Al-Ahram Weekly | Economy

		23 -29 May 2002 Issue No.587 Economy	Current issue Previous issue Site map
Published in Cairo by AL-AHRAM established in 1875		Recommend this page

All at sea
Not a shred of good news has stirred the dead waters of the capital markets. Sherine Abdel-Razek reports

The capital markets have become a journalist's nightmare. Nothing raises the spirits, nothing quickens the reporter's pulse, no good news brightens the dealer's day. It is all reminiscent of a scene in Coleridge's Ancient Mariner: "as idle as a painted ship upon a painted ocean."
And what news there is tends to be an albatross slung round the market's neck.
"No serious moves to revive the economy"; "Government shying away from IMF loan"; "Reluctance to liberalise the exchange rate".
And inevitably, inexorably, stocks are sinking.
Overall market transactions came to LE540.8 million through the week ending 15 May, but as usual most were fixed-income bonds: stale and safe. They amounted to LE322 million. Foreigners continue to desert the sinking ship, maintaining their position as net sellers. Their sales amounted to 20 per cent of all transactions, their buys a mere eight per cent.
Macro-economic news has done little to slake the market's thirst for optimism. Unnamed IMF sources said the Egyptian government was moving away from taking an IMF loan, as it would be accompanied by demands for economic reform, such as freeing the exchange rate. Quoted by Reuters, the sources said the government was unlikely to take up the International Monetary Fund's Compensatory Financing Facility (CFF), which is worth about $500 million. The facility was agreed upon at the Sharm El-Sheikh donors' meeting in February as part of a package of quick-disbursing funds. The sources added that a further $1 billion in quick-disbursing aid pledged by the World Bank and African Development Bank (AfDB) would not be released without a CFF or at least an IMF blessing that the economy was sound.
CFFs are designed to support countries facing temporary economic problems beyond their control, such as the aftermath to 11 September. But funds are not released unless the IMF is persuaded that there are no deeper macroeconomic problems.

Analysts say the government is reluctant to accept the loan as the IMF may pressure it to liberalise the exchange rate. And it doesn't want to do that lest imported food prices rise, sparking social unrest. Some basics such as bread and sugar are subsidised, but many Egyptians still rely on free market goods.
All this bad economic news was hardly likely to buoy stocks. Regional mobile operator, Orascom Telecom (OT) made the best of it. The week started with investors expressing relief after the company announced that it had made the first payment on its recently acquired Tunisian GSM licence. The company is trying to sell a part of its pan-African GSM operator Telecel to finance the deal.
However the relief was short-lived. OT reported a substantial net loss for fiscal year 2001 and an audited consolidated net loss worth LE435.30 million for the year ended 31 December 2001. The previous year, OT reported a consolidated net profit of LE37.30 million. The share ended the week unmoved at LE11.68.
More blows struck another dealer's favourite, Al-Watany Bank. In recent weeks they have capitalised on rumours that an Arab investor wants to buy 40 per cent of the bank's equity. It is now known, though, that the investor, the Kuwaiti Burgan Bank, is no longer interested. Reasons have not been given, but the chastened stock fell to LE17.75.
What is clear is that after dallying with Al- Watany, the Kuwaiti bank is eyeing up other talent in the market. It has surprised analysts by expressing an interest in buying a majority stake of the Egyptian-American Bank (EAB).

EAB has not been wanting for suitors this past year after its major shareholders, including Bank of Alexandria, announced their plan to sell shares. Among a long list of investors, the bank chose to negotiate with Standard Chartered bank. Talks foundered, however, after differences over price.
In other market news, National Société Générale Bank (NSGB) announced a reviewed net profit worth LE35.30 million for the first quarter of 2002. This compared to a net profit of LE34.10 million for the same period last year.
The Capital Market Authority announced its approval of the revised offer put forward by Pilkington International BV to acquire 90 per cent of El- Masreyah Glass. Pilkington already owns 10 per cent. The offer is based on it acquiring a minimum of 70 per cent of the company's shares at a set price of LE175. Pilkington International BV is a subsidiary of British company Pilkington plc. The company previously offered LE171 per share before needing to up the stakes after a counter-bid by Egyptian Kuwaiti Holding (EKHO) of LE173 per share.
That was about the best of it in a week of plenty of news but little to cheer. As the dealers and investors parched of all encouragement might have said, following Coleridge, of the bad news slopping around the market: water, water everywhere: and not a drop to drink.

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