Market report

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With Dow Jones scoring lower than 7,000 points for the first time in 12 years last week, the financial markets had a new reason, as if they needed one, to fall even further. The Egyptian market, not as resilient as it claimed to be, was not immune from this general trend.

Even when the index closed in the green through the last 10 days, the gains hovered around just one to two per cent, with foreigners coming as net sellers and thin trading prevailing.

News on the macroeconomic front shows that Egypt is no more resilient to the crisis than any other country. For the fourth consecutive month, net international reserves (NIR) declined through February to $33.1 billion, compared to $33.4 billion in January. The retreat comes on the back of drying capital inflows due to the financial crisis. Weaker net reserves would be reflected in depreciation in the Egyptian pound against the dollar, to reach LE6.1 by the end of 2009, according to EFG- Hermes, the country's leading investment bank estimates.

On another negative note, Minister of Trade and Industry Rachid Mohamed Rachid told Reuters News Agency that exports could fall by 10 per cent during the current fiscal year due to the decline demand on products from the North Africa region. Furthermore, he expected negative growth in industrial production during the first half of 2009, pointing out that it will start picking up by the third quarter.

As a part of its package to revive the economy, the government will tender a number of projects to be established under the Public-Private Partnership (PPP) programme. The tendered projects under the PPP programme include 345 new schools, in addition to hospitals, water and waste water plants. Projects in agriculture, housing, domestic trade, information technology and urban development will be offered as well. The government had previously announced that LE15 billion worth of PPP projects would be tendered, in addition to the LE15 billion fiscal stimulus package for the current fiscal year, to help boost economic growth.

RASCOM DEVELOPMENT HOLDING (ODH): The Swiss-based parent company of Egypt's Orascom Hotels and Development (OHD) signed a memorandum of understanding with the Housing Development Administration of Turkey (TOKI) to develop affordable housing communities in Turkey. The company expects to deliver 20,000 low budget units in Ankara and 12,000 in Istanbul, ranging in size from 60 to 120 square metres. The two projects should generate $800-900 million in revenues. In Egypt, ODH is developing 75,000 units in budget housing projects on 10.5 million square metres of land in 6 October City and Fayoum. It is also currently negotiating setting up similar projects in Jordan and Yemen. Company Chairman Samih Sawiris has previously said that although budget housing does not provide high profit margins, it secures a sustainable and new source of revenues to the company.

TELECOM EGYPT (TE): Egypt's sole fixed line operator filed a complaint with the National Telecommunications Regulatory Authority (NTRA) against local mobile operators which, according to TE, reduced the fees of mobile-to-mobile calls to be almost equivalent to a fixed-line call. The NTRA is currently investigating the complaint. On another note NTRA said it might not offer a second fixed line and offer instead a WiMax licence.

EFG-HERMES: The leading regional and local investment bank released its 2008 results which showed a 27 per cent decline in its net profits to reach LE933.5 million. The company attributed the decline to the effects of the international financial crisis, which resulted in its posting losses of LE55 million in the fourth quarter of the year. The investment bank took several measures at the end of 2008 to reduce total operating expenses. These measures included salary reductions for the top 200 employees, the implementation of a new expenses policy and the relocation of certain functions to Egypt, all of which should lead to a meaningful decline in operating expenses. Bloomberg reported that EFG had cut seven per cent of its workforce between November and mid-February, in an effort to reduce costs as the global economic recession deepened.

AL-EZZ GROUP HOLDING FOR INDUSTRY AND INVESTMENT: The company, which owns 65 per cent in Al-Ezz Steel Rebars, will get a LE3.5 billion loan from a consortium of seven banks. The banks include the Commercial International Bank (CIB), the Arab-African International Bank, the Bank of Alexandria, the Banque du Caire and Bank Audi. The group will use the five-year loan to restructure a number of earlier short-term loans it received. On another front, imports of Turkish steel to Egypt are declining as mentioned by press reports both in Turkey and Egypt. Importers have pursued fewer new contracts for imported steel, as they fear the government could impose import tariffs on steel, especially with pressure coming from Egyptian steel manufacturers.

Compiled by Sherine Abdel-Razek