In need of a jolt

By Sherine Abdel-Razek
As the market continued to plod along this week, daily transactions dipped below the daily average for the last year. A steady decline in the volume of trade has been evident over the past three weeks, having started at LE652 million then falling to LE323.8 million to drop to LE279.9 million last week.
Virtually all of the most actively traded companies ended the week in the losers camp and the Capital Market Authority's index declined by 0.92. MobiNil maintained its position as market leader with transactions accounting for 21 per cent of overall market activity. It was one of the few popular stocks ending the week with slight gains at LE81.81 compared to LE81.61 at which it began the trading week.
Media Production City (MPC) and Orascom Telecom (OT) dropped in value during the week, in spite of having both made the news. MPC announced that it was examining the possibility of a partnership with the newly formed Arab Company for Arts and Publishing, which will engage in publishing, film production and distribution and cinema ownership. MPC also signed a marketing agreement with its major shareholder, the Radio and Television Union, to promote DVDs to be produced by the union in return for 40 per cent of sales revenues. With LE5.4 million worth of its shares traded during the week, MPC stock settled at LE20.55.
Likewise, OT's announcement that it would establish a new provider for telecommunications in Syria did not prevent a loss of LE0.54 per share to close at LE59.8.
Bucking the trend, however, was Chipsy Food Industries which recorded a 27 per cent increase during the week to close at LE6.98. The share jumped to reach the 5 per cent ceiling on daily price movements throughout the week. Chipsy Food Industries, which was listed on the market in June of last year, has already unveiled a plan to expand locally and regionally, saying that it is discussing a merger with another food industries company whose name it did not disclose. The outcome of these negotiations will be announced within the next two weeks.
A damper was put on the banking sector with the release of Moody's Investors Service annual report on Egypt's banks. The report stated that the liquidity problem in this sector has not been fully resolved despite recent interventions by the Central Bank. The persistence of this problem means that banks may see their credit ratings downgraded, the report stated.
Moody's suggested that the deterioration of the credit-offering system increased banks' risk of insolvency. "Risks were especially high as banks went into the cycle with high credit expansion rates, while the ensuing liquidity shortages starved businesses of working capital and led to several companies showing signs of distress," said the report posted on the Moody's Web site. "Although we believe the operating environment for banks has deteriorated, to date we have not made any changes in the Egyptian banks' financial strength ratings. However, unless there are improvements in both the economy and the banking system, negative pressure on the ratings will increase."
Moody's rates seven Egyptian banks, including the four public sector banks and the Commercial International Bank, Misr International Bank and Egyptian American Bank.
The report caused little reaction in the banking sector. EFG-Hermes, in one of its daily reports, said that the Moody's report only mentions factors that have already had a clear impact on the market.
Following the posting of this report, the performance of stock for Egyptian banks was static. The exception was the Egyptian American Bank (EAB), which continued to decline in reaction to the release of its quarterly earnings. EAB registered a 35 per cent decrease in its profits for the nine-month period ending in September compared to the corresponding period the previous year. Its profits for the first three quarters of 2000 came to LE53.9 million.
As foreign investors seem to be losing patience with the stock exchange's recent uninspiring performance, hopes that the market would recover before the end of the year are dwindling. With selling orders assessed at approximately LE30 million compared to LE26.7 million in purchase orders, foreign investors were net sellers. However, some market-watchers are predicting a recovery once Ramadan is over and the New Year has begun based on the information in an EFG-Hermes daily report that some undervalued stocks have been heavily oversold.
Related sites:
Cairo and Alexandria stock exchanges
Orascom Telecom
EFG-Hermes
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