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PUMPING UP THE VOLUME...

If you’ve been out of the market most of 2005, there is no doubt that you let a golden opportunity pass you by. It’s easy to see in hindsight: the broad-based HFI Index and the broader CIBC Index more than doubled in value in 2005, posting 131.7-percent and 130.6-percent gains respectively. As for the period from December 15, 2005 to January 15, 2006, both indices were up 19 percent a pop at 62440.07 and 264.77 respectively. Meanwhile, advances dwarfed declines by a ratio of 7-to-1. Still, the market continues to ring up around £E 1 billion a day.

A review of 2005 performance reveals that Sixth of October Development & Investment Co. (SODIC) had by far the best performance (up 3482 percent), followed by EFG-Hermes (up 849 percent) and Arab Cotton Ginning (ACG, up 653 percent). Other performers worth reviewing include the four IPOs launched during the year, which all closed on a positive note: Raya Holding (up 48 percent), Sidi Krir Petrochemicals (up 52 percent), AMOC (up 74 percent) and Telecom Egypt (up 30 percent).

As for the period under review, the top 20 performers included three housing stocks, three contracting stocks and four milling stocks. Housing stocks came back into favor in light of speculation over their benefits from the recent mortgage law coupled with the appreciation of land prices due in part to increased demand by Arab nationals. Investor interest in milling stocks – although it is not dividend pay time – can be explained by the fact that the stock prices of these companies did not climb as much as the rest of the market during the second half of 2005.

It is clear that the market is attracting the interest of local retail investors who were drawn in by last year’s IPOs. As a result of increased public awareness, around three quarters of daily trading now comes from retail. As such, part of current demand for certain listed stocks is artificial due to non-expert investors stepping into the market.

Speaking of large caps, Orascom Telecom (OT) continues to make the headlines with its logical stock split. The stock ended the period up 24 percent at £E 720.80. It is worth noting that OT was quoted in the media as offering the largest bid for Nitel, Nigeria’s state-owned telecommunications operator, albeit lower than the reserve price set.

Another interesting story is that of EFG-Hermes, which has acquired a 20-percent stake in Bank Audi of Lebanon and secured licenses for asset management and investment banking activities in the UAE. The stock, which jumped 53 percent to £E 173.95, was also partially supported by expected higher profitability levels as a result of tapping into both the Saudi and UAE stock markets.

At the onset of the new year, the Cairo & Alexandria Stock Exchanges (CASE) named 10 stocks that will be available for margin trading once it kicks in, including Mobinil, Oriental Weavers and ACG. A quick look at this list reveals no surprises, except for the conspicuous absence of TE. It is worth noting that TE’s stock has recently been trading downward following its IPO in December 2005, though long-term prospects appear sound.

Naturally, the lingering question is: Are we in for yet another year of green performance across the board? Some analysts believe the market has reached unsupportable levels, while others are full of optimism for a continued progression. Normally markets need a breather for profit taking then pick up again. There is no doubt that a bubble is in the making, but whether it will burst or continue to grow is anyone’s guess given the continuing propensity for “irrational behavior.”

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