Market report

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The market is still searching for a direction to follow with no clear trend through recent trading sessions. The quick, even whimsical changes in foreign investors' appetite for traded shares are the main determinant of the market's direction. On a more positive note, the market defied the expected aftermath of Sunday's attacks at Al-Hussein tourist area, surprising observers by inching up 1.23 per cent on Monday to close at 3,572 points.

Market observers attributed the resilience of the market in spite of the attack to the fact that tourism has grown less sensitive to such events, especially attacks of such limited scale. CI Capital Holding attributed this to the fact that the notion of terrorism is becoming more widely accepted as a global phenomenon and not as a country-specific ill.

However, fears are building up for the economy due to the combined effect of the attacks and the repercussions of the financial crisis.

In 2008, international tourist arrivals reached 12.8 million tourists, 15 per cent higher than in 2007, yet in light of the current global economic downturn analysts believe the numbers may be as low as around 10.1 million in 2009.

ORASCOM TELECOM HOLDING (OTH): The regional telecom operator received an offer from its 34 per cent-owned MobiNil to acquire a 100 per cent stake in the Internet service provider Linkdotnet and Link Egypt for software programming solutions. The offer was approved by MobiNil's board of directors, although the value of the offer is still unknown. The decision to sell would come in line with OTH's recently proposed plan to focus on its GSM business and boost its cash position to finance further acquisitions. Over the last six months, OTH sold OrasInvest and M-Link for $180 million and $77 million respectively. CICapital Holdings said the deal will be positive to its valuation for OTH. On the other hand, it added that the transaction would strengthen MobiNil's position in the Internet market, especially the wireless broadband segment. MobiNil's main competitors, Etisalat Misr (EM) and Vodafone Egypt, both have arms in the Internet business, namely Egynet and Nile Online, acquired in 2008 by EM and Vodafone's Raya Telecom.

CREDIT AGRICOLE EGYPT: The bank released its financial results for the year ending in December, showing a seven per cent decrease in net profits to reach LE475.4 million. According to EFG-Hermes, the decline was expected as earnings in 2007 included non-recurring, non- interest income and relatively high provision reversals. No figures were available for the fourth quarter alone as the bank has restated its 2007 and 2008 financial statements to comply with the criteria of the International Financial Reporting Standards titled IFRS39, as per the Central Bank of Egypt's recent instructions and the restated quarterly statements are not available. Fee income growth for the whole year came to five per cent, a level that EFG-Hermes describes as weak, and which it attributes to a slowdown in trade finance volumes, the largest contributor of fee income for Egyptian banks. The bank's NPL ratios were around eight per cent in September, almost unchanged relative to 2007.

EASTERN COMPANY (EC): Egypt's cigarette monopoly renewed its joint production contract with British American Tobacco (BAT) for another five years. The contract covers the joint production of Viceroy brand, the only product produced jointly by the two companies. Both EC and BAT have 50 per cent revenue and cost sharing for this product. Sales of Viceroy contributed one per cent to EC's total local cigarette sales in 2007/2008.

ORASCOM CONSTRUCTION INDUSTRIES (OCI): It was revealed that the company has started to construct a new shopping mall at Cairo Festival City, New Cairo. The project is owned by the Emirati Al-Futtaim group and includes a number of villas, malls and middle income housing projects. On another note OCI signed a detailed 20-year agreement with the Algerian Sonatrach and Sorfert Algerie, for supplying natural gas. Sorfert Algerie is currently constructing a nitrogen fertiliser production complex which shall have an annual capacity of 1.2 million tonnes of urea and 0.8 million tonnes of ammonia. The complex is located in the Wahran province near the Mediterranean coast. OCI has a 51 per cent stake in Sorfert and Sonatrach holds the remaining 49 per cent. The complex is scheduled to begin production in late 2010.

NATIONAL SOCIÉTÉ GÉNÉRALE BANK (NSGB): The bank's 2008 results showed a 74 per cent increase in its net income to reach LE1.14 billion. The results were supported by a LE392 million reversal of no longer needed provisions, and excluding that amount the net income would have grown by 14 per cent. Net interest income went up by 20 per cent to reach LE1.4 billion in 2008 as a result of a 14 per cent increase in interest from loans, and a 25 per cent drop in treasuries interest income, accompanied by a drop of three per cent in interest expense. Commenting on the results, Beltone financial said that the net profits came to 16 per cent above its estimates due to additional recoveries of provisions worth LE65.2 million in the fourth quarter in addition to the fact that the growth in operating income was strong, as a result of stronger growth in net interest income, and investment income.

Compiled by Sherine Abdel-Razek