21 - 27 February 2002
Issue No.574
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Al-Ahram Weekly Online 21 - 27 February 2002 Issue No.574 |
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Sitting pretty
Investors are sitting on their holdings until the government's response to the Sharm El-Sheikh conference is clear. Sherine Abdel-Razek reports
What will Egypt do with the $10.3 billion showered on it in Sharm El-Sheikh? That is the question currently guiding investment decisions; and its echoes can be heard across the capital market.
Egyptian stocks were lightly traded in the week ending 14 February as investors awaited news on the structural reform conditions linked to the donor package.
The priority for many investors remains a change in foreign exchange policy; some analysts are calling for further devaluation of the pound to LE4.80- LE4.90 to the dollar. This level, according to observers, is closer to the pound's market worth than the current managed core rate of LE4.5. The dollar now trades at LE5.25 on the black market.
Under these expectant skies, the market could only muster transactions worth LE314 million, compared with LE469 million the previous week. The decline looks even steeper when compared with historical figures: last year during the same week trading was worth LE120 million a day. A handful of blue chips dominated transactions, with MobiNil, Orascom Telecom and Commercial International Bank (CIB) accounting for about 60 per cent of the week's trades and each gaining in price. MobiNil is still capitalising on recent positive results, while Orascom Telecom is banking on news of a capital increase. Their shares closed at LE32 and LE14.26 respectively.
As for CIB, it was the market's star throughout the week. The bank has posted a 4.03 per cent increase in its net profits for the year 2001, which reached LE401.76 million against LE384.99 million the preceding year. These figures confounded analysts' forecasts that the bank's profits would decline in 2001 owing to its cautious policies and the overall economic gloom. CIB, Egypt's largest private bank, follows a careful credit policy, lately justified by the deterioration in credit quality across the sector. The full year results were supported by a big improvement in the bank's final quarter results, when it posted net income growth that was 32 per cent higher than in the same period in 2000.
Analysts point out, though, that this improvement is not a result of stronger core operations but of a revaluing of the bank's net foreign assets. According to HSBC's January report on the bank, CIB benefited in 2001 from a revaluing of its foreign exchange assets as a result of the devaluation of the Egyptian pound. This could generate the bank an income increase of 100 million pounds. "CIB remains our bank of choice in Egypt given its market position, focused strategy, management ability and capacity to generate long-term quality earnings. But in the short term, macro- economic concerns dominate," the report said. Its shares ended the week at LE29.42. Last year, they peaked at LE41.26 in early September.
Moving to heavy industry, the Alexandria Cement Company had not announced its expected results by the end of the week and as a result its shares are still suspended. Recently, the company made an offer to buy its own free-float shares. The Capital Market Authority (CMA) suspended the offer until Alexandria Cement's annual results are made public. It also placed a moratorium on the cement company's shares. Alexandria Cement's compliance with CMA's disclosure requirements is expected to help shareholders make "an informed decision" about the offer. The company published an audited net loss of LE17.44 million for the first nine months of 2001, compared with a net profit of LE6.04 million in the corresponding period the previous year.
Another cement company making the news during the week was Misr Beni Suef Cement, which announced that its new production line would launch within weeks. The line will add an annual 1.4 million tons to the company's capacity. The company is being eyed by international investors who expressed interest in its forthcoming 25-30 per cent capital increase.
Bonds are still trading furiously, accounting for 48 per cent of market activity during the week. Most of those trades (95 per cent) were in government bonds.
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