Obvious foreign interest and a new set of rules gave the capital market a much-needed push during 2002 A look at the Egyptian capital market of one year ago, as it struggled through the aftermath of 11 September, would have depressed even the most optimistic observer. This year, the picture is much rosier. The main indicators of a gradual recovery this year are the handful of acquisition offers by foreign entities for local listed and non-listed companies. The biggest was the LE1.308 billion acquisition of Al-Ahram Beverages Company (ABC) by the Dutch giant, Heineken. The deal is considered to be the biggest private sector acquisition in national history. ABC was privatised in 1997 when it was bought by Luxor Group, an American company owned by the El-Zayat family. The Heineken-ABC deal was followed by Swiss food industries giant, Hero's, acquisition of a majority stake in the local jam and juice maker, Vitrac, for an undisclosed sum. Other than the food industry, tourism and cement were also targeted by foreign investors. Gezira Hotels was acquired by the French company, Accor, in late November while Cemintis Francis bought a 2.8 per cent stake in Suez Cement. The end of the year also witnessed Irish cement producer, CRH, bidding for 34 per cent of Misr Beni Suef Cement. The Egyptian American Bank and Watany Bank of Egypt were also approached by foreigners but the deals were blocked for undisclosed reasons. The market legislative infrastructure was also enhanced during 2002 and a revival in market transactions was witnessed compared with the previous year. Additionally, a list of regulations aimed at reinvigorating the market and increasing transparency were introduced during the year, including listing rules for traded securities. A committee was formed to decide whether a company can be listed in the bourse according to a number of criteria that included market capitalisation and transaction volumes. The year also witnessed a new set of rules concerning disclosure and insider trading. Thus, no week passes now without the stock exchange suspending transactions on companies violating the disclosure rules. Violations range from failing to publish financial statements on time, the publishing of inaccurate figures, or suspected insider trading. Due to the increased tendency of listed companies to buy back their under performing shares in the current bearish market, the stock exchange also introduced a set of rules regulating treasury stock purchases. However, the most praised move of the year was the decision to abandon the 5 per cent limit on the daily movements of share prices. Effective from July, 12 of the exchange's most active stocks were exempted from this ceiling, which was criticised for distorting market forces. Ten other companies will be included soon. Soon after lifting the ceiling on these 12 shares, the market received another pat on the back with the decision to introduce margin trading. While still not in force, the plan will enable investors to buy shares and pay only 50 per cent of the value of their purchases, the rest being paid by the brokerage company as an interest-bearing loan. The plan has been positively received by small investors. The market also saw the introduction of "over the counter" (OTC) transactions in July for non-listed companies. In a move to target small investors and increase their investment awareness, the stock exchange also sponsored a three-day exhibition and conference under the name: "step by step". "Step by step" included open workshops where potential investors were taught the basics about the operations of the stock market. As for listed companies, the year was not as eventful as previous years. Perhaps this was due to the absence of any new floatations. Orascom Group, along with its many affiliates, made the most news. The Egyptian Cement Company, the cement producing arm of Orascom Construction Industries, issued LE1 billion worth of bonds to finance all of the company's existing project finance loans. The bond offering was Egypt's biggest ever corporate bonds issue. Additionally, the 71.25 per cent stake that France Telecom owns in MobiNil was transferred to Orange in a LE1.25- billion deal this year. Orascom Telecom (OT), the regional GSM operator, reached an agreement in which it will reschedule its $101 million debts to the American giant, Motorola. OT has also postponed its capital increase pending a plan to restructure its debts and divest some of its assets, including its African affiliate Free cell. Lakah Group also made the headlines. The stock exchange delisted the shares of one of its holding companies, due to the failure of its owner, Ramy Lakah, to provide the bourse with documents showing that he has settled his debts. However, the company's shares are still being traded in the OTC market. The year witnessed the domination of bonds on the market. This was to be expected given the economic slowdown and bearish markets. Bond transactions accounted for an average of 60 per cent of overall market activity through the year. Egyptian Global Depository Receipts (GDRs) showed a mixed performance during the year with most of them expected to end the year in the red due to low demand resulting from regional unrest. The number of GDRs fell to eight due to the delisting of Lakah Group's GDRs. As for Egypt's 20 investment funds, performance was better than expected, with most of the funds registering positive returns higher than the market's yield. This was due to the diversification of portfolios to include various investment instruments. A co-operation agreement was signed between the Cairo & Alexandria Stock Exchanges (CASE) and the securities exchanges of Malta and Tunis during the third quarter of this year. CASE Director Sameh El-Torgoman said, in October, that the Association of Securities Bourses of the Mediterranean Basin Countries (MED) would expand co-operation between these three exchanges and others in the region. By Sherine Abdel-Razek