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Al-Ahram Weekly On-line 9 -15 November 2000 Issue No.507 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly On-line 9 -15 November 2000 Issue No.507
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Books Travel Living Sports Profile People Time Out Chronicles Cartoons Letters Market Focus
Season to be jolly?
By Sherine Abdel-Razek
Despite the delay of the offering of Telecom Egypt and the rock bottom prices for stocks, the mood in the market was upbeat for the third consecutive week. This was reflected in the Capital Market Authority Index which gained 5.09 points during the last of these three weeks which ended 2 November.
Source:EFG HERMES 
The almost frantic divestment which dominated the market recently seems to have calmed. More significantly, foreign purchases of stock accounted for 14 per cent of the overall market turnover during the week. With this inflow of capital, foreign acquisitions marginally exceeded the LE64.2 million worth of selling by foreign entities over the week.
Market analysts were divided regarding the implications of these indicators. Some believe that these point to the beginnings of a recovery. Observers holding this view ascribe the moderate trading volume to the increasing selectivity of investors, who are choosing to concentrate on less risky shares. Those who are sceptical about the prospects for a recovery, believe that fundamental changes need to be made to economic policy before a sustainable turn around occurs. Proponents of this perspective cite the liquidity crunch, escalating exchange rates and the mixed messages regarding the banking sector's credit policies as factors that will continue to weigh down the market if decisive action is not taken.
The most recent step taken to put things in order was last week's decision to raise by 0.5 per cent the interest rate on both post office savings and the National Bank of Egypt's investment certificates. By i ncreasing the yield on pound deposits, this measure aims at stemming a growing trend towards the dollarisation of bank deposits.
However, the reaction to this move was unexpectedly cool. By increasing the appeal of avenues of investment which compete with traded securities, the decision was expected to cause a slight decline in the market. Instead, investors chose to put their money in shares, which are currently traded at very low prices.
Trading got off to a good start last week with the National Bank of Egypt's purchase of a LE100 million-stake in the Media Production City. Representing the sale of some 4 million shares, this deal boosted both the value and volume of transactions for the entire week.
Also keeping the mood in the market upbeat was the performance of the big cap shares. The value for those of MobiNil and its majority shareholder Orascom Telecom (OT) received a significant boost from the announcement that Motorola is currently negotiating with France Telecom and OT to sell their stakes in Egypt's first mobile-phone provider. This news caused shares in MobiNil and OT to shoot up to LE78.5 and LE49.93 respectively. By reaching this level, MobiNil broke the LE75 mark which it has been stuck beneath since the beginning of October.
Talk of a strategic investor also played a role in the movement of stocks for Suez Cement. The value of its shares inched up at the beginning of the week amid what turned out to be only rumours of a strategic investor. By the end of the 5-day trading week, Suez Cement's stock closed at LE35.46 -- a price that is 0.77 per cent lower than the price at which it opened at the beginning of the week.
Trading activities in the shares of banking sector leader, the Commercial International Bank (CIB), were weighed down by the release of its financial results. CIB, Egypt's largest private bank (in terms of net worth), announced that at LE206.7 million its net profits for the nine-month period ending September 2000 declined by 1.8 per cent compared to profits during the same period last year. Such a decline had been expected by analysts due to CIB's strategy of over-provisioning.
Al-Ahram Beverages experienced mixed fortunes during the week. First, the good news: the producer of a wide range of alcoholic and non-alcoholic drinks, the company was chosen by the biannual American financial publication Forbes Global as one of top-20 most promising small-sized companies in the world. However, this pat on the back failed to stop the steep decline in the value of Al-Ahram's stock which fell by 3 per cent during the week to settle at LE49.01 a share.
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