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MARKET WATCH

Seesawing to summer

The market continued its profit-taking bout to the disappointment of most investors, especially those maintaining long positions. Both the broad-based HFI Index and the broader CIBC Index gave up 9 percent and 12 percent to 35172.91 and 141.63 respectively during the period March 15 to April 15. Yet, they are still up 47 percent and 35 percent year-to-date. It may be time to introduce short selling so investors can have a way out of their losses should the market turn its back on them. If that happens, only investors with disposable cash will have a chance in stock picking.

Stock prices remain unpredictable, with as much chance of coming down as going up. Should they drop, it would take more effort to bring them back to where they were. For example, shares of Media Production City dropped 32 percent from £E 18.29 to £E 12.42. But the shares would now have to increase by 47 percent to get back to the £E 18.29 level. 

Even powerhouse Orascom Telecom Holding (OT) saw its shares plummet from £E 472 to as low as £E 380 in three weeks. However, news of the company’s first ever cash dividend, albeit representing less than 1 percent of yields, signified the company’s improving visibility. This was supplemented by news that its chairman is in a bid to acquire an Italian mobile operator.

What is confusing market participants in general and traders in specific is that the market is now a one-way street, either up or down. If the overall sentiment is positive, one could make money by buying just about any stock, but when it turns negative, one is most likely to lose money. It probably remains true that stock picking based on fundamentals is best suited for such market conditions but only in the long term. If investors trust a company’s management and believe in its growth potential, it’s likely that such an investment would be fruitful. The question is when?

During this period, prices of all six milling companies’ shares shed between 20 and 30 percent. Also, shares of both Al Ezz Steel and Ceramics, lost 24 percent and 26 percent respectively. Even market heavyweights closed the period on a negative note. Share prices of both MobiNil and Vodafone Egypt retreated 4 percent and 10 percent, respectively. Similarly, all cement companies closed in the red except for Suez Cement, up by16 percent, and Torah Cement, up by 2 percent. Meanwhile, Orascom Construction Industries (OCI) dropped 20 percent to £E 119.66, but still remains the second largest company in terms of market capitalization behind OT. 

Another loner that grabbed investors’ attention is Arab Cotton Ginning, which may be on the verge of acquiring privatized textiles-related assets. The company’s proposed capital increase is earmarked for such expansion opportunities. Ironically enough, the company’s shares defied gravity and closed the period up 7 percent at £E 10.51, having dipped as low as £E 7 in late March. 

The market seems to be seesawing its way to summer. Everyone seems to be in a wait-and-see mode. Consolidation would bring back hope to investors once cash is available, especially with the forthcoming Raya Holding IPO. If this proves to be another OT, one better be prepared with a bag of cash.

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