Welcome changes

Following a handful of macroeconomic developments, the big caps are gaining ground once again, reports Sherine Abdel-Razek
The Egyptian government has recently taken several long- awaited steps that are being hailed by analysts as key market reforms. The most recent of these moves was the Central Bank of Egypt's (CBE) decision to lower the pound-dollar exchange rate to 3.90 from 3.86. In accordance with the "managed peg" system implemented in January, the bank has also increased the margin by which the pound may fluctuate.
"The margin [of currency fluctuation] for banks and non- bank dealers [exchange bureaus] is plus or minus 1.5 per cent for the US dollar and Arab currencies, and plus or minus 2 per cent for other foreign currencies," the Central Bank announced.
The move was applauded by analysts as a sign that the government was adopting a more flexible monetary policy.
However, other market observers said the move was relatively minor and needed to be coupled with a reduction in interest rates if it were to make a difference. Currency dealers point out that the official exchange rate still lags behind the black market rate of LE4.07.
Egypt's monetary policy has recently been criticised by many international institutions which say that the official rate is at least 15 per cent higher than the market one. Their suggestion has been that the government float the pound.
The change in monetary policy was preceded by the successful launch of Egypt's first sovereign eurobond on international markets. Although a number of analysts predicted that the current setback in global financial markets would undermine the prospects of the offering's success, the $1.5 billion two-tranche offering was oversubscribed. A source at one of the institutions lead- managing the offering reported orders worth $3 billion. The bonds issued for the first tranche, which are worth $500 million and have a maturity date of 2006, were quoted at 100.25 per cent of their face value while the other $1 billion- worth, which mature in 2011, were quoted at 101.25 per cent of their value.
As Egypt's first international bond offering, the issuing of the eurobond is directed at advancing the country's investment profile internationally, while boosting capital inflows and creating a long- awaited benchmark for domestic interest rates.
These positive developments were reflected in the performance of the market's big caps, most of which closed the trading week having made gains in the value of their shares. The Capital Market Authority index was also a winner having gained 5.8 points to end the week at 608.4.
In spite of these positive indicators, the market's overall turnover was extremely low, coming in at a mere LE158.4 million. Such limited movement was attributed to the "wait and see" mood that is prevailing in the market. Investors are standing firm as they wait for the release of the financial results of some of the market leaders stocks as well as the outcome of merger and acquisition deals in process.
Anticipation surrounding the imminent release of what are expected to be good quarterly results by market leaders MobiNil and Orascom Telecom gave their shares a boost, causing them to end the week with share prices higher than those at which they opened.
MobiNil, which is expected to post a second-quarter net profit of at least LE100 million, ended the week at LE62.7 compared to its opening price of LE58. Orascom Telecom rallied from its poor performance the previous week, during which its price dropped to LE22.9 -- coming close to its all-time low -- to gain ground last week and close at LE25.4. The improved performance of these stocks should also be attributed, in part, to the worldwide revival in IT shares last week.
Egypt's beverage market monopoly, Al-Ahram Beverages Company (ABC), caught the attention of all brokers and market observers last week. Hitting the 5 per cent ceiling of the maximum daily gains in its share price during the last two days of the trading week, ABC closed at LE54.17. Dealers were unable to explain the reason behind the share's strength. Over the past two and a half weeks, the stock has soared from a recent low of LE43.15 on 17 June.
The Egyptian American Bank (EAB) lost some of its momentum due to the absence of news on its majority equity sell-off. It ended the week lower at LE57.57. Industry sources said Standard Chartered, a London-based Asian-owned institution, had already made a bid and Cairo-based analysts speculated that Citibank, part of Citigroup, might be another bidder.
Another popular player in the banking sector during the week was the privately-owned National Societe Generale Bank (NSGB). The bank offered its current shareholders four new shares for every 11 shares. NSGB announced in June its plan to raise its nominal capital to LE300 million pounds from LE220 million through a bonus share issue.
Lakah Group managed to make it into the news this week. The industrial conglomerate said that it expected to sign a deal with its eurobond holders on an overdue coupon payment in a week's time. It also announced in the same statement that it had concluded with Iraq its first supply contract under the United Nations "oil-for-food" programme.
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