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A GLOBAL ROLLERCOASTER RIDE

A 300-point swing between a high and a low on US indices is never the norm, except during crises. Markets around the world, Egypt included, might be bracing for volatility, yet the period from December 15 to January 15 marked another lifetime high for Egypt’s benchmark indices. The CASE 30 added 8.9 percent to 10985.56, while the HFI index added 10.2 percent to reach 97535.24 and the broader CIBC index added a whole 15.3 percent to end the period at 447.48. The rally that kicked off 2008 came on the heels of another stellar performance by the market in 2007, with the indices gaining 51.3 percent, 51.3 percent and 38.8 percent, respectively.

Last year might have given investors reason to celebrate, but this year seems a little shaky. They say that if the US sneezes, global markets catch a cold. And Egypt is no exception, mostly because Egyptian equities have been climbing since mid-2006 with no major correction, and because Arab and foreign investors make up a third of the market turnover.

In the ICT sector, Raya Holding, up 3.3 percent to LE 13.50, paid a cash dividend of LE 0.48 on December 26. Its management decided to withdraw its bid for the second fixed-line license after failing to secure an international partner. In addition, Kuwait-based Watheeqa Holding announced that it sold a 4.4-percent stake in Raya, denying plans to increase its stake in the company. Mobinil, up 15.9 percent to LE 232.37, paid a cash dividend of LE 6.23 per share on January 3. The company, which will launch its 3G service in May, said it would report its 2007 results on January 30. Meanwhile, Orascom Telecom Holding (OT), up 1.6 percent to LE 91.14, finalized the sale of its investments in Iraq and HTIL, and denied rumors it was selling Mobinil.

The real estate sector also continued its boom. Egyptian Tourism Resorts, up 5.4 percent to LE 8.80, is expecting its 2007 results to hit LE 400 million. Also, plans are under way to raise its capital from LE 840 million to LE 1 billion through a 19-percent stock dividend. Sharm Dreams for Touristic Investment, up 22.3 percent to LE 30.56, announced a LE 130 million capital increase. In its first month of trading, Talaat Moustafa Group Holding, up 7.7 percent to LE 12.94, announced that it will start operations in Saudi Arabia and will establish a new securitization subsidiary.

In the financial world, banks shifted gears to capitalize on growth in mortgage finance. Suez Canal Bank, up 28.7 percent to LE 33.63, is setting up a mortgage finance company, while Housing & Development Bank (HDB), up 10.4 percent to LE 47.70, is setting up a real estate asset management company. Recently, HDB announced a LE 120 million rights issue. Due to a conflict of interests, CIB, up 8.7 percent to LE 93.42, sold its 38.38-percent stake in the car finance company Contact Cars, which plans to venture into the mortgage market.

Some market participants were anticipating a minor correction in the second half of January. The correction set in, but was exacerbated by a global sell-off out of fear that a full-blown US recession would take its toll on the global economy. Ironically, the US market escaped the worst of the global turmoil.

For Egypt, fundamentals are still sound with foreign direct investments expected to continue, mainly from Gulf countries. For astute investors, market dips resulting from undue panic create investment opportunities that are too good to pass up.

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