14 - 20 February 2002
Issue No.573
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Al-Ahram Weekly Online 14 - 20 February 2002 Issue No.573 |
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Donations welcome
A rally of the capital market was the early fruit of the Sharm El-Sheikh donors' meeting. Sherine Abdel-Razek reports
In recent months, the market has vainly been trying to weather the storms whipped up by 11 September. Last week, rays of light appeared at last.
Market spirits were immediately lifted by last week's donors' meeting in Sharm El-Sheikh, price rises coming after the share indices had hit eight- year lows at the start of February.
In fact, the market did not even wait to see the value of aid that Egypt will get before embarking on a spirited climb which continued throughout the week ending 7 February. Share trades averaged LE40 million each day during the week, about double the previous week's levels. The all-share CMA Index gained 13 points to close at 617.
After news of the $10.3 billion in aid that Egypt will receive, the market was further cheered to learn that Egypt has pledged to overhaul the banking sector by joining the IMF-World Bank Financial Sector Assessment programme, under the terms of which, it must establish one body to isolate non-performing assets within the financial system and another body responsible for banking sector restructuring. Consultants will also examine possible reform of the financial system, including financial markets.
Gerard Rizk, analyst for Nomura securities in London, explained why this is good news. "Predominantly state control of Egyptian banks has resulted in a sector that is inefficient, lacking in transparency, open to abusive practices such as non-commercial lending and limited in the services it provides to customers."
The banking sector has always been described by analysts as underdeveloped, with only 10 per cent of the population using banking services. Egypt's four state banks hold 60- 65 per cent of the sector's assets.
Rizk told Al-Ahram Weekly that the repercussions of failures in the government's fiscal and economic policy will affect banks gravely, heavily exposed as they are to the public sector. No wonder, then, that news of the overhaul has energised bank shares. CIB, the sector's leading share, closed at LE28.5.
Telecom shares also fared well during the week. Shares in the sector's main market movers, MobiNil and Orascom Telecom, attracted a lot of attention during the week. MobiNil has been hard hit by the downturn, falling more than 30 per cent from its January high of LE37, to hit LE25 last week. This week, it edged up to LE29.26.
As for Orascom Telecom, investors had plenty of news to digest. The regional mobile operator is being approached by two investors who are considering buying its 80 per cent holding in its sub-Saharan Africa subsidiary, Telecel. There is also talk of a possible capital increase and share buy-back. Another encouraging development was the moratorium granted on the $300 million loan Orascom took last year to finance its Algerian licence. The telecom giant's shares climbed during the week to LE13.7
The cement sector also made headlines. The Capital Market Authority suspended bids for Alexandria Cement's remaining floating shares (about 20 per cent of its equity) until the company discloses its 2001 financial results.
The authority pointed out that the information will help shareholders make an informed decision on whether to accept purchase offers. French cement giant Lafarge has a controlling stake of about 80 per cent in Alexandria Cement; the privately-owned Alexandria Development Ltd bid for the remaining 20 per cent last month. Alexandria Development is offering LE19.5 a share, a low price compared to the LE80 paid two years ago by the British Blue Circle Company, Paris, when it acquired a majority stake in the company. Lafarge took over Blue Circle last year.
Another cement company, Suez Cement, was also in the news. Ciments Français announced that it has increased its stake in Suez's capital to 34.1 per cent. The company bought an additional 1.8 million Suez Cement shares from its Employee Shareholders Association. Ciments Français paid LE51 per share, the same price as it has paid for all previous purchases. Currently, there is an agreement between Ciments Français and Suez Cement's founding shareholders that prohibits the French company from tendering an offer for publicly traded Suez shares before October next year. Suez shares closed at LE38.
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