Al-Ahram Weekly | Economy | Insufficient measures

		21 - 27 November 2002 Issue No. 613 Economy	Current issue Previous issue Site map
Published in Cairo by AL-AHRAM established in 1875

Insufficient measures
The Central Bank's move to lower interest rates has failed to pull the market out of its prolonged slump. Sherine Abdel-Razek reports

Economic theory has it that any decline in bank interest rates should give a push to capital market investment. Not true where Egypt is concerned and especially so last week after the Central Bank shaved its discount and lending rate from 11 to 10 per cent.
The market saw another spate of thin trading during the week ending 14 November. Overall transactions fell to LE158.7 million compared to LE402 million in the previous week. Shares transactions accounted for only 32 per cent of all activity.
Market analysts believe that the interest rate reduction was too small to impact the ailing bourse. A Ministry of Foreign Trade report forecast the move will not have a direct effect on the exchange market, saying a market revival requires additional measures, such as the offering of new companies for sale.
Foreigners' buying and selling orders cornered only four per cent of transactions. "Egypt wasn't the most dynamic market to begin with and now the appetite for emerging market equity has dissipated," a London-based analyst told Reuters.
Most of the market blue chips fared poorly, with MobiNil and Orascom Telecom closing in the red.
Torah Cement's shares were the most popular, influenced by hopes the company would be sold off before the end of 2002. The company, 66 per cent of which is owned by Suez Cement, cornered LE5.9 million worth of transactions -- around four per cent of the market's overall turnover.
Watany Bank of Egypt's shares also made the news this week. The bank has appointed Ahmed Hassan Koura as managing director and deputy chairman to replace Fatima Lotfy, who left the bank due to differences with its management.
The new management's first challenge will be to deliver better news to the bank's investors after last week's results announcement. The bank's net profits declined by 67.1 per cent during the first nine months of 2002 to LE29.2 million compared to LE88.8 million recorded in the corresponding period last year.
The leader of the banking sector, the Commercial International Bank (CIB), announced that it is heading a consortium of 12 local banks to settle a debt amount of LE600 million owed by the food manufacturer Kabbani Group. The group owes CIB alone LE240 million.
The local cigarette monopoly, Eastern Company, posted a 10 per cent increase in net profits to LE79.0 million in the first quarter of 2002/2003, compared to LE71.8 million for the same period a year ago.
The increase came on the back of a surge in the sales of local cigarette brands by 16.7 per cent as consumers continued to shift to cheaper local brands.
The company is facing fierce competition in foreign markets, limiting its export revenues. In July 2002, Eastern Tobacco launched a new brand of Cleopatra King Size to replace the cheaper old bestseller. Its plans are to increase its production of the new brand as it gradually reduces the production of the old one.
According to an EFG-Hermes report, the company's revenues are expected to increase by 10 per cent to LE2.5 billion in 2002/2003.
On a positive note, Egypt's first mortgage company has been established with an authorised capital of LE1 billion. The company aims to provide real estate buyers with a long-term loan to help finance their purchases. One of the main partners, the National Investment Bank, announced that company activities will commence in 2003.

The performance of Eastern Company shares over the last three months source:EFG-Hermes

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