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MARKET BOUNCES BACK

During the period from February 15 to March 15, the market rebounded after the correction of February, with the HFI and CIBC indices rising 9.7 percent and 23.8 percent to 99427.42 points and 541.86 points, respectively. Globally, the market recovery began with the US Federal Reserve decisions to cut the Fed fund rates by 75 basis points in late January, followed by another 50 basis points cut in early February and 75 basis points recently in March to reach 2.25 percent. The discount rate was also lowered from 4 percent to 2.5 percent. This came as an attempt to end fears of a sharp slowdown in the US economy that could drag the economies of other countries down.

On the macro front, oil prices continued their climb, surpassing $110 per barrel and posing further threats to inflation and overall economic growth. In an attempt to curb the accelerated rise in inflation, Egypt’s Monetary Policy Committee (MPC) later decided to raise the overnight deposit and lending rates by a further 50 basis points to reach 9.5 percent and 11.5 percent, respectively.

But the major hot topic in the local market was the government’s decision to increase the local prices of nitrogen fertilizers by almost 100 percent to decrease the export activities and to finance subsidies on imported fertilizers.

The move boosted fertilizer stocks. Abu Kir Fertilizers and Misr Fertilizers, major azotic (nitrogen-based) fertilizer producers, were among the top gainers during the period, jumping 80 percent and 72.2 percent to LE 347.8 and LE 39.13, respectively. EFIC, a phosphate fertilizer producer, also benefited, rising 37.9 percent to LE 259.07 as the increase in azotic fertilizer prices is likely to lead to a higher demand for phosphate fertilizers.

Small caps still enticed investors’ appetites, with four stocks registering triple-digit returns. Heading the list was Nile Cotton Ginning, which soared 170.2 percent after turning net losses into net profits in its first-half results ended December 2007. Egyptian Contracting (Mokhtar Ibrahim) rose 112.4 percent after winning new projects in Saudi Arabia and the UAE, in addition to 80-percent growth in first-half net profits. Meanwhile, the 123.6-percent increase in Egypt Aluminum’s price was attributed largely to its strong first-half financial results. However, Egyptian Real Estate (EREC) increased 124.4 percent with no headlines during the period. Hmmm.

Most large-cap stocks exhibited a positive performance during the period led by sector-related stocks. Ezz Steel was up 28.4 percent due to its announced expansion plan and the latest increase in steel prices. El Sewedy Cables increased 26.7 percent in view of establishing a phosphate fertilizers plant in Suez. Meanwhile, Orascom Construction Industries (OCI) rose 16.2 percent on the heels of its agreement in February with the UAE-based Abraaj Capital, a leading regional private equity company, to merge the latter’s fertilizer production operations, Egyptian Fertilizers Company (EFC), under OCI. By contrast, Orascom Telecom, Talaat Moustafa Group and EFG-Hermes were among the few stocks that closed in the red.

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