A profit-taking spree stripped the capital market of some of its gains, after hitting an all-time high earlier last week. Sherine Abdel-Razek reports A seven per cent drop in the broad-based Hermes Financial Index (HFI) of the Egyptian capital market at the end of the last week took investors by surprise. The slump immediately followed the index reaching a record-breaking level of 40,000 points on Monday's transactions, boosted by upbeat sentiments that have dominated the market since the beginning of the year. Analysts perceive the decline to be driven by a cyclical profit-taking spree, a common occurrence in the wake of continuously bullish market performance, in order to benefit from capital gains. Even accounting for last week's losses, the HFI index has risen more than 50 per cent this year. Moreover, the selling wave was also inspired by decisions by a number of institutional investors to sell in emerging markets worldwide, due to worries about the economic impact of soaring oil prices as well as expectations of higher US interest rates. In Egypt, small investors panicked upon seeing institutional investors liquidating their positions, adding a further downward pressure on the market. Another factor that partly contributed to the loss was the news that IT giant Orascom Telecom (OT) is facing problems over a deal to increase its stakes in its Tunisian and Algerian subsidiaries. OT acknowledged on Thursday that it is encountering "certain difficulties" in implementing an agreement to increase its stakes in its Algerian and Tunisian mobile phone subsidiaries by more than 20 per cent each. OT said it had agreed to buy the extra stakes in both units from the Palestine Investment Fund, but after paying for and receiving shares in the Algerian unit, the seller was not meeting its obligations on the Tunisian subsidiary. The mood in the market was decidedly negative, especially after stock market management decided on Tuesday to cancel Suez Cement transactions as its share prices tumbled in the countdown to the implementation of the Italcementi purchase of a majority stake in the company. The downward spiral bottomed out on Thursday when stock market regulators suspended trading on 10 active stocks that had shed more than 10 per cent of their value. The fall had brought prices down to buy levels, encouraging foreigners to embark on a buying spree late on Thursday. The early transactions of this week had mixed results. Though realising a 184 per cent increase in its net profits for 2004, OT saw its shares fall four per cent as this figure was lower than expected. The Cairo-based regional mobile phone operator reported net profits of LE2.02 billion ($348 million) last year. The most important event in the first two days of this week's transactions was the purchase of 21.36 million shares of Suez Cement at LE97 per share. Italcementi Group and a consortium of Arab and foreign investors were behind the move, buying 33.4 per cent of Suez Cement's shares after all the private bids were covered, compared to 68 per cent in the case of the public bids. As a result of the transaction, Italcementi Group -- through Ciments Français -- will become the majority shareholder in Suez Cement Company, owning about 54.2 per cent of the company after making investments worth a total of about 460 million euros since 2001. The consortium has previously made an offer to buy the shares at LE80, which was rejected by the government as too low.