From bad to worse

By Sherine Abdel-Razek
It was another hard week at the stock market; in fact, a very hard week. News that a number of listed companies had achieved poor results put a damper on the market already in the throes of the lull that occurs each Ramadan.
So, few people were surprised when this week witnessed a decrease in the value of the shares of some of the most actively traded companies along with a decline in the volume of transactions. But when one looks at the figures -- market turnover was down by about 50 per cent from the previous week at LE323.8 million this week compared to LE652.2 million a week earlier -- it is clear that there is cause for some concern.
Not surprisingly, the general low mood in the market had its greatest impact on foreign investors, whose selling transactions were 1.6 times the value of their purchases.
The release of figures showing a dismal financial performance by some heavyweight companies also contributed to the market decline. Nasr City Housing released its first quarter results for fiscal year 2000/2001, which showed a 14 per cent drop in earnings compared to the same period last year. Also sounding a negative note was the Suez Cement Company which announced an 11 per cent drop in its operating profit during the last nine months. Both companies saw their shares drop in value over the week.
Another factor that may have contributed to the gloomy atmosphere prevailing at the bourse is the increase of interest rates on treasury bills. Some observers suggest that these investments, which are a lower risk alternative to shares, are directing capital away from the bourse. With the decision to raise interest rates to 9.091 per cent on the 90-day bills, investors' attraction will likely become all the greater.
This measure is being hailed as significant due to its timing, having been taken only two weeks after the Central Bank of Egypt decided to raise interest rates on investment certificates and post office savings certificates. Some market experts have even suggested that these steps may be a harbinger for increases to interest rates for bank accounts.
One of the most popular stocks during the week was Eastern Tobacco. Dominating cigarette production in Egypt, with a market share of 85 per cent, Eastern Tobacco has attracted considerable attention amid rumours that Philip Morris and British American Tobacco have expressed interest in acquiring a stake in the company. This speculation followed the news that the government plans to divest an additional 15 per cent of the company. Already, 34 per cent of the company has been floated on the stock exchange while 66 per cent is owned by a holding company.
Despite predictions that it has attracted a strategic investor, Eastern Tobacco was unable to resist the general downward trend in the bourse. Thus, its shares dropped 3.25 per cent of its value to close at LE66.1.
In spite of all the bad news, companies in the information technology (IT) sector rallied at the end of the week. Egypt's IT companies got a welcome boost from the gains of the NASDAQ index -- considered a key indicator of the performance by IT companies. NASDAQ's increase has been attributed to speculation that interest rates will be reduced in the United States.
True to form, MobiNil was the market leader, cornering 24.6 per cent of market transactions. It also succeeded in reversing the downward trend it suffered during the last two weeks, gaining LE2.18 over the week to close at LE81.60.
Joining MobiNil on the list of the most active stocks, in terms of both value and volume, were the usual names: Orascom Telecom (OT), Media Production City, the Lakah Group and the Arab International Construction company (AIC).
The big winner of the week was Misr Chemicals which bucked the downward trend with a 10.75 per cent increase to close at LE4.43 as Misr Chemicals rode a wave of interest resulting from recent announcements about its plans to upgrade its manufacturing facilities.
The dominant trend in bond transactions was the opposite of that for stocks. The news that Egypt was about to choose among five bidders to lead-manage its eurobond offer generated enthusiasm for this type of investment. Transactions in bonds last week reached LE88.7 million -- an increase of 27 per cent compared to the previous week.
Related stories:
From bad to worse
Holiday blues 7 -13 December 2000
Downward 'correction' 30 Nov. - 6 Dec. 2000
Related sites:
Cairo and Alexandria stock exchanges
NASDAQ
MobiNil
Orascom Telecom
Lakah Group
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