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MARKET WATCH
Siege next door discourages trading
The
period from March 17 to April 17 was a rough one for the Cairo &
Alexandria Stock Exchanges (CASE), as the political situation in
neighboring Palestine encouraged a market nosedive since the beginning
of April. The broad-based Hermes Financial Index (HFI) moved from
5379.7 at the close of the trading day on March 14 to 5257 points as
of the April 17 close – down 2.28 percent. The market’s blue-chip
EFG Index (EFGI) showed a 2.36-percent decrease from 2286.6 to 2232.7
within the same period. Nevertheless, assistant manager at CIBC’s
research department Amr El Alfy argued that CASE is still “doing
well compared to other Arab markets in the region.”
The
dramatic siege of the Palestinian president in his Ramallah
headquarters, which began on the weekend of March 28, was enough to
bring the HFI down 5.58 percent when trading resumed on Sunday March
31, reaching a low on April 2 at 5130 points. The EFGI too was
ravaged, falling 4.02 percent, from 2318 on March 28, to 2225 on March
31. The index also reached its lowest point of shares traded on March
28, when a mere 150,000 shares changed hands.
As
usual, telecommunications stocks bore the brunt of the impact. MobiNil
faltered as volumes slowed. Falling 8.7 percent, its stock went from
ŁE 31.57 to ŁE 28.82 for the period, often trading no more than
10,000 shares per day. MobiNil had, for the first time, distributed a
cash dividend worth ŁE 1.50 per share, which was intended to raise
trader confidence and boost stock value. Technical analysis from EFG-Hermes
set the stock’s resistance level at ŁE 31 and its support at ŁE
27, categorizing both short- and long-term trends as
downwards.
Parent
company Orascom Telecom (OT), meanwhile, hardly fared any better,
slipping 13.57 percent – from ŁE 13.71 to ŁE 11.85 – for the
period. The market is currently waiting for a new telecommunications
law that would grant private companies the right to provide
international telecommunication services without intervention from the
government’s Telecom Egypt. El Alfy predicted that passing this law
would certainly boost telecom revenues, but, he added, “not any time
soon.”
As
for the banking sector, Commercial International Bank slipped ŁE 3.31
on its share price – a loss of 10.68 percent. Closing at ŁE 27.67
on April 15, the stock managed to top market turnover throughout the
month, although between April 13 and 14 the stock fell 12.73 percent,
as it announced the distribution of an ŁE 3.75 cash dividend per
share.
Al
Watany Bank of Egypt fought against the tide, climbing 14.89 percent
for the period, from ŁE 18.64 on March 14 to ŁE 21.90 on April 15.
News of an Arab investor’s plan to acquire the bank hit the market
in mid-April, and saw the price shoot up from ŁE 21.85 to ŁE 22.10
from Thursday to Sunday. Al Watany is expected to announce the
distribution of a cash dividend soon, which should see the price
come down.
The
cement sector too saw its ups and downs, with blue-chip Suez Cement
stock falling ŁE 1 for the period. Suez was not a very active player
throughout the month, with a maximum volume of no more than an
approximate 87,000 shares traded. Fear that Suez might fall below ŁE
36 and result in a new round of selling continues to loom over the
stock.
The
Capital Markets Authority (CMA) announced that it would postpone the
deadline on a bid by Alexandria Development Limited (ADL) to buy
Alexandria Cement’s freely floated shares. ADL already holds an
80-percent stake in the company through its French parent company,
Lafarge. The bid was for a minority 20-percent stake in Alexandria at
ŁE 30 per share (see story, page 28).
As
for the immediate future, according to analysts, nothing is written,
given the current regional unrest. The privatization process is
stalled, with low-profile companies being offered for sale, which
generate little interest from investors.
The
rates at which public enterprises can be sold, according to Mohamed
Hassouna, a valuation and financial analyst at the Public Enterprise
Office, “reflect a hierarchy of risk,” he said. “This includes
international, regional, country-specific, industry-specific and
company-specific risk. What’s happening now [in Palestine] adversely
affects privatization by increasing the risk factors on all our
sellable assets.”
Tamer
Gadallah, a broker at Investia, said that declining foreign reserves,
which stood at $14.17 billion in January, as well as perennial
exchange-rate unpredictability, are also factors holding the market
back. Legislative developments too have a long way to go before their
benefits are felt on the market. Short-term improvements are a
possibility, but only if stability is restored in the region and the
feuding parties return to the negotiating table.
FATIMA EL-SAADANI
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