Market Report: Profit-hunting slows down recent bourse growth

Ahram Online, Tuesday 14 Feb 2012

Recent growth trend slowed by profit hunting but drop is cushioned by rises in telecom shares; non-Arab institutions are day's main net sellers

(Photo: Reuters)

Profit-hunting had the effect on Tuesday of slowing down the recent profit-gaining trend the bourse has been witnessing since December. Rises in large telecom shares managed to cushion the drop.

Benchmark EGX30 index dropped 0.65 per cent to conclude the day’s trade at 5,066 points. The broader index, on the other hand, gained 1.74 per cent to close at 488 points.

“Foreign investors were able to capitalise on the recent gains in the market because they were the main buyers over the past period,” capital markets expert Mostafa Badra told Ahram Online

The EGX30 gained some 1,480 points, 40 per cent of its current value, since the end of December 2011. During this period, foreign investors were generally the main buying force; while Egyptian and Arab investors continued to be sceptical of the market’s ability to recover.

“Foreign investors are seizing the opportunity,” Badra adds, “It’s only normal to realise profits if you achieve 20, 30 or even 40 per cent return on your invested capital in a period of one month.”

Non-Arab foreign institutions were the day’s main net sellers at LE159 million. Overall, they made up some 18 per cent of the day’s LE863 million (approx. $144 million) turnover.

Egyptian investors were net buyers on Tuesday, at LE142 million.

Main shares such as Orascom Construction Industries (OCI), Orascom Telecom (OT) and Commercial International Bank (CIB) dropped 3.23, 3.67 and 1.48 per cent, respectively.

“If it wasn’t for Mobinil and Orascom Telecom Media and Technology (OTMT), the benchmark index would have seen a much larger drop,” Badra explains.

Mobinil and OTMT gained a significant 9.99 and 9.72 per cent, respectively, as they continue to enjoy the optimism resulting from the announcement of a shift in Mobinil’s shareholding structure.

On Monday France Telecom (FT) said it had reached a preliminary accord to buy out most of OTMT’s stake in their jointly owned telecom operator Mobinil. FT said it would end up owning 95 per cent of the mobile carrier, as it will offer a put option at LE202.5 per share. Mobinil closed trading today at LE151 per share.

For its part, OTMT said on Tuesday it would give shareholders much of the $1 billion it stands to gain by selling its stake in Mobinil and retain part of it for new business opportunities.

OTMT would retain a 5 per cent stake in Mobinil and continue to manage the company under a contract with the French telecoms group.

“The gain in EGX70 reflects opportunities still present in lower cap stocks; which are preferred by Egyptian investors,” Badra added.

The EGX70 includes more shares that the EGX30; but contribution to total market cap is lower. Its increase today was reflected in the number of stocks gaining value, 119 versus 52 that dropped out of 185 traded. 

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