16 - 22 May 2002
Issue No.586
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Al-Ahram Weekly Online 16 - 22 May 2002 Issue No.586 |
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One step forward
Investors gave a cautious welcome to government plans to breathe life into the market. Sherine Abdel-Razek reports
Investors have long been waiting with bated breath for better economic news. This week, they got some. The government unveiled its plans to revive the moribund stockmarket; and ever since, respiration on the bourse has been a little easier. Still, there were a few huffs of caution: most gains were slight, as investors wait for plans to be implemented, and investment to flow.
The trading week was shortened by the holiday, but by 9 May, most blue chips had managed to head north. There was exhalation amid the inspiration, however, as the value of equity and bond transactions fell. Moreover, some dealers believed that the market's value was inflated by arbitrage trade in shares listed as Global Depository Receipts (GDR) on international markets. It was also buoyed by investors needing dollars who bought local shares, exchanged them for GDRs, and sold them for hard currency. Egypt's dollar supply remains low, a dollar fetching LE5.1 on the black market.
At the head of the government's list of new measures came those those related to privatisation. Prime Minister Atef Ebeid announced that the government will reconsider how it sells state-owned companies.
More specifically, the minister of electricity and energy said his ministry has begun a preliminary study for offering for sale up to 15 per cent of some of the state-owned power companies slated to be sold to the private sector. Initially, plans to sell power companies were revealed two years ago; they were later shelved after problems valuing the companies.
In another move to invigorate the market, the Ministry of Finance announced that a new system for trading treasury bills and government bonds will be introduced next September. The ministry's plan includes an issue of two billion pounds-worth of bills and bonds. Under the new system, only registered banks and brokerage companies may act as primary dealers in the market. Approved dealers will be allocated portions of the offerings at low interest rates on the condition that they cover 150 per cent of the issue. Following that, the dealers will trade the offerings in secondary markets. Only government bonds will be allowed to be traded in the capital market; bills will be traded through the central bank.
Traded companies also enjoyed their share of good news. Al-Watany Bank announced that the unnamed Arab institution, which has "expressed interest in buying 40 per cent of the bank's equity," has completed due diligence. The anonymous buyer has until the end of May to reach a final decision about whether to proceed with purchase.
The sale of Al-Watany equity comes as a part of the bank's plan to increase its shares from 25 million to 45 million shares, a move approved by its general assembly earlier this year. According to the plan, an anchor investor will take 16 million of the new shares and buy a further two million existing shares at a price to be announced. The remaining four million new shares will be distributed to existing shareholders in a rights issue.
The bank should be an attractive investment, having posted a six per cent net income rise in 2001, surviving the tough economic conditions that have stripped its peers of profits.
Orascom Telecom (OT) also fared better this week, despite rumours that it was having difficulties financing the Tunisian GSM licence it won earlier this year. Analysts have said that OT has yet to sell its 80-per cent stake in its sub-Saharan subsidiary Telecel, and may, as a result, be struggling to find the cash to pay for the Tunisian licence. A senior Tunisian official also described the GSM deal as "stillborn." Yet despite these misgivings, investors held firm: OT's stock stayed stable at LE11.67. Perhaps they were encouraged by news that this week OT paid the first installment of $227 million on the concession and the Tunisian minister of communication put his signature on the final agreement.
MobiNil, OT's subsidiary, remained stout in the face of news that Telecom Egypt has begun work on a rival third mobile network, to begin operation next year. MobiNil already competes fiercely with Click, the operator of Egypt's second GSM network. Nevertheless, the telecom giant's shares rose a point to LE 28.53.
Cairo and Alexandria Stock Exchanges was informed that the Egyptian-Kuwaiti Holding Company and Guardian Middle East and Africa had offered to buy 80.05 per cent of Al- Masreyah Glass for LE169 per share. The company had been targeted by a British glass company in February but the approach came to nothing, as sellers felt the offer price was too low.
Another popular share this week was Media Production City, which attracted several institutional buyers. Dealers attributed the shares' popularity to Media Production City's announcement that it plans to open 18 production studios by early June. Shares closed eight per cent higher at LE10.58 pounds.
Encouraging news also came from the UK, with HSBC, a British bank, saying that it will increase its investments in Egypt by $250million.
The Bank's Project and Export Finance Division in London will transfer funds to HSBC's subsidiary in Egypt, which will use them to finance international ventures in the country. HSBC bought Egyptian-British Bank two years ago and changed its name to HSBC Bank Egypt.
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