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GET READY FOR THE RIDE...
It seems that the irrationality resulting from the plethora of
retail investors stepping into the market has taken its toll. The
period from January 15 to February 15 witnessed a profit-taking
wave as both the broad-based HFI and the broader CIBC Index slipped
1.4 percent and 4.1 percent, to 61577.85 and 253.94, respectively.
Declines had the upper hand over advances for the first time in
over seven months with a 2-to-1 ratio.
Retail and local investors are still driving the market with around
65 percent and 75 percent, respectively, of the £E 1 billion
traded daily. Foreign investors, mainly westerners, seem to be turning
into net buyers. Meanwhile, valuations still remain below those
of their counterparts in the Gulf, alluding to a possible inflow
of funds yet to come.
Egypt Kuwait Holding Company (EKHO) was the top performer over the
period with a 68-percent return. Its stock price advanced from $2.27
to $3.82, partly due to news that the company is tapping the petrochemical
sector through one of its subsidiaries.
Otherwise, it was all about real estate. Coming closely behind were
SODIC and Heliopolis Housing & Development. The first, which
was added to the CASE 30 Index, continued to skyrocket to £E
269.73 (up 56 percent), while the second shot to £E 153.44
(up 55 percent). It's worth noting that Heliopolis announced its
first-half results ending December 31, 2005, posting 25 percent
in higher profits of £E 35 million. Nasr City Housing &
Development was also added to the CASE 30 Index, jumping 36 percent
to £E 129.34. All three companies are expected to benefit
from the increase in land prices over the last few months due to
increased foreign interest in real estate, particularly by Gulf
investors.
Even non-real estate companies had a taste of this increased interest
with Olympic Group's stock advancing 30 percent to £E 53.40.
Olympic had announced a new 50-50 real estate venture with Al-Futaim
Group, one of UAE's largest family-owned businesses.
In telecoms, Mobinil's stock dropped to £E 189.56, a 13-percent
drop from the coveted £E 200 price. This came on the heels
of missing most analysts' estimates for the fourth quarter and full
year results. On the other hand, Vodafone Egypt maintained its composure
with its stock slipping only 5 percent to £E 100.36. Also,
Orascom Telecom Holding (OT) stock slipped 7 percent to £E
335.16, having split at a ratio of 2-to-1 effective January 22.
Recently, OT has secured several new debt facilities, the largest
of which is $2 billion earmarked to repay its indebtedness resulting
from the acquisition of 19.3 percent of Hutchison Telecom. Speaking
of regional expansion, the Nigerian government had cancelled the
sale of Nitel to OT, which had bid $256.5 million, and invited bidders
to negotiate a fresh deal.
It's been said that what goes up must come down, but no one ever
said when and by how much. The market went up collectively by 437
percent in 2004 and 2005. It is conceivable that a correction of
15-20 percent is in the vicinity. However, the mood of market buyers
and sellers has changed more in favor of retail investors, which
leads to higher market volatility. Once the dust settles, only those
who can stand such volatility will survive while others filter out.
Only then, the market will be marching to a "real" drummer,
not out of whack.
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ANALYZE THIS
Trading over 45 million shares worth £E 10 billion,
EFG-Hermes Holding is on a roller-coaster ride. Its share
fluctuated this period between £E 170 and £E 277,
a 23-percent volatility. A single-digit stock in 2004, it
hit three digits due to news of the company's strategic future
plans. It announced its acquisition of 20 percent of Banque
Audi of Lebanon indicating that it's looking to become a full-fledged
financial player and launched a £E 2 billion capital
increase earmarked to finance the acquisition. It also tapped
into the Gulf markets of Saudi Arabia and the UAE, which pushed
share prices higher as investors factored in expected gains
from the comparatively larger markets. However, prices dropped
on February 2 with over 3 million shares traded in line with
the market-wide profit-taking wave.
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