Market Report: Egypt's main stocks take first hit in a week

Ahmed Feteha, Michael Gunn, Wednesday 26 Oct 2011

Benchmark slips 0.63 per cent as investors choose a moment of relative political calm to make quick profits on high-cap shares

Egypt
A time to reap: investors make quick gains in advance of Egypt elections (Photo: Reuters)

Egypts major stocks saw their first loss in a week on Wednesday, as traders took advantage of relative political stability in the run-up to November's elections to opt for quick gains.

The benchmark EGX30 slipped 0.63 per cent to close at 4,319.7 points, bringing an end to its five-session winning streak. 
 
"The trading norm in the market now is to make quick gains because of the unstable nature of stocks. Traders don't have the patience to hold on their positions to realise greater profits," said Mostafa Badra, a capital markets expert
 
From the 185 stocks traded on Wednesday, 117 lost value and only 50 gained. Healthcare and pharmaceuticals and financial services were the two sectors to finish in the green.
 
Losses were driven by downturns in the kind of high-cap stocks that previously boosted the index -- Orascom Construction Industries, Commercial International Bank and Orascom Telecom, all of which slipped between 0.6 and 1 per cent in value.
 
“Big stocks are still the most trusted and most traded in the market and they have determined how the market fares for every single session in more than month,” Badra explained.
 
There was a milder drop for the broader EGX70 index, which started the session with a 492-point surge before reversing its gains and dipping 0.38 per cent below the line.
 
"Smaller stocks were pulled down by the drop in the blue chips, they couldn’t sustain their gains on their own," said Badra.
 
Three shares, OCI, CIB and the Amer Group made up one third of the day’s LE222.7 million turnover.
 
Not all high-caps fared badly, however, with the Amer Group, a leading real estate developer, becoming the session’s highest gainer. 
 
It rose 6.48 per cent to close at LE1.15 per share following news of a LE121.6m capital increase, financed from the company’s profits and to be distributed as free share to all shareholders by 13 November.
 
Other companies had less favourable news. Mobinil, Egypt’s oldest mobile provider shed 1.7 per cent to close at LE95.02 per share following Tuesday's announcement of a 96 per cent drop in 3Q2011 profits.
 
Egyptian investors were the day's sole net-sellers, offloading LE23.4m in stocks, while Arabs and other foreigners were net-buyers of around LE11.5m apiece.
 
Trading took place amid the backdrop of IMF negotiations and preparations for the country's first democratic parliamentary elections.
 
Planning Minister Faiza Abu el-Naga said on Monday that Egypt would discuss financing from the International Monetary Fund with IMF officials this week with an open mind, after Cairo turned down $3.2 billion in loans offered by the Fund this summer. 
 
Any deal with the IMF could improve market sentiment significantly by easing uncertainty over Egypt's funding of its budget deficit, and by creating a precedent for other foreign lenders to follow.
 
Michael Millar, head of research at Naeem Holding, told Reuters the country was now in a relatively politically phase as candidates registered for parliamentary elections due to start on 28 November and this could lend support to the market until voting began.
 
However, "we are entering earnings season and many companies will still be reporting earnings down on last year, although most should show a sequential improvement on the quarter. Further earnings downgrades could follow," Millar added.
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