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MARKET WATCH Market picks up at year end Happily, December saved the year 2002 from having been an unqualified wipe-out. Both the blue-chip EFG Index and the broad-based Hermes Financial Index jumped 5.01 percent and 2.17 percent in the last month of 2002 to end the year on a positive note – up 3.5 percent and 1.88 percent respectively. Meanwhile, our period, from December 15 to January 15, exhibited mixed performances for both indices. The former added 1.57 percent to its value, while the latter slipped 0.86 percent, closing at 2302.13 and 5347.93. The market surge in December was helped in part by the outstanding performance of Orascom Telecom Holding (OTH)’s share price, which ended the period up 56.3 percent at £E 11.71, having recorded a high of £E 16.30 on January 8, implying a 118-percent return. OTH announced on December 24 that it would sell its majority stake (91.6 percent) in Fastlink, Jordan’s number one mobile operator, to Mobile Telecommunications Co. (MTC) of Kuwait, in a deal valued at $423.9 million. Fundamentally speaking, the transaction meant additional equity value for OTH, which has been unfairly traded at levels close to its life-time low of £E 6.54. By releasing some of its hidden value, OTH saw its shares reflect the good news. Still, in a market where many investors’ portfolio performances are in the red, any surge represents an opportunity to sell. Indeed, OTH’s share price slid to as low as £E 10.76 on profit taking before finding its feet. It was a busy month for the holding company, which launched its Tunisian mobile network on December 27 (well ahead of its planned January launch) and then reported its long-anticipated nine-month results on January 15. The results recorded a net loss of £E 96 million, including a one-time non-cash charge to the amount of £E 188 million related to its African operation Telecel. Ultimately, though, OTH’s share price was not affected much by the negative report, as the market digested the one-time charge without which OTH would have recorded a net profit of £E 92 million. Similarly, MobiNil, one of OTH’s main subsidiaries, advanced slightly to £E 33.15, up 5.07 percent for the period. The share price traded as high as £E 37.01 on January 8, the same day OTH recorded its high for the period. MobiNil is expected to report its year-end results early February. It is worth noting, however, that MobiNil may soon find its rival, Vodafone Egypt, also listed on the stock exchange, which could have the effect of pulling market liquidity away from MobiNil shares. Other than that, the market this period belonged to banks. With the new banking law waiting for parliamentary approval, the banking sector has become the center of attention. After all, it is the sector that reflects the state of the economy more accurately than any other. Private sector banks have seen several management reshuffles, and their public sector counterparts aren’t far behind. The management of both National Bank of Egypt (NBE) and Banque Misr, Egypt’s two largest banks, was changed with the appointment of two new chairmen, supposedly with more “private sector mentalities.” President Hosni Mubarak met with the governor of the Central Bank of Egypt (CBE), as well as chairmen of the four public banks, on January 13 to discuss the new banking law. The law will establish new rules for the sector, the most important of which is the minimum capital requirement of £E 500 million for Egyptian banks. Therefore, banks will have no choice but to increase their capital and merge with other financial institutions – or else face extinction. Al-Watany Bank of Egypt (AWB) had already approved its £E 75 million capital increase by the end of 2002, but it may well need another capital increase to meet the new capital requirement. As profitability is the main source for maintaining capital requirements, Egyptian banks are currently eyeing different opportunities to maximize their shareholders’ value. Egyptian American Bank (EAB) was among the first to set the trend in terms of interest rates, which it cut on Egyptian pound deposits by 150-200 basis points, starting a trend that could be emulated by banks whose interest margins have been in decline recently. Most banks ended the period down, with the six largest private sector ones closing as follows: CIB down 2.80 percent; MIBank down 5.78 percent; NSGB down 2.46 percent; EAB down 3.55 percent; AWB down 13.9 percent; and the Export Development Bank down 6.84 percent. Elsewhere, cement companies all closed down with the exception of Suez Cement, which ended the period up 5.8 percent at £E 31.17, despite a 33-percent drop in its unreviewed, unconsolidated nine-month profits. Torah Cement closed down 18.32 percent at £E 23.85, after both Suez Cement and the Holding Company for Metallurgical Industries denied the sale of their stakes in the company. Torah Cement’s shares, meanwhile, have been bid up recently, largely due to anticipation of a takeover. The two listed contractors, aic and OCI, were not any different, with aic closing down 21.52 percent despite the finalization of the second phase of its debt settlement due to CIB, and OCI slipping 4.42 percent. The period’s winners included three shares that seldom trade. The top gainer was Misr Gulf Oil Processing (MIGOP), which has been the subject of acquisition talk, closing up 68.93 percent. The two other biggest gainers were Alexandria Real Estate Investment, up 48.7 percent, and Alexandria National Iron & Steel (ANSDK), up 24.9 percent. The latter was boosted by the company’s announcement to buy 100,000 treasury shares. Another acquisition candidate, Paints & Chemical Industries (PACHIN) jumped 13.82 percent to £E 18.70 as talks continued with a Dutch suitor. Furthermore, both issues trading over the counter were down for the period, with Lakah Group chalking up the worst performance, down 43.33 percent to £E 0.17. Amr H. El-Alfy, MBA
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