7 - 13 February 2002
Issue No.572
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Al-Ahram Weekly Online 7 - 13 February 2002 Issue No.572 |
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Persevering amidst the tumult
The capital market was hesitant in the run-up to the Sharm El-Sheikh meeting. Sherine Abdel-Razek reports
Commensurate with its long and steep declining trend, the capital market hit its lowest level ever for eight years half-way through the trading week ending 31 January. But the rate of decline had lessened by the end of the week, supported by hopes for the key donors' meeting taking place this week in Sharm El-Sheikh.
Weighted down by worries about the future of the economy on a macroeconomic as well as a micro level, and made nervous by the negative future growth prospects for companies in general in 2002, the benchmark Hermes index fell 126.71 points to end at 4,762.31, plummeting the index to levels not seen since April 1994. The index, set up by Egypt's largest investment bank, EFG- Hermes, includes 100 of the most heavily traded stocks in the market.
Equity investments were paltry throughout the week; while the overall market turnover was LE711.4 million, LE544.9 were in bonds not shares. Foreigners were still selling, divesting twice as much as they bought.
But the light at the end of the tunnel, the meeting of 37 international donors, gave the market a reason to hold steady without further loss. The meeting is being counted on as a financial life-raft for the economy which, according to government statements, badly needs a fresh injection of $2.5 billion. The government has prepared a list of projects that will benefit from the grants and loans extended by donors which include the IMF and World Bank.
Last week, five World Bank representatives gave Prime Minister Atef Ebeid their evaluation of Egypt's economic performance since 11 September and of Egypt's restructuring programme, and outlined ways of attracting foreign investment to Egypt beyond the deals to be signed at the conference. High hopes await the big event, as any optimistic outcome should restore investor confidence and spur a market recovery.
In the market, optimism has vied with gloom. The struggle between the bulls and the bears, the buyers and sellers was reflected in company share performances during the week. Blue chips like Orascom Telecom and MobiNil were dumped at the start of the week but perked up towards the end. The two shares were relatively actively traded, closing at LE10.43 and LE26.03 respectively.
MobiNil is still banking on its better-than-expected full-year results. Investors were also encouraged by an earlier company statement concerning early repayment of a dollar- denominated loan. The statement said that MobiNil would repay the first instalment of the $220 million loan soon. That first instalment amounts to $24.2 million. The second instalment, equivalent to $24.2 million, is due in July 2002. The loan is repayable over the period 2002-2006. Market observers believe that this step will help ease pressure resulting from the currency devaluation which had worried investors.
Still suffering after international ratings agencies Moody's Investors Service and Fitch cut their outlooks for several Egyptian banks earlier this month, bank shares were not the market's best performers. CIB ended on LE26, approaching its year low of LE25.
Another piece of news came from Eastern Tobacco company. Egypt's cigarette monopoly posted LE122.33 million worth of net profit for the six- month period ended 31 December 2001. Those figures compare with a net profit of LE148.10 million for the corresponding period in 2000.
Media Production City (MPC) has decided to set up a new production and marketing firm with a capital of LE250 million. The shareholders of the new company will be Arab and Egyptian investors, including renowned Saudi businessman Saleh Kamel. MPC closed at LE10.9.
Apart from transactions, the market witnessed two important developments this week. Sameh El- Turguman, chairman of the Cairo and Alexandria Stock Exchanges (CASE), has announced that the bourse trading committee has finalised a new price discovery system that will set the opening prices for shares. This is a change from the current system which uses the previous day' s closing price. Included in the new system are proposed amendments to increase the maximum limit for share movements in daily transactions from the current five per cent to 10 per cent.
Furthermore, (CASE) has rebalanced its CASE 50 liquid index in accordance with its biannual schedule. The index includes the 50 most actively traded stocks according to the value of their transactions. It changes on 1 February and 1 August every year. Companies expunged from the index include Chipsy Food Industries and El-Ezz Steel Bars. Those added include Orascom Telecom and Qena Cement.
Lastly, the Holding Company for Spinning and Weaving has prepared a list of 13 companies to be privatised. After a review of valuations prepared by international consultants, the companies will be made ready for sale to the private sector. Of the 13, four are being valued by Price Waterhouse Coopers. News of new privatisations always encourages the market, as it means more commodities to trade.
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