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Downward pressure follows record gains
Published in Al-Ahram Weekly on 02 - 11 - 2005

Good micro-economic news failed to offset the downward pressure of investors taking their profits, reports Sherine Abdel-Razek
The gains posted by the Bourse during the last couple of months are not over, say observers, though investors are seeking to cash in and liquidate their holdings to realise capital gains. The Cairo and Alexandria Stock Exchange (CASE) is suddenly in the middle of a profit-taking frenzy.
Anticipation of third quarter results is adding to the problem, believe market experts, with investors holding on tightly to shares expected to report strong results. Third quarter results have to be posted by mid-November at the latest according to Capital Market Authority disclosure rules.
Though trading in the week ending 27 October was relatively thin, with an overall turnover of LE2.8 billion -- down to LE450 million a day compared to an average of LE700 million recorded during the rest of Ramadan -- both major players and small caps saw important developments.
With a turnover of LE318.08 million financial group EFG- Hermes emerged as CASE's second most actively traded stock during the week, closing at LE74.46, 5.19 points down. The retreat was a result of investors liquidating their holdings in the wake of record gains since the beginning of September, when shares were being traded at LE40.
The textile sector emerged as the week's top performer with listed companies benefiting from the news that US cotton subsidies are to be reduced. Arab Cotton Ginning, with a turnover of LE494.29 million, became the most actively traded stock, gaining 7.2 per cent to close at LE16.37.
The banking sector also performed well on the back of a number of developments. The French bank Caylon and the UK-based HSBC are expected to submit respective bids for the Egyptian American Bank sometime next week. The two banks were short- listed by the Bank of Alexandria, which owns a 32.5 per cent stake in EAB, from the 20 international and local banks that had expressed interest.
Commercial International Bank (CIB) is about to complete the due diligence process on the National Development Bank. CIB is itself expected to be the subject of a buying spree following the announcement that the National Bank of Egypt is considering the sale of its 18 per cent holding in CIB which, until NSGB's recent acquisition of Misr International Bank, was Egypt's largest private sector bank. Other major shareholders include the International Finance Corporation (IFC), with a five per cent stake. CIB ended the week at LE55.7, down from LE57 the previous week.
Following a 92 per cent increase in net profits -- which reached LE71.9 million -- during the first nine month of 2005 Al-Watany Bank shares gained 22 per cent to close at LE23.62, their highest price since April 2002.
Orascom Construction Industries (OCI) has also been making headlines. OCI is part of the consortium behind the Egyptian Basic Industries Corporation (EIBC), a new ammonia producing company. OCI, which is seeking to diversify its activities and benefit from Egypt's competitive edge in fertiliser production, has a 30 per cent stake in EIBC, which plans to produce 2,000 metric tonnes per day of ammonia. OCI will assume a portion of EIBC's set-up loans.
OCI is also about to finalise loans of $430 million to finance its own expansion. The loans will be used to consolidate OCI projects in Iraq, including its newly built cement plant in Kurdistan, due to begin production in 2006 with a capacity of 1.1 million tonnes annually.
OCI may face problems securing the necessary finance locally as its debt burden edges closer to 30 per cent of total capitalisation. As a hedge against possible default Central Bank of Egypt regulations do not allow loans to exceed 30 per cent of capital.
OCI's sister company, Orascom Hotel & Development (OHD), offered existing shareholders a chance to subscribe to its new LE180 million offer of 36 million shares priced at LE5. The offer opened on Sunday with shareholders allowed to buy up to 43.8 per cent of the total number of shares already held. The subscription period will last for a month, after which the company will begin preparations for further capital increases expected to raise a total of $50 million.
Alexandria for Mineral Oils Company (AMOC) remained in the limelight, posting first quarter results for 2005/2006 recording an impressive 236.5 per cent increase -- LE180.5 million -- in its bottom line figure. In a week in which the market trend was definitely down, though, AMOC shares ended the week at LE87, up from LE86.2.

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