Market Report

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An upward correction movement through the first two days of the current trading week lightened up the gloomy atmosphere that came to characterise the market through October, when the market lost 30 per cent of its value. The CASE30 index gained almost nine per cent on Sunday and Monday, after it had closed the previous week suffering an overall loss of three per cent. This improvement came about despite a decline in Arab Gulf markets, hit badly by negative news in the Kuwaiti banking sector.

News on the local macroeconomic level was positive throughout the week. Egypt's Producer Price Index (PPI) continued to drop, registering 22.7 per cent in September, compared to 29.4 per cent in August. The PPI has been declining since June 2008, when it registered 33.7 per cent, on the back of lower food inflation.

Press reports highlighted a plan by the Suez Canal to attract 64 per cent of the world's large oil carriers, up four per cent from current figures, by deepening the canal basin to 66 feet from the current 62. Construction costs are expected to reach LE1.2 billion. Canal revenues reached record highs of $5.2 billion in fiscal year 2007/2008 and $4.2 billion in 2006/2007.

MOBINIL: Results for the nine-month period ending September showed a 38 per cent increase in the company's subscribers to reach 18.91 million. Meanwhile, sales revenues reached LE7.3 billion at the end of September 2008, an annual advance of 20 per cent. The company's net income during the first three quarters of this year reached LE1.48 billion year-on-year increase of 2.4 per cent, putting earnings per share at LE14.18. CI Capital Holding, the local investment bank affiliated to Commercial International Bank, noted that the results will have a positive impact on the company's stock price, which now trades at a price/ earning ratio of six, compared to an average of 8.2 times in the Middle East and North Africa region, which means that the shares have an upside potential of 37 per cent to reach LE150, compared to Sunday's price of LE109.

ORASCOM TELECOM HOLDING (OTH): International rating agency Moody's Investors Service put OTH's Pakistani arm Mobilink under review for a possible downgrade. The move reflects concerns over further deterioration in Pakistan's political and economic environment and its impact on Mobilink's operating profile, challenging the ability of OTH to achieve foreseen revenues and EBITDA growth. In a related news item, Naguib Sawiris, the company's CEO, stated that the company's full year revenues will be affected by the devaluation of the Pakistani rupee and its effect on Mobilink and its ability to realise expected revenues and net profits needed to repay a $115 million loan due over the coming 12 months. On another front Sawiris announced his company is not interested in acquiring a stake in Telekom Austria. He also added that the company was in advanced negotiations to enter the Namibian mobile market by the end of the year.

ORASCOM DEVELOPMENT HOLDING (ODH): A company release sent to the Egyptian stock exchange stated that ODH's Chairman Samih Sawiris has increased his holdings in the company to 7.33 million shares by buying 31,200 shares through the Swiss Exchange, where the company is currently listed.

EFG-HERMES: The leading investment bank said it has called off merger talks with the Lebanese commercial Bank Audi Egypt, due to unfavourable market conditions. Meanwhile, EFG-Hermes said it has no intention to sell its 23 per cent stake in the Lebanese bank. A joint statement by the two banks noted, "the parties confirm that they will continue their collaboration on a number of projects and activities which add value to their respective customers and shareholders base." Had it happened, the merger would have resulted in a financial entity with $20 billion worth of assets which would have placed it in the third rank among regional banks after the Arab Bank and the National Bank of Kuwait.

TELECOM EGYPT (TE): The country's sole local fixed line operator is adopting a new promotion package through November. TE will remove installation and administrative fees, amounting to LE250, for all new fixed lines registered during the month. Meanwhile. existing subscribers, commercial or domestic, can also subscribe to new fixed lines free of charge. New subscribers would still have to pay a sales tax of LE30 and registration fees of LE55. In a comment on the move, Beltone Financial expected that the move would result in a minimal decrease of 0.2 per cent in TE's 2008 estimated earnings, as the company will not generate connection revenues during November.

AL-SEWEDY CABLES: The company announced that construction works in its dry transformers plant at the 10th of Ramadan City will start at the end of 2008. The new plant will have an initial annual capacity of 650 dry transformers and 120 electric transformers. The company hinted that it might increase its capacity one year after this plant begins operations. It added that it plans to increase its cable exports to Europe and that it is looking to invest in India and Pakistan.

Compiled by Sherine Abdel-Razek