, as a preliminary step towards its privatisation. Government officials assert that according to new regulations, up to 49 per cent of the company will be privatised. This came about a year after the government's initial announcement of plans to privatise one of Egypt's seven power generation and distribution companies, and which were put on ice because of differences over the company's evaluation. Minority stakes are also expected to be floated in the Eastern Tobacco Company, Egypt's cigarette production monopoly raising the company's private ownership to 45 per cent of its assets.
