11 - 17 April 2002
Issue No.581
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Al-Ahram Weekly Online 11 - 17 April 2002 Issue No.581 |
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Regional market gloom
The regional tension has done nothing but bolster the capital market woes. Sherine Abdel-Razek reports
Struggling to survive the stagnant local economy, the market was a little more than just vulnerable to the waves of tension which recently resurged in the occupied territories. Investors promptly fled most of the regional markets amidst the escalated violence of last week. The regional desertion was mirrored by the decline in foreign transactions in the market during the week ending on 4 April. While foreigners bought what was worth of LE18.7 million of shares, their selling activities mounted to LE23.4 million.
It was not only the foreign contingency of market movers that left it cold, however. The market in general has continued its near year-long downward trend, with its all share index losing 5.1 points to end the weeks at 619.3 points. Overall market transactions came relatively thin at LE173.6 million, LE27.6 million out of which was in bonds transactions.
This dismal performance came at a time when news of any potential kick-start to the stagnant economy was absent. What was expected to be the only hope -- the positive impact of revealing the figures of the national draft budget -- was offset by the negative impact of the regional tensions.
The size of the national budget for 2002/2003 has been stabilised at LE146.4 billion, an unprecedented high in Egyptian history. The cabinet announced that 26.4 per cent of the budget will be allocated to salaries, and 117,000 jobs are projected to be offered throughout the year. The budget proposal will be brought before the People's Assembly and the Shura Council next month.
Shares of the Commercial International Bank (CIB) were the most active during the week, as it cornered 17.1 per cent of the overall market transactions to close at LE31.5. Another banking sector player in the limelight throughout the week was Al-Watany Bank (AWB). An Arab financial institution has signed a preliminary agreement to buy 40 per cent stake in AWB. Under the agreement, the Arab investor has until mid-April to accept or decline the bank's asking price on its shares. Neither the share price nor the name of the investor have been released. Last month, however, AWB's General Assembly approved a plan to increase its capital to LE315 million -- news which promptly pushed the bank's share price steadily up.
Not all bank shareholders were celebrating this week. Shareholders of the Egyptian American Bank (EAB) objected to its decision to distribute a dividend of only LE3 a share. The lower- than-expected dividend came as part of the private bank's plan to direct of its profits to boost its loan provisions.
Complaints amongst shareholders were in seeming abundance this week. Shareholders of another listed company, Alexandria Cement, have submitted complaints to both the Foreign Trade Ministry and the Capital Market Authority (CMA), against the company's decision not to distribute any dividends for the fiscal year 2001. The decision came despite the company's profit posting of LE207 million during 2001. The complaints also included the shareholders "concerns" over the low bid offered by Alexandria Limited to buy a 20 per cent stake in Alexandria Cement. Analysts say that the valuation of the company's share price -- in accordance with its 2001 results -- comes in at LE51.6, compared to the LE30 offered by Alexandria Limited.
The CMA -- the market regulator -- criticised the financial statements of the Arab International Contractors (AIC) company, saying it did not submit its consolidated financial statements to the CMA. Moreover, the annual statements published by the company in local newspapers -- a stipulation for all listed companies -- lacked several important items, together with the auditors' report on the company's inventory.
The downward motion did not come as much of a surprise to most of those involved in the regional market scene. What did come as a shock, however, was the 43 per cent drop in the net profit of Suez Cement during 2001. The unaudited financial statements of the company showed LE166 million of net profits, compared to LE290 million for the same period last year. Nevertheless, the drop may not be as severe as it seems, for last year's figure included LE56 million in dividends from Tourah Cement as well as an unusual gain of LE104 million from the sale of the company's stake in rival Egyptian Cement Company. Net profit before the unusual items for 2000 was LE130 million. The adjustments did little to console investors, with the consequence that Suez Cement shares plunging to LE37.57.
One piece of good news this week came when Orascom Construction OCI -- whose Algeria project is backed by the World Bank (WB) -- heard that the International Financial Corporation (IFC), a subsidiary of the WB, would provide a $35 million grant for the construction of OCI's cement factory in Algeria. OCI has full ownership of the factory so far. Total costs of the cement production unit are estimated at $260 million, putting the IFC grant at 13.40 per cent of the total cost.
Amidst the regional turmoil and global chaos, any piece of good news comes as a pleasant surprise. In this case, however, investors are looking for a bit more -- some potential for a future upward market turn.
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