Al-Ahram Weekly Online   4 - 11 June 2009
Issue No. 950
Published in Cairo by AL-AHRAM established in 1875

Market report

The market started this week with two active sessions that saw the main index exceeding the 6,000 points threshold and the value of transactions passing LE2 billion on Monday and Tuesday. This came after losses during the last trading sessions of last week.

Things were not as rosy on the macroeconomic level. Foreign direct investments dropped 53 per cent in the first three quarters of 2009 compared to the same period last year, down to $5.2 billion, mainly due to sharp declines in Greenfield investments, and privatisation that dropped 83 per cent. Meanwhile, foreign investment in the hydrocarbon sector declined only 24 per cent to $2.8 billion. On the other hand, the growth in broad money supply (M2) stabilised at 6.8 per cent in April, compared to 6.9 per cent in March 2009 and its peak of 23.9 per cent in March 2008. The small drop was due to lower growth in local demand deposits, similar to the trend in recent months. "The drop in money supply growth since the second quarter of 2008 has been reflecting the effect of monetary tightening throughout 2008, lower capital inflows, and the lower propensity to spend by the lower and middle income groups in an environment of high inflation," said Beltone Financial.

EZZ STEEL REBARS: The largest local steel producer reduced its selling price for the month of June by LE150 per tonne to reach LE3,050 amid increased competition from imported steel whose price hovers around LE2,900. CI Capital estimated the surplus of Ezz Steel Rebars in the market at 600,000 tonnes. According to CI Capital, the company said it will conduct maintenance on its plants in June and has started to import Turkish steel to make up for lower production. Speaking at a steel conference held in Cairo earlier this week, George Matta, Ezz Steel Rebars marketing director, said steel producers have lost 35 per cent of market share to imports so far in 2009, because they are unable to keep up with surging demand. This loss was unavoidable, according to Matta, because production capacity couldn't keep up with demand.

ORASCOM TELECOM HOLDINGS: In addition to the ongoing dispute the company has with France Telecom over the ownership of the holding company that owns Mobinil, Orascom Telecom Holdings (OT) had an eventful week. First came weaker than expected results for the first quarter of 2009, showing a 66 per cent decline in profits compared to the same period of 2008 to reach $72 million. The drop came on the back of a retreat in profits of the company's Algerian and Pakistani units, Dezzy and Mobilink, due to local currency devaluation, difficult economic conditions, and the competitive and regulatory landscape in the two countries. OT's sales figure dipped four per cent year on year to reach $1.197 billion.

The company's blended average revenue per user (ARPU) dipped to $5.80 in the first quarter of 2009 from $6.60 a year earlier. OT said total subscribers had exceeded 80 million by the end of March 2009, up from a previously stated figure of 78 million for end of December 2008.

The company, seen to be highly-leveraged and depending on credit to finance its current operations, surprised the market by announcing its expressed interest in acquiring the Pakistani operations of the Royal Bank of Scotland (RBS). The State Bank of Pakistan granted the company a green light to conduct due diligence. According to Reuters, RBS is selling assets in Asia, including Pakistan, because of its capital constraints and its need to reduce the size of its balance sheet.

SIXTH OF OCTOBER DEVELOPMENT AND INVESTMENT (SODIC): The real estate developer posted a net loss of LE8.3 million in the first quarter of 2009 compared to a net profit of LE17.5 million in the first three months of 2008. Moreover, the company's revenues tumbled to LE14.5 million compared to LE46.4 million in the first quarter of last year.

Commenting on the results, Beltone Financial said that SODIC's revenues in the first quarter of 2008 were mainly driven by land sales, amounting to LE30.4 million, while the rest of the revenues stemmed from delivering units in Beverly Hills, while revenues in the first quarter of 2009 were solely attributable to units delivered in Beverly Hills.

SODIC reacted to the slow in sales due to the global financial crisis by quickly modifying the structure of phase four in its project Allegria, to provide 94 smaller-sized units at more affordable prices without compromising the sales price per square metre. SODIC has sold 90 per cent of the phase since January.

Compiled by Sherine Abdel Razek

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