Market Report: Egypt stocks make mild gains on cautious optimism

Ahram Online, Thursday 1 Mar 2012

Investors project EGX30 to reach 5,600 points but remain wary of a possible harsh correction

(Photo: Reuters)

Egypt's Bourse concluded the week's trading Thursday on a mild increase fuelled by investors' caution.

The market's main index, EGX30, gained 0.38 per cent to close at 5,370 points.

"EGX30 is currently targeted to reach the 5,600 [point level] as it is the next resistance point; but this comes at a price," Tarek El-Kafrawy, a trader at CIBC securities told Ahram Online.

"Investors are cautious of a tough correction if the market shoots up too fast."

El-Kafrawy is referring to drops that markets usually undergo following increases. These drops are usually driven by profit taking.

"The rule of thumb is that the higher the increase, the sharper the following drop," El-Kafrawy explains.

EGX30 saw an exceptionally positive week, gaining 352 points since last Wednesday and augmenting its rally since the beginning of February, when it gained 785 points – some 17 per cent of its start of month value.

The index had grown by 48 per cent since the start of 2012.

Politics seems to be the main driver behind the market's growth.

"Since the start of February, the political scene has been calm and stable," El-Kafrawy stated. "Now investors can think about the market and not about protests or the possibility of violence."

Egypt's newly elected Parliament, which convened on 23 January, has boosted investor confidence in the Egyptian transition process.

"The market has become an attractive investment vessel once again," Kafrawy adds.

Positive news from the US market, as well as the prospect of a large ownership shift in listed mobile venture Mobinil also added to market optimism during the month in general and the previous week specifically.

American stock markets hit multi-year highs on stronger-than-expected economic data earlier in the week. The NASDAQ topped 3,000 for the first time since mid-December 2000 before retreating. Similarly, the Dow industrials and the S&P 500 rocketed to four-year highs.

Arab markets also witnessed exceptional levels during the week. The Saudi Arabian market hit a 52-week high on Wednesday as turnover approached $3 billion.

Mobinil, the largest listed mobile carrier in Egypt's Bourse, announced that main shareholder France Telecom (FT) will buyout 95 per cent of the company's share at LE202.5 per share. The announcement attracted major funds to Mobinil in hope of quick returns if the news materialised.

Mobinil closed Thursday's trade up 0.98 per cent at LE178.85 per share, marking LE50 million in total trade volume.

OTMT, the other party in the deal, also gained 0.96 per cent to close at LE4.2 per share.

Total market turnover marked LE703 million on Thursday, with 96 shares gaining value and 77 dropping.

Talaat Mostafa Group (TMG), Egypt's largest listed real estate developer, was the most active share today, constituting close to 9 per cent of total turnover at LE60 million.

However, it gained a meagre 0.21 per cent to close at LE4.76 per share.

Palm Hills Development (PHD) resumed its rally, gaining 1.78 per cent. The company saw seemingly un-justified large increases since the beginning of the week. PHD sent a statement to the exchange saying that no major events are taking place within the company to drive the surge in its share price.

The real estate developer closed Thursday trade at LE2.29 per share.

Orascom Construction Industries (OCI), the largest stock by market cap, flat-lined at the day's close.

On Tuesday, Iraq's Cabinet said it awarded OCI a $363 million contract to build a 1,014-megawatt gas power plant in the north of the country.

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