23 - 29 August 2001
Issue No.548
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Al-Ahram Weekly Online 23 - 29 August 2001 Issue No.548 |
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Back in business
After a very difficult summer, the capital market is enjoying a revival thanks to the devaluation of the pound. Sherine Abdel-Razek reports
After hitting its lowest levels in seven years in late July, amid regional unrest and a gloomy domestic economic outlook, the market is showing some signs of recovery.
Following the government decision to devalue the pound by six per cent on 5 August, stocks began to rally such that the EFG- Hermes financial index gained 12 per cent in less than eight trading days.
Brokers said that the government move has both boosted investor confidence and highlighted cheap valuations of traded stocks, particularly in the eyes of foreign investors.
The decision to expand the margin in which the value of the pound can fluctuate from 2 to 3 per cent above and below the central rate has helped to minimise foreign investors fears that further devaluations might wipe out their capital gains when they repatriate their profits.
As a result, foreigners were net buyers. Last week their buying transactions reached LE55.7 million, representing 15 per cent of total market transactions, while their selling orders accounted for 12 per cent of market turnover.
An upward trend dominated the market throughout the week ending 16 August save for the last trading day. This movement was reflected in the Capital Market Authority index which gained approximately 4 points to close at 594.
The cement sector was back in the limelight as its heavyweights registered a respectable performance. Traders said that active trade in cement stocks resulted from the fact that the devaluation of the pound, which effectively increased the price of imported cement, helped to boost the local product domestically and abroad.
Another factor that has given the market, and the cement sector in particular, a pat on the back was the government's announcement that it was selling all of its remaining stakes in companies that it had partially privatised. The Ministry of Public Enterprise also announced that it had received serious offers for its 47.9 per cent stake in the Helwan Cement Company. This news gave Helwan a considerable boost helping it to claim the lion's share of market turnover during the week with LE30.4 million-worth of its shares changing hands. Helwan's shares increased in value by LE3.84 to close at LE32.26.
Suez Cement has also fared well amid anticipation of the announcement of its mid-year financial results and finalisation of its deal with Ciments Français, which has recently submitted a bid to buy up to 25 per cent of the partly state-owned firm for a maximum of LE687.5 million. Suez closed the week up at LE33.82.
As for the telecom sector, after gaining 15 to 20 per cent during the previous two weeks, Orascom Telecom (OT) dropped in value to close at LE17.80.
Al-Ahram Beverages enjoyed considerable publicity during the week. The beverages firm posted a fall in first half pre-tax and net profits despite a 19 per cent jump in sales. Reuters attributed these results to Al-Ahram's newly implemented cost-savings measures which have yet to compensate for costs incurred from its recent acquisition of its sole competitor, El- Gouna Beverages.
Net and pre-tax profits both fell to LE40 million from net profits of LE45 million and pre- tax profits of LE51 million in the first half of the calendar year.
Another active stock was that of the Egyptian American Bank (EAB), although there was no news on its negotiations with prospective buyers. EAB closed at LE58.48.
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