Bucking its customary Ramadan sluggishness, the capital market saw active trading over the first two weeks of the holy month. Sherine Abdel-Razek reports With shortened trading hours, Ramadan is a generally slow month for the Egyptian stock exchange. Coming on the heels of the Taba attack, and the subsequent fears that it would drive away both tourists and investors, observers expected the month to be even slower than usual. The Cairo and Alexandria Stock Exchange indices, however, ended up telling a totally different story. In fact, the first two weeks of Ramadan were quite eventful. With a handful of blue chip stocks posting financial results, the market actually moved quite a bit. The Egyptian Company for Mobile Services (MobiNil) posted its nine-month results for the fiscal year 2004; the company reported a 62 per cent increase in net profit before taxes, reaching LE1.03 billion. That solid figure was slightly undermined by lower than expected third-quarter results; during the three-month period ending in September 2004, MobiNil's 37 per cent increase in net profits was much lower than analysts had expected. This was attributed to different accounting practices, since the company included new expenses in its results. MobiNil shares fared well nonetheless, approaching the LE123 level, their highest since the middle of 2000. Average transactions on the share last week amounted to LE15 million. The share's all time high was in early 2000, when it reached LE187 before beginning a spiral decline during 2001 and 2002, nose-diving all the way down to LE26 in February 2002 amid an overall economic slowdown. The company's subscriber base is currently 3.5 million. MobiNil's rival Vodafone-Egypt (VE) also had some news. The company announced its first half results for fiscal year 2005 (according to the British accounting year which begins March and ends February of the following year). VE posted a 41 per cent leap in net profit offset by a LE284 retention of profits as a provision for taxes that it will have to pay for the first time since its inception. Net profit after taxes saw a 13 per cent drop to LE457 million, compared to LE526 million. The company boasted 3.2 million subscribers at the end of September 2004, up seven per cent on a quarterly basis compared to the three million reported on 30 June 2004. Overall, MobiNil's less than expected third-quarter results and VE's tax provisions shaved the market of some of its gains. The banking sector's star, Commercial International Bank, also released its nine-month results. A 52.4 per cent increase in net profits (up to LE348.9 million) provided its investors with a healthy pat on the back. Orascom Construction Industries (OCI), meanwhile, along with its 53 per cent owned subsidiary, Egyptian Cement Company (ECC) said it would issue two nonconvertible bonds valued at LE1.4 and LE1 billion. According to a Prime Securities research report, Alexandria Bank, Citibank, and the Arab Bank are currently in the final stages of revising ECC's debt structure, intending to replace the company's 2002 LE1 billion bond, which becomes callable by the end of 2005. OCI's LE1.4 billion bond issue will be divided into two trenches. On a related note, the international Fitch Rating Agency revised the company's national credit rating upward to AA-, versus a previous A+ rating. OCI also announced that its subsidiary, Contrack International, in partnership with the Qatar based Al-Darwish Engineering, won a $78 million contract for the construction of a new residential campus in Qatar's Education City, funded by the Qatari Foundation for Education, Science and Community Development. Construction should be completed in just over 16 months. The market also saw the full subscription to Egypt's first Treasury bond issue floated through the newly introduced primary dealers system. The issue has a nominal value of LE3 billion and a seven-year term to maturity commencing October 2004. Meanwhile, the bond's fixed coupon rate was set at an annual 11.5 per cent. The new system involved the Central Bank of Egypt granting exclusive rights to pre- selected financial institutions to bid for bonds and bills in the primary market. The big four public banks, plus nine joint venture and private banks, were selected by the Finance Ministry to be primary dealers. The new system began operation in July 2004, with the 13 dealers accepting offers from other financial institutions with different interest rates, which they then submitted to the Finance Ministry to decide on the pricing of the new issues, according to the demand volume and market interest rate. The offer ended up being two times oversubscribed. The Finance Ministry is planning to offer treasury bonds on a quarterly basis. The next issue will take place within the next two months, and will include two trenches worth LE3 billion each, with four and 10 years of maturity. The market was eager for this kind of a development to help it break through its currently stagnant corporate bond market. The activation of treasury securities will provide a benchmark for corporate bonds. The value of listed bonds on the Egyptian market is currently LE20 billion, with LE14 billion in government bonds and bills, and LE6 billion in corporate bonds. On another positive note, market observers also welcomed the Investment Ministry's newly revealed plan to activate the capital market. The plan includes a wide range of changes starting with the introduction of new activities like margin trading and short selling, to the issuing of new investment tools like derivatives, and the setting up of a new back up electronic trading system. Moving stock exchange activities to the Smart Village in Giza is also part of the plan's overall goal of establishing a fully unified financial centre.
