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Al-Ahram Weekly 31 August - 6 September 2000 Issue No. 497 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 31 August - 6 September 2000 Issue No. 497
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Travel Living Sports Profile People Time Out Chronicles Cartoons Letters Summer slumber's over
By Sherine Abdel-RazekFor the third week in a row, the overall sentiment regarding the performance of the Egyptian market has been positive as the traditionally slow summer period seems to be drawing to a close.
Registering its highest level in three months last week, the Capital Market Authority (CMA) general index gives the impression that the market will maintain its recent upward trend. One of the prominent factors behind the strong indication given by the index was an improved performance by second-tier low capitalised players.
A strong demand among local investors has helped to offset the increase in selling transactions by foreigners. Selling transactions accounted for 22 per cent of the market's overall turnover. Local purchases of stock were fuelled by the recent good news on the macro-level about a lower budget deficit in the first half of this calendar year. Added to this were reports by the Ministry of Economy showing a decrease in the price to earning (P/E) ratio to 9.3, putting the market in third place among 34 emerging markets. A ratio at this level means that shares in the Egyptian market are inexpensive compared to those in other emerging markets.
The revival came despite the fact that a number of short-term investors have liquidated their assets to cash in on profits. However, the market enjoyed ample support from longer-term investors who are continuing to buy shares.
The recovery in share prices is not the only factor contributing to market optimism in recent weeks.
A delegation from the American financial institution Morgan Stanley visited Egypt last week to review the constituents of Egypt's stand-alone index. After the removal of five companies and the addition of the Media Production City, the index now comprises 15 highly capitalised Egyptian companies. Topping the list of these is the market leader, the Egyptian Company for Mobile Phone Services (MobiNil) which has won a 40 per cent weighting in the index. This has helped to stem the company's losses which reached 38 per cent since January this year.
The weighting of MobiNil, which has been the market's star since its debut in 1998, came as no surprise, but the inclusion of the film and entertainment conglomerate Media Production City confounded predictions. While the entertainment company's stock has enjoyed some recent gains, its fundamental earnings outlook is still unclear, a factor that many had predicted would prevent its inclusion in the index.
The lack of transparency characterising Media Production City's finances has caused reservations among market experts. EFG-Hermes, Egypt's largest investment bank, refuses to advise on buying or selling the conglomerate's shares, maintaining a "no opinion" recommendation.
Morgan Stanley's review came as a preliminary to including the stand alone index for Egypt in its Emerging Markets Free Index, expected to occur by May 2001.
The market has also welcomed the news of the settlement between businessman Rami Lakah and his creditor banks, a move that ended the sharp decline in the value of both shares and Global Depository Receipts (GDRs) for the Lakah Group.
Just hours after news of the settlement broke, the value of Lakah Group's GDRs rocketed by 117 per cent while their twin shares traded on the Cairo stock exchange gained 5 per cent, the full extent of fluctuations in value permitted to occur in one day under the bourse's regulations. For the three days following the settlement, shares in the Lakah Group retained a place among the those most actively traded.
It is noteworthy that before this correction, the group's shares dropped in value by 80 per cent over three weeks in reaction to news about Rami Lakah's flight to Paris.
There has been another important development that will certainly give the market an always welcome pat on the back. Bloomberg, the specialised financial news service, has announced that it will start displaying news of the Egyptian stock market's transactions by October this year.
