CAIRO: Talaat Moustafa Group Chairman Hisham Talaat Moustafa appeared on Egyptian television twice this week to warn investors against making trading decisions based on rumors. Moustafa appeared on "El Beit Beitak and "Good Morning Egypt, reiterating his call for more stringent measures against rumor mongering, which he said can have a detrimental affect on the economy. When rumors, fear and hearsay continue to rule the roost in financial markets, it is publicly traded companies that really feel the pinch. For Talaat Moustafa Group (TMG), spreading of allegedly false information has heavily weighed down the stock this week. Shares of TMG - Egypt's largest real estate developer by market value - plunged almost 20 percent since rumors started flying early this week that the group was crumbling with financial instability. The stock posted Sunday its sharpest single-day drop since it began trading last November. Rumors that Company Chairman Hisham Talaat Moustafa fled the country slammed the stock into the red for three consecutive days. Traders said investors were selling the stock at any price even after the company issued a statement to the stock exchange on Sunday confirming that "Moustafa is at the company performing his work. Shares in the group - which is made up of 21 companies operating in real estate, tourism, and building materials - led declines on Sunday, plummeting 14.38 percent lower to LE 6.85. It extended losses on Monday, shedding 7.63 percent to last trade at LE 6.66 per share. In an attempt to dispel rumors, Moustafa appeared twice on Egyptian national television Sunday, calling for a crackdown on the spreading of false information that he warned could shake confidence in Egypt's financial institutions and, in turn, the economy as a whole. "Rumors and hearsay are [directly] reversed on the stock market, Moustafa told terrestrial Channel One's "El Beit Beitak - one of Egypt's most popular nightly talk shows. "As a result, investors [drop] the stock, people lose money, purchasing power shrinks, and the economy suffers as a whole. "Rumors and false information threaten to bring a country's economy to its knees. Rumors circulating inside the stock market can be destructive, Moustafa reiterated on the "Good Morning Egypt show. During his intensified media appearance, he called on investors to double check the facts before deciding to sell in a stock. "People should approach rumors with utter vigilance and wisdom. Ask your brokers, the stock exchange, company officials before believing the rumor, he said. "Trading rules stipulate that listed companies disclose quarterly financial results, capital raise, investment plans, market performance. And these are facts that should be checked before choosing to sell the stock. According to TMG records, the group posted a net profit of LE 875 million ($163.9 million) after tax and minority interests in the first half of 2008. Annual net profit hit LE 1.32 billion in 2007 (up 70.9 percent), while revenues soared to LE 1.86 billion (45.5 percent annual growth). Sales in the first six months of 2008 jumped 117.7 percent to LE 9.8 billion from LE 4.5 billion in the same period of 2007. The firm announced last June that it was on track to hit its full-year sales target of LE 12.5 billion, which compares to last year's LE 10.5 billion. Moustafa anticipates that sales rates would increase this year on strong demand for real estate in Egypt, soaring some 21 percent. In a statement to the stock exchange end of June, TMG said it also had actual sales of LE 21 billion not yet entered on its books which should produce net profit of LE 6 billion over the next three years. Egypt's economic performance vis-à-vis other regional and international countries is so far positive, Moustafa said on Egyptian television. "So why are [companies] wrestling and dragging the bourse from the previous 12,000 points to Sunday's close at 8,600 points? At the end of the day, it is the Egyptian citizen that is hardest hit. He called for the drafting of legislation criminalizing rumor mongering in the Egyptian stock market to protect the national economy. "The rumor-mongering has to stop, he said. "If there is a penalty that incriminates that sort of behavior, it will control the market which will positively reflect on trading.
