Market Report: Egypt stock rally falters on telecoms disputes

Ahram Online, Wednesday 21 Sep 2011

The Bourse is back in the red for the first time in three days, down 0.7 per cent as disputed news for high-cap telecoms firms makes investors think twice

Egyptian Stock Exchange
Traders work at the Egyptian Stock Exchange in Cairo (Photo: Reuters)

Egypt's recent stock rally proved short-lived on Wednesday, as the high-cap telecoms shares which powered the Bourse's gains for the last two days reversed their performances to push the main index into the red.

The benchmark EGX30 dropped 0.68 per cent to 4,433 points, its first loss in three days, as investors shied away from heavyweight stocks. The broader EGX70 and EGX100 which deal in smaller, more speculator-friendly shares, saw even sharper declines of 1.1 and 1 per cent respectively.
 
"[The losses] were all about the news for Orascom Telecom and Mobinil," said Ashraf Abdel Aziz, head of institution sales at Arabia Online Securities.
 
Conflicting news reports for the two telecoms firms seemed to speed their decline as Orascom Telecom (OT) lost 2.7 per cent and Mobinil fell 3.2 per cent, rolling back some of the gains they had made since Sunday.
 
OT shares fell as far as 3.9 per cent early in Wednesday trade after an Algerian source denied reports the country's Telecom Ministry had made a US$7 million valuation for Orascom subsidiary Djezzy. Such claims on Monday had sparked sustained buyer interest in OT, with stock previously gaining some 13 per cent.
 
Confusion also reigned when it came to the role of Mobinil in the potential sale of Orange Switzerland by its owner France Telecom. 
 
Mobinil, part owned by telecoms tycoon Naguib Sawiris, said on Wednesday it had no knowledge of any proposal by France Telecom to swap its shares in a Swiss telecoms company for the stake held by Sawiris in the Egyptian operator.
 
From 174 trade shares, 35 gained while 123 finished down in a session marked by low turnover of just LE216.6 million. 
 
Orascom Telecom was responsible for around a sixth -- some LE31.37m -- of total trade, and most other high-caps mirrored its decline. Shares in the Commercial International Bank, Ezz Steel and real estate developer SODIC dropped 1.6, 1.4 and 4 per cent respectively.
 
Construction and building materials was one of just three sectors to finish in the green, pushed up by a 0.4 per cent rise for Orascom Construction, Egypt's largest listed firm.
 
Among the EGX30s scattered gainers were Egyptian for Tourism Resorts, up 5 per cent, and cable maker El-Sewedy, which gained 3 per cent amid conflicting reports over $300 million in deals it was reported to have secured with the Ethiopian government.
 
Analysts attributed the poor performance of the EGX70, which often holds steady while the main index dips, to the day's net-sales by Egyptian investors.
 
Foreigners were the day's only net-buyers, shelling out for a marginal LE11.6m, while Egyptians and other Arabs were net-sellers to the tune of LE7.6m and LE4m.
 
"We're seeing uncertainty from investors due to the ambiguous standing of big deals involving Orascom and Mobinil," said capital markets expert Mostafa Badry.
 
"In this atmosphere we're seeing investors resort to speculations, buying and then taking quick profits on the recent gains. Some days this will mean significant losses."
 
As trading closed, Egyptian Prime Minister Essam Sharaf named Mohamed Abdel Gawad Omran as new chairman of the stock exchange, succeeding Mohamed Abdel Salam.
 
Omran was previously the vice chairman of the Holding Company for Insurance and served as deputy chairman of the Bourse for four years, from 2006 to 2010.
 
"I don't think the change had any impact on the market -- it happened too late. But Thursday's session might be impacted," said Abdel Aziz.
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