|
VOLATILITY IN ACTION
It seems that “Black Tuesday,” March 14, was a harsher
correction than anticipated. The HFI Index dropped almost 20 percent
only to recover after the CASE halted trading for 30 minutes giving
investors a chance to catch their breath. The correction magnitude
was amplified by the fact that retail investors, mostly from the
Gulf, accounted for the bulk of trading. As a result, both the HFI
and CIBC indices slid, 10.2 percent and 13.4 percent to 55321.05
and 219.88 respectively, during the period from February 15 to March
15. Also, declines dwarfed advances with a ratio of almost 5 to
1.
Correction aside, this was a news-heavy period. EFG-Hermes finalized
a capital increase and announced its preliminary 2005 results with
profits of £E 348 million to £E 356 million. Its stock
fell 22 percent to £E 47.93, mostly on Black Tuesday dropping
as low as £E 33 but eventually crossing the £E 50 threshold.
Meanwhile, both NSGB and its recent acquisition, MIBank, released
their 2005 results posting a 100-percent increase to £E 493
million and a 99-percent drop to £E 1.5 million, respectively.
The results reflect their provisioning strategy with the former
cutting and the latter beefing up provisions by 40 percent. Nonetheless,
NSGB’s stock advanced 3 percent to £E 45.30 and MIBank’s
0.5 percent to £E 31.98.
Cement stocks, under-performers last year, closed in the black with
Alexandria Cement and Torah Cement closing 5 percent and 3 percent
higher respectively. Meanwhile, Sinai Cement posted a 125-percent
profit increase in 2005, amounting to £E 181.9 million. This
followed a 28-percent increase in sales. The stock stabilized at
around £E 54.
In real estate, SODIC’s stock continued to nosedive, given
its 5-percent movement limit. Once trading at £E 284.37, the
stock closed 54 percent lower at £E 125.02, proving that things
could turn sour when a stock flies high without fundamentals. Merger
negotiations with Palm Hill Construction and New Cairo Investments
ceased without any details.
Even telecom stocks closed on a negative note. Telecom Egypt (TE)
fell 19 percent to £E 15.81, despite announcing the resumption
of its Algeria venture, a new expansion project in Jordan and an
81-percent profits increase in 2005. TE plans to raise monthly subscription
by 25 percent to £E 10 starting April 2006 and is likely to
co-bid with Telecom Italia for the third mobile license. Mobinil
and Vodafone Egypt also closed in the red, down 8.6 percent to £E
173.30 and 5.1 percent to £E 95.25, respectively.
Orascom Telecom’s stocks also shed some pounds, closing 4 percent
lower at £E 321.86. The company acquired 19.3 percent of Hutchison
Telecom International Ltd. But the worst telecom performer was Raya
Holding, with a 33-percent drop to £E 16.05. Its acquisition
of a local ISP giving it a 20-percent market share and making it
Egypt’s second largest ISP didn’t help.
Although institutional investors despise volatility, it’s what
makes this market exciting. Exuberant volatility is what turns off
investors in general. Black Tuesday might have filtered out investors
who couldn’t stand the market dynamics, which bodes well for
the overall market. Stock movements should start making sense as
the dust settles. Best advice – monitor portfolios closely,
keep abreast of market developments, use technical analysis to decide
when to enter the market and select stocks on fundamentals.
|
ANALYZE THIS
ARAB COTTON GINNING
Arab Cotton Ginning (ACG) has been on a roller-coaster ride.
Trading as low as £E 6 a year ago, its stock shot up
to £E 31.25 in February. The company, which has been
on an acquisition spree to build a textiles group, is now
facing severe stock price meltdown making it vulnerable for
acquisitions. Good or bad, ACG was one of 10 stocks selected
for margin lending in January, boosting its stock liquidity
and volatility. In February, the company announced impressive
half-year results of £E 10.6 million in profits versus
£E 5.7 million in the previous period. Later, its board
of directors approved a capital increase for existing shareholders
at £E 5 a share, doubling its capital to £E 925.9
million with the funds earmarked to finance the acquisition
of two textiles companies. This period, the stock dropped
a whopping 44 percent from £E 23.21 to £E 12.94.
It later slipped to £E 10.88 before inching up to £E
13.75.
|
Submit
your comment
Top
|
