The market ended 37 days of closure by a shortened, red dominated session but with better than expected losses, Sherine Abdel-Razek reports Cordons of military tanks surrounding tens of full- of-worries investors was the scene viewed by passers-by at the stock exchange headquarters in downtown Cairo yesterday, the first day of transactions after 55 days of closure. The military presence aimed at containing the expected anger of individual investors had the market lost a big chunk of its strength on opening. The bourse delayed the opening several times under pressure by individual investors fearing that the resumption of trading could wipe out their holdings. The fears were justified and proved not to be groundless as the market's main indices turned red the moment the starting bell rang. Most of the blue chips comprising the EGX30 index and even those on the EGX70 index for smaller companies, nose dived by 10 per cent, the highest decline permitted before suspending the stock from trading according to new trading mechanisms temporarily introduced by the stock market regulator. "This was expected as all the worries, anticipation and fears accumulated during the closure period are being digested now. It is healthy that the market reflects this and then starts to stabilise," said Mohamed Radwan, head of international sales in Pharos for Financial Investments. Acting Exchange Chairman Mohamed Abdel-Salam asserted in a news conference held in the middle of the transactions that the decline is less than feared and that the bourse will not shut down again. The overall loss of the market's main index EGX30 by the end of the only three-hour-long session was 8.9 per cent compared to 8.95 per cent stripped out of the broader EGX100 index. The overall transactions came at LE487 million. "Despite the loss, the market's performance today was better than expected. All observers knew that we will see a double digit loss and very thin transactions that would not have exceeded the LE50-70 million range," according to what Tamer Ismail, head of dealing room in Cairo Capital Group told Al-Ahram Weekly after the end of Wednesday's session. According to Bloomberg, the EGX30 became the world's worst-performing gauge this year after plunging 16 per cent in the week the market closed. The measure rose 15 per cent last year and 35 per cent in 2009. The bourse, North Africa's second-largest after Morocco by market value, resumed trading two days before a deadline that could have led to its removal from the MSCI Emerging Markets Index. Trading was suspended after the market closed 27 January as protests that led to the ouster of Hosni Mubarak grew. The face of Mohamed Mustafa, a stock market investor standing in front of the stock market building by the end of the session, showed signs of relief. "I believe the market will return to its normal levels within a week as stock prices are very attractive to investors right now," Mustafa noted. What cushioned yesterday's fall, according to Ismail, is heavy buying in individual stocks, for reasons related to those companies, in particular by both foreigners and Egyptians. Shares of Orascom Telecom Holding (OTH) gained five per cent in the session as it was the first time it changed hands locally after shareholders of VimpleCom gave the green light for completing the $6 billion deal between VimpleCom and OTH. Another example for those lucky stocks is Sinai Cement which gained five per cent after its chairman said it will pay LE9 dividends. Other than those handful of companies, there was no demand whatsoever on the listed companies, as even heavyweights with no involvement with the previous regime yearned for almost absent buying orders, according to Ismail. Another factor that protected the market from a deeper decline is the suspension of transactions on 46 listed companies at the beginning of yesterday's session, after they failed to meet disclosure requirements. The companies include Ezz Steel Rebars and Gemma, the ceramic producing arm of Ezz group and Amer group. "Had these companies been traded, the market would have incurred losses that would have weighed down it," said Ismail. The market regulators and the Egyptian Cabinet have been trying to come out with ideas to support the market. Prime Minister Essam Sharaf, Orascom Telecom Holding chairman, billionaire Naguib Sawiris, and pop singer Mohamed Mounir have appeared in commercials asking Egyptians to support the stock market and the economy. "I, like most people in Egypt, do not know much about the bourse," Mounir says in the advertisement. "But I found out that the bourse has an important role in the Egyptian economy. What is being asked of all of us, by any means, is to support the bourse for a more beautiful Egypt, better Egypt, and stronger Egypt." The Ministry of Finance also vowed to inject LE150 million of funds to the local brokerage companies and the cabinet is currently considering a suggestion to use up to 75 per cent of the money of the risk guarantee fund to support the financial services companies. "This is all in vain. The market should be left to demand and supply forces to determine the price of companies. As for the financial institutions hurt by the closure, it is not the duty of the government or the fund to make up for their losses," said Hani Tawfik, a market expert and head of Arabiya online. "Such interference means we are using the government money to support the price of shares so that speculators who bought the shares at their very low levels would later sell it at higher prices," he added. Egyptian shares tumbled in New York and London on Tuesday with the Market Vectors Egypt Index ETF (EGPT), a US-listed fund that holds Egyptian stocks, retreating 5.7 per cent and London- listed global depository receipts of Orascom Construction Industries, the country's biggest publicly traded builder, down 4.5 per cent. On Wednesday, the performance of GDRs came mixed. Where to go from here, analysts cannot decide. "We will see some volatility for a while and it will not start heading up soon as people will not rush to buy any stocks now. They will wait until it reaches a bottom where there are very good bargains and buy," according to Radwan. However, both Radwan and Tawfik agree that the overall negative sentiment covering the economy and the outlook of the heavyweights, the majority of which have connections with the previous regime, might elongate the wait-and-see period. Additional reporting Ahmed Kotb
