By Sherine Abdel-Razek "Thursday brought about changing winds. The question is: will they continue to blow?" commented HC Securities on the change of direction which the market witnessed on 15 June, following four days of heavy losses. The answer was yes for at least Sunday and Monday which saw the market gaining four per cent amidst a buying interest by foreign investors. The previous week was one of CASE's most difficult yet as it shed down 10.9 per cent of its values to close at 4,771. Market capitalisation retreated by LE28 billion during the week, to reach LE380 billion. EFG-Hermes and OHD announced, however, that they will buy treasury stocks. This triggered a buying spree which that pushed the market up, starting Thursday. Another positive development at the end of the week was ABN AMRO's issuing new close end certificates tracking the CASE30 index. The new issue includes 500,000 certificates which mature after four years. It will be listed in the Italian Bourse. The Investment Bank last December had issued open-ended certificates tracking CASE30, and listed in the Swiss Stock Exchange. These issues provide investors with exposure to the entire CASE30 Index, without their having to buy every individual stock. In another positive note , both EFG-Hermes and Orascom for Hotels and Development announced that they would be buying back 10 and one million respectively of their treasury stocks as a means to support their shares. This coincided with the National Bank of Egypt starting a new fund to act as a money maker. Analysts are in consensus that given such positive development, the market's setback is not justified. The current economic indicators are encouraging, with the Egyptian economy awarded a thumb up recently by a several foreign rating institutions. But as HC said, "it would be a mistake to necessarily correlate good economic news with good market performance. In these days of dramatic rises and falls, the market sometimes seems completely unpredictable". AL-WATANY BANK OF EGYPT: The bank's management team saw an important change with the resignation of its chairman Ahmed Kora who was replaced by Ayman Ahmed Hussein. The resignation came in the wake of recent changes in the bank's ownership. EFG-Hermes and the Saudi financial company Naeem group has recently increased their stake in the bank by buying its shares from the market. The CASE authorities held transactions on the banks' shares for a couple of hours on Sunday and requested it to either confirm, or deny, press reports which said that it had received acquisition offers from two Arab banks. The trading was resumed after the bank denied having received any bids. EFG-HERMES HOLDING: The company announced that it will start its Saudi Arabian operations by October 2006. It added that it will be buying 10 million shares of treasury stocks in the period from 15 June to 15 July this year. This would support its free falling share prices. Its shares closed at LE27 on Sunday, losing around 90 per cent of its value since mid- January. The severe decline in prices induced Misr Helwan for importing and exporting to file a suit against EFG-Hermes, in which it blamed the company's management for this decline. Misr Helwan said it had bought 350,000 of EFG-Hermes shares at prices which ranged between LE76 and LE252. It added that the company's misconduct in giving preferential treatment to some of its shareholders at the expense of others had induced shares to reach the price of LE23, on 14 June. EFG-Hermes declined to comment and described the accusation as "groundless". It remains the market's heaviest traded stock, having alone in the past week cornered 31 per cent of overall market transactions. EASTERN COMPANY: The local cigarette monopoly reported its financial results for the first nine months of fiscal year 2005/2006. EFG-Hermes described them as "disappointing", adding that sales were in line with expectations. The company's earnings before taxes declined by 11 per cent, due to a change in the sales mix to lower margin brands and an increase in the prices of raw materials. The effective tax rate dropped from 45 per cent to 22 per cent. EC reported a cautiously high income tax figure in the corresponding period of the last year, because of its dispute with the Tax Authority. This was settled in the fourth quarter of 2004/05. EC subsequently reported an effective tax rate of 28 per cent for FY2004/05. EFG- Hermes also expected the rate to stabilise at 22 per cent for FY2005/06. Cigarette consumption has started to recover due to price stability. Sales witnessed a growth rate of 4.6 per cent. EFG accordingly maintained its fair value estimation of the company, at LE304 per share. ALEXANDRIA MARITIME AND COMMERCIAL BANK: This became the target of fierce competition, when Piraeus Bank Egypt conducted a due diligence study for the bank. This coincides with the Union National Bank of Emirates announcement that it has concluded the required due diligence of AMCB. The offer is expected to be submitted within the next few days. ALEXANDRIA FOR MINERAL OILS COMPANY (AMOC): 13 consortia started on Sunday, and for 45 consecutive days conducting due diligence to buy the offered 50 per cent of AMOC equity. The interested consortia include Indian, Kuwaiti, Saudi as well as Egyptian companies. The sold stake could exceed 50 per cent, since there is a 20 per cent floated in the market. Analysts have meanwhile ruled out the possibility of Alexandria Petroleum Company divesting its 20 per cent stake in AMOC, so as to preserve investors' rights in the company. On a related note, members of the energy and power committee in the Shura Council expressed their reservations regarding the privatisation of profit-making oil companies. This was during a visit to the SIDPEC and AMOC production facilities at Alexandria. The Shura committee members agreed that although they mainly seek profit, banks which hold stakes in these oil companies may divest them. They recommended that on the other hand, the entities affiliated to the Petroleum Ministry such as the Egyptian General Petroleum Authority and Egypt Petroleum should retain their stakes. The committee recommended this, adding that investments injected in oil companies are recovered within a timespan of less than two years.
