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Stocks' slide shows no sign of slowing

November 2011
The period from September 15 to October 15 saw EGX 30 lose 4.9 percent to 4,152.3 and EGX 70 more than 12 percent to 474.4. Even the recently launched EGX 20 capped index lost 5.1 percent to 4,484.8. Declines outnumbered advances by nearly 7:1, and it was the fourth consecutive period the market has lost ground.
Most gainers were either from defensive sectors or event-driven. Suez Canal for Technology Settling - which owns October 6 University - saw its shares advance 5.6 percent to LE 12.96. Three milling companies also saw their shares advance: Middle & West Delta Flour Mills (4.7 percent), Upper Egypt Flour Mills (3.4 percent), and East Delta Flour Mills (1 percent). Arab Investments & Development Holding's shares advanced 10.2 percent to LE 0.65 after the company announced its subsidiary acquired another stake in a limousine company and it plans to buy back shares. The gainers list included some large caps, such as Orascom Telecom Holding (OTH) and its subsidiary Egyptian Company for Mobile Services (Mobinil), which inched up 1.6 percent and 4.1 percent to LE 3.22 and LE 95.7, respectively.
The losers were dominated by large caps. Orascom Construction Industries (OCI) - the largest listed stock on the Egyptian Exchange by market cap - saw its shares slip 4.5 percent to LE 221.37. Meanwhile, Sinai Cement slipped 11.8 percent to LE 31.54 against the backdrop of bombings and attacks on the natural gas pipeline that supplies its factory.
Real estate stocks continue to suffer. Both Palm Hills Developments and Remco for Touristic Villages Construction lost a fifth of their value, finishing at LE 1.23 and LE 1.98, respectively. Madinet Nasr Housing & Development fell 16.6 percent, Six October Development & Investment Co. 15.5 percent, Amer Group 12.6 percent, and Heliopolis Housing & Development 11.7 percent. TMG Holding - Egypt's largest listed real estate developer - was down only 6.5 percent for the period.
Steelmakers were in a worse state, with shares losing almost a quarter of their value during the period. Ezz Steel shares closed down 25.7 percent at LE 5.80 and subsidiary Ezz Al-Dekheila ended 23 percent lower at LE 430.64. Even Egyptian Iron & Steel saw its shares drop 22.4 percent to LE 4.69. The government said it plans to offer steel producers that were stripped of new licenses some financing facility under which they can pay off their license fees over seven years.
With market turnover drying up, financial services firms saw their shares pressured. EFG-Hermes fell 6.9 percent to LE 11.96, Pioneers Holding 18.4 percent to LE 3.24 and Naeem Holding 13.8 percent to $0.25.
Standard & Poor's has followed the lead of Moody's and Fitch, downgrading Egypt's credit rating to BB- with a negative outlook. The Supreme Council of the Armed Forces expects a president to be elected by March 2013. Until then, the question is how will the "interim" government address the people's growing demands? The answer should be: Greater transparency.

Ezz Steel

Troubles continued to mount during the period for both Ezz Steel and the company's namesake and major shareholder. Ahmed Ezz was sentenced to 10 years in prison, and Ezz Steel stock lost 25.7 percent after the company said a court ruling annulling licenses granted in 2008 would impact growth. Its shares fell to a seven-year low of LE 5.3 on October 10. The company said it would review all current projects, but plans to finish construction of its Direct Reduced Iron plant at Ezz Rolling Mills, which will produce steel from iron ore instead of scrap metal. A daily average of 1.3 million shares worth LE 8.2 million changed hands during the period, with the stock ending lower in 13 of 19 sessions.

© Business Monthly 2011

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