Bull king of the hill
The unprecedented capital market rally is the outcome of developments on both the macro and micro levels. Sherine Abdel-Razek
Hardly a day goes by now without the stock market breaking new records. The market indices as well as the traded shares' prices have been recording all time highs since the beginning of the year. The benchmark Hermes index ended Sunday transactions at 32,206.58 points, another all- time high and representing a 35 per cent jump since the start of the year. The value of transactions during January reached an unprecedented LE6.2 billion, while market capitalisation has increased by 23 per cent since the end of the year to reach LE277 billion.
New macroeconomic developments in key sectors in addition to the upbeat expectations after strong end of the year results have partially ignited the rally, while developments in individual market leaders have contributed positively.
The increasing number of companies in the stock market, as the new government continues its pro-privatisation policies has also aroused positive sentiment in the market.
The government's new policies aimed at encouraging investments and smoothing the procedures of establishing investments is the main impetus, announced Chairman of the Investment Authority Ziad Bahaaeddin last week. This improved investment climate is reflected in a 78 per cent increase in value of authorised capital by new companies, according to Bahaaeddin.
Taking a closer look at the performance of the market's different sectors, telecommunications maintained its position as the market's star if not the main mover.
Shares of MobiNil hit a five-year high of LE170 last week boosted by Merril Lynch's increasing MobiNil's fair value by 26 per cent to LE168 per share. The agency said in a statement that revaluation of the Egyptian pound would help reduce capital costs for the company's upgrading efforts in its mobile phone network.
The number of MobiNil subscribers also rose to four million, ahead of market expectations, and Merril Lynch's 2004 after-tax profits are forecasted to reach LE849 million.
MobiNil's parent company, Orascom Telecom Holding (OT), continued its upward trend to reach LE365.5 per share during this week's early transactions as the company announced the launch of its mobile phone operation in Bangladesh, with investment costs estimated at $200 million. The network is currently operational in nine major cities, and is set to serve the entire country by the end of 2005.
Also, OT has decided also to maximise its equity stake in its key GSM operations in Algeria and Tunisia by 2.83 per cent and two per cent respectively. The transaction will be funded through a combination of debt and cash flow.
Shares in the textiles sector were booming thanks to speculation about the benefits of Egypt's Qualified Industrial Zones (QIZ) agreement with Israel and the US.
The biggest percentage gainer was Arab Cotton Ginning which shot up 18.7 per cent to close at LE6.98, an 18-month high. Brokers said it rose on media reports that it planned to acquire companies eligible for the QIZ benefits.
Under the agreement signed last December, companies in seven zones in Egypt can export duty-free and quota-free to the United States provided their products have at least 11.7 per cent Israeli content.
The cement sector was also active, as a number of the sector's key players had recently announced rising profits due to strong exports and high local prices. Moreover, some foreign buyers have expressed their interest about stakes in some local firms.
There are rumours about a renewed bid for Suez Cement from Italcimenti whose LE80.05 pound a share offer was rejected by the Egyptian government last year. Also, French-based Lafarge Titan, which currently owns 95 per cent of Beni Sueif Cement, has announced a bid to acquire 11.55 per cent of Alexandria Cement.
The banking sector did not fail to attract attention as well. News about a number of mergers and acquisitions offset the effect of disappointing results from two of the sector's main players. CIB's net profits fell during the first quarter of 2005 to LE156.8 million from LE183.7 million a year earlier. Meanwhile, MIBank also posted lower-than-expected full year results for 2004, showing net profit growth to LE150 million, up a mere 5.5 per cent from a year earlier.
Other members of the sector capitalised on acquisition talks. The Capital Market Authority approved a proposal from Société Arabe International de Banque (SAIB) to extend the deadline for its offer to acquire 100 per cent of Al-Watany Bank of Egypt's 31.5 million outstanding shares, at a price of LE11.25 per share. Interested sellers are to submit shares by 23 February, while the offer remains contingent on SAIB acquiring at least 60 per cent of AWB.
After raising its stake in the local National Société Générale Bank last month to 78 per cent, the French Société Générale's Group has expressed its interest in acquiring a local private sector bank.
Alexandria Iron and Steel turned in an outstanding performance, posting LE832.8 million in profits during the first nine month of fiscal year 2004, compared to LE271.9 million a year earlier. This jump stemmed primarily from a 64.7 per cent increase in sales revenues, culminating at LE5.5 billion.
In another related development, the National Investment Bank is considering buying the 4.5 per cent that the Holding Company for Metallurgical Industries currently holds in ANSDK. ANSDK's capital stands at LE1.3 billion, while El-Ezz Steel has a 32.6 per cent stake in it.