CAIRO: As word of bankruptcy at Lehman Brothers and a takeover at Merrill Lynch, two of the world s largest and most influential financial firms, rippled across the globe Monday, local markets were among many to feel the sting. The benchmark CASE 30 index slid 5.52 percent to close at 7,541,24 points Monday and dropped another 4.73 percent to 7,184.35 Tuesday. Yet even as local tickers glow increasingly red, sanguine income reports continue to roll in from many of the Egyptian companies whose stocks have been hardest struck, their executives poise a still bare contrast to the alarm across the Atlantic. Since last March, the total market capital of Orascom Hotels and Development (OHD), a subsidiary of Orascom Development Holding, has shrunk from nearly $4 billion to just over $1.6 billion, reflecting its stock price s tumble from LE 95 per share to LE 38 Tuesday. All of this is perhaps counterintuitive when viewed against the company s recent successes: For the first half of this year, ODH reported that hotel revenues had jumped 29.6 percent, occupancy rates hurdled over the 80 percent mark, and that the firm added over 1,000 rooms to its capacity. This is guilt by association, Amr Sheta, the firm s vice chairman, said. Someone screams bomb, so everybody starts running. Now, as financial institutions tumble domino-wise across the West, analysts are predicting further declines, as foreign investors pull out of emerging markets in an attempt to recoup their losses. "Redemptions are forcing a reduced exposure to emerging market equities for foreign investors, said Tarek Shahin, an analyst with Beltone Financial. While sizeable land banks suggest that business at firms like OHD will be steady for some time, if not as heady as in the last few years, shakeups in the West have sown skepticism throughout a wide range of markets, Shahin said. "All the indices across the world - Brazil, India, Hong Kong - are down , he said. People have their ears closer to negative news now. Many investors are concerned about Egyptian real estate specifically, as high inflation could dampen consumers abilities to buy new homes, he said. Such sentiments have contributed to the drooping stock prices of companies like OHD, alongside the exchange as a whole. We re grouped in the real estate sector, so that s how we re viewed. We re having one of the best years we ve ever had in terms of revenues, sales, profits, squeezing expenses, Abdalla Elnockrashy, managing director of development and real estate at OHD, said. I just scratch my head all day long. I mean, operationally we can t get any better, he added. And the development company should, in theory, be above the inflationary fray, company representatives said. The firm caters mostly to wealthy foreigners and Egyptians who are buying second homes, and tries to spread its sales out between local and foreign markets so as to hedge region-specific downturns, Sheta said. Typically, in a downturn of the economy, who gets hurt is the bottom and the middle line, Elnockrashy said. Most of what we sell is top-line and exclusive sort of resorts or second homes.
