Market report

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The market maintained its strong correlation with US and European markets with the main index, the EGX30, following the movements of the Dow Jones and FTSE100.

After losing a whopping 5.95 per cent last week, on the back of a decline in international indices, improvement in international markets sentiment triggered a series of gains, albeit limited, during the first three trading sessions of the week to reach 6,861.37 points at the end of Tuesday compared to 6,551.65 on Thursday's close.

News on the local level helped to maintain the gains. The economy grew by 4.9 per cent in the third quarter of 2009 -- the first quarter of fiscal year 2009/2010 -- compared to 4.7 per cent in the previous quarter. The increase was fed by above 13 per cent growth in both the telecom and construction sectors during the three-month period ending 30 September.

The relatively better performance of the tourism sector, which grew by 5.4 per cent, also helped to support the growth while revenue from the Suez Canal, which brought Egypt $4.7 billion in the last fiscal year and contracted 19 per cent in the third quarter, registered a four per cent increase month on month in October.

Figures from the National Telecommunication Regulatory Authority (NTRA) showed that the penetration rate of mobiles in Egypt increased to 68 per cent during October, marking an almost 40 per cent increase from one year ago.

Small investors, mainly depending on interest rates on deposits as a source of income, praised the Central Bank decision to leave its overnight lending and deposit interest rates unchanged at 9.75 per cent and 8.25 per cent. The rates are used as a benchmark by commercial banks to decide interest rates on deposits and loans.

A Central Bank statement attributed the decision to the fact that domestic fiscal and monetary measures undertaken so far will help provide a positive environment for the domestic economy, especially in light of relative recovery in the global economy.

The rationale behind stabilising the rates was proven valid a few days later with urban inflation figures marking a second increase in a row to reach 13.3 per cent in October compared to 10.8 per cent in September. The increase in food prices and tuition fees fed the jump during the month.

PIONEERS HOLDING: The financial services company made headlines this week with news of its takeover of investment bank Beltone Financial in a share swap deal.

Pioneers, with a leading position in Egypt's retail market, said it would issue 100 million new shares to give Beltone shareholders a 17 per cent stake in the merged firm.

While the management of the two entities will remain separate, both will report to a holding company. Pioneers was listed on the Egyptian stock market in June and it came second among financial services companies working in the local market in terms of the value of transactions in the third quarter of this year. The company's customers base is dominated by individual investors.

Beltone, which focuses on institutional investors was ranked sixth. According to a Beltone statement, Beltone oversees some $5 billion in assets and is based in Egypt with offices in New York, Saudi Arabia, Qatar and the United Arab Emirates.

On the other hand, Pioneers, which specialises in brokerage services, offers market research and investment banking for retail and institutional clients. It operates in Egypt, Saudi Arabia, the UAE, Bahrain and Syria.

PALM HILLS DEVELOPMENT (PHD): The real estate developer posted a 27 per cent drop in net profits for the third quarter of 2009 to reach LE133.2 million. This came despite the fact that figures indicate demand for its higher-end real estate projects with the number of reservations exceeding cancellations.

According to Reuters, gross cancellations dipped to LE305 million, a second quarterly drop but still substantially higher than a year ago. Gross contracts signed grew for a third straight quarter, to LE924 million, 27 per cent higher than a year earlier.

Cancellations exceeded contracts in the last quarter of 2008 and in the first quarter of 2009.

EGYPTIAN CONTRACTING (MOKHTAR IBRAHIM): The public construction company won a LE526.4 million contract to launch a first phase water purification plant project in 6 October governorate. In another development, Banque Misr agreed to issue a letter of grantee worth LE3 billion to grant the company the ability to meet its financial obligations in an infrastructure project in Al-Ain Emirate in UAE.

SWEEDY CABLES: The regional cables and wires manufacturer was shortlisted among 10 companies to acquire a licence to set up a wind farm in Egypt. CI Capital described the news as positive, because winning the bid should secure its wind energy line of business backlog and operations. CI capital reiterated its "buy" recommendation for shares.

Compiled by Sherine Abdel-Razek