|
Market heads downstream on global current
The stock market took another beating during the period from May 15 to June 15, with decliners outnumbering advancers by a ratio of 6 to 1. The HFI and CIBC indices ended the period down 17 percent and 12 percent, at 43034.31 and 188.86, respectively. That brought both indices well into double-digit negative performance for the first time this year, each being down 22 percent since January 1.
Global factors may be at play, as the Cairo & Alexandria Stock Exchanges (CASE) appears to be caught in the same current as other emerging markets. Global inflation fears have had their toll on investor sentiment, triggering a global sell-off in emerging market equities, including Egyptian stocks.
Locally speaking, fundamentals are still sound, with companies reporting double-digit growth rates in their first-quarter earnings almost across the board. Orascom Construction Industries (OCI), for instance, reported a 54-percent jump in its bottom line to £E 525 million compared to £E 340.5 million a year ago, thanks to solid construction and cement performance. Yet OCI’s stock plunged along with the market, down 22 percent to £E 171.76.
Oriental Weavers, meanwhile, posted a bottom line growth of 11 percent, despite rising costs of raw materials. The company recorded net income of £E 62 million in Q1 2006 versus £E 56 million a year earlier. However, the company’s stock held on, ending the period down only 3.5 percent to £E 63.13.
Olympic Group, Egypt’s brand name consumer durable company, reported 94 percent higher consolidated income of £E 46.8 million in Q1 2006 versus £E 24.1 million a year earlier. Nevertheless, its stock gave up 16 percent of its value to end the period at £E 39.14.
In telecoms, Orascom Telecom Holding (OTH)’s net income grew to $147 million in Q1 2006, a 10-percent year-on-year gain. The company’s stock also shrugged off the earnings, closing down 16.5 percent at £E 239.31. On a similar note, Vodafone Egypt reported its quarterly results, in which net income jumped 74 percent year-on-year and 10-percent over the previous quarter to £E 472 million. The company’s stock was relatively more resilient to the market sell-off, dropping only 4 percent to £E 81.95.
Even in banking, news of CIB’s proposed capital increase through a 50-percent stock dividend was short lived as the stock advanced 6.5 percent on the announcement day (June 1) to £E 65.16, only to close the period down 17 percent at £E 59.11.
In the last article, we did not rule out another wave of sellers hitting the market, which was indeed what happened this period. Arab investors appeared as net sellers, joining forces with retail investors. However, one positive indicator to consider is non-Arab foreigners turning net buyers.
Another positive bit of news was Moody’s raising its rating for Egypt from Baa1 to Baa2 with a stable outlook. As an emerging market, Egypt may be paying the price of becoming more integrated with the global economy. However, global investors are now turning their eyes to emerging markets and picking up undervalued equities. With this recent sell-off, Egypt is probably one of the markets they are now considering.
ANALYSE THIS
El Sewedy Cables
El Sewedy Cables, which manufactures cables, transformers, metal products, plastics and lighting fixtures, made an IPO debut on May 29 through a private placement that was 4.3 times oversubscribed. The company’s 60 million shares, 50 percent of which are considered free float, were listed on the Cairo & Alexandria Stock Exchanges (CASE) as of May 18 and were priced at £E 43 per share. On its first day of trading, the stock closed down 5 percent at £E 40.83. It failed to close above its private placement price three days later, then took a nosedive to close down nine of the next 10 trading sessions. By June 15, the stock was at £E 32.37 – down 25 percent from its private placement price.
The stock may have been hit by a double whammy. First, the equity market was not performing well at the time of the IPO, which has made some other companies shelve their offerings to a later date. Second, the stock may have been negatively affected by the lack of information about the company’s future growth prospects.
|
Submit
your comment
Top
|
