With inflation rates still in double digits, global stock markets continuing to see more black days than white, it would seem that there's nowhere to go but up or is there?
Despite the onset of yep, you guessed it the global economic crisis, the real reason local investors need to worry is because the CASE 30 Index doesn't seem to be budging from a low and very narrow stretch of points. It doesn't matter if you bet against the market or with it you're bound to lose. But that's okay, it's a new year!
EGX
The sliver of good new is that the EGX authority is moving full-steam ahead with its new trading software X-Stream. The new system, which is still in the trial stage, enables traders to have a virtual 'price discovery session' before actual trading starts. This allows orders placed during the 'pre-opening session' to be amended and is intended to curb sharp stock volatility that has characterized the opening minutes of countless trading sessions since the EGX began its freefall in September 2008. X-Stream also provides traders with more customized interface screens and the ability to view equities, bonds, exchange-trafed funds (ETFs), futures and options simultaneously.
The first actual trading session held using the system was on November 27, 2008. Stock prices spiked upwards immediately after the market opened and trading continued until 11:25am. The software suffered from a technical problem during the session, according to an EGX report, but had no effect on trading.
Beginning this month, futures will be traded on the EGX in addition to the forecasted increase in investments in ETFs, which are generally less volatile than standard stock portfolios. The system will also feature a surveillance mechanism that allows the firm to monitor its traders in addition to preventing them from buying or selling stocks outside the lower or upper limit specified by the investor.
The EGX has already trained nearly 1,000 traders on the new software and conducted 30 trial sessions. The exchange also announced it has updated its data storage capabilities, as well as its internal network and e-trading system to capitalize on the increasing number of local, Arab and foreign e-investors.
Travel and Leisure
The entire sector is under pressure to perform well during the high winter season given the current state of the global economy. Most tourists coming to Egypt are from Europe and Russia, both now bracing themselves for recession and unlikely to be sending many vacationers in the near future.
First up is Egyptian Tourism Resorts (EGTS.CA, bt100 number 71). The company's operation model depends on attracting tourist-based FDI to infrastructure-ready regions like Sahl Hashish. The first nine months in 2008 were good for the company, with consolidated 3Q2008 net profits topping LE 224.69 million, compared with LE 163.76 million in 3Q07.
In addition, Egyptian Tourism Resorts acquired a total of 24 million shares in treasury stock with prices varying between LE 1.73 and LE 2.6 per share. Par value stands at LE 1 per share. Stock prices have slightly fluctuated over the reporting period, starting at LE 2 per share and ending at LE 1.85 per share. The company also sold-off four pieces of land totaling an area 145,816 square meters for a combined price of $18.688 million (LE 103.158 million).
Outside the bt100 list, Misr Hotels (Hilton, MHOT.CA) seems to be performing rather well, with net profits soaring to LE 209.9 million in the first half of 2008 compared with LE 67.1 million in the same period of 2007. Meanwhile, standalone 3Q08 results showed a slight increase of net profits to LE 23.1 million from LE 22.99 million in 3Q07.
The company also issued dividends at the beginning of December 2008 amounting to LE 6.5 per share, though par value is LE 15 per share. Hilton stock prices started the reporting period at LE 103.6 per share and ended it at LE 98.36.
Orascom Development Holding's (ODH, ODHN.CA) 3Q08 consolidated net profits reached 85.68 million Swiss francs (LE 424.97 million) compared with 50.4 million Swiss francs (LE 250 million) in 3Q07.
TNT Holding LTD decided to acquire 5,000 shares via the Swiss Stock exchange (SWX) priced at 34.44 Swiss francs (LE 170.8) per share -- in addition to the 7,140 shares acquired during November 2008 at a similar average price, bringing the total number of shares acquired by TNT Holding to 12,140 shares.
Also during November 2008, SOS Holding acquired 2,614 shares with an average price of 31.98 Swiss francs (LE 158.6) per share. Sameh Sawiris acquired a massive 14,925 shares with an average price of 33.5 Swiss francs (LE 166) per share, bringing his total ownership in ODH to 7.345 million shares.
Since its listing in May 2008, TNT's stock prices have increased from their par value of 25 Swiss francs (LE 124) to 40.98 Swiss francs (LE 203.26) per share. Meanwhile, the acquired OHD is still in free float and has seen its stock prices decrease from LE 30.25 per share at the beginning of the reporting period to LE 19.69 at the end of it.
Orascom Hotel Holdings (OHH, ORHC.CA, bt100 number 53) announced that consolidated net profits have dropped from LE 117.17 million in 3Q07 to LE 107.689 million in 3Q08. Stock prices have remained stable since early October 2008, when they decreased from LE 50 per share to LE 40 per share during the October 8 trading session.
Utilities
The utilities sector is one of the most vital yet underrated sectors on the EGX: The costs related to the sector are governed by the state, disallowing companies from adjusting prices related to operating costs.
The first of these companies is Natural Gas and Mining Project (Egypt Gas, EGAS.CA, bt100 number 64), whose 3Q08 consolidated net profits decreased from LE 123.467 in 3Q07 to LE 111.892 million. Stock prices in Egypt Gas fell from LE 63.7 per share at the beginning of the reporting period to LE 52.44 at the end. Par value is LE 10 per share.
Outside the bt100, REGWA (REGW.CA) raked in net profits of LE 950,000, up from LE 859,000 in 3Q07. REGWA's major operations include digging wells in Egypt, Sudan and Libya. The company operates four subsidiaries in the region.
Food and Beverage
Cairo Poultry (CPC, POUL.CA, bt100 number 29) announced its 3Q08 net profits of LE 153 million, up from LE 111.9 million in 3Q07. Stock prices started the reporting period at LE 18.29 per share and ended at LE 14.19 -- still well clear of its LE 2 per share par value.
The second highest ranked company on the bt100 in the food and beverage sector is Delta Sugar Company (SUGR.CA, bt100 number 36), which saw poor financial performance during 3Q08. Net profits reached LE 277.8 million, down from LE 410 million in 3Q07. Stock prices fell from LE 24.6 to LE 21.5 per share during the reporting period.
The lowest ranked company in the sector, Egyptian Starch and Glucose (ESGI.CA, bt100 number 78), saw almost no rise in its 3Q08 consolidated net profits: LE 19.248 million in 3Q08 versus LE 19.159 million in 3Q07. Its stock prices fell from LE 22.4 to LE 20.2 per share during the reporting period.
Regional Stock Markets Overview
Comparing two Gulf-based stock exchanges, the Turkish index, two North African exchanges and the CASE 30 sheds light on how the region was affected during the last three months of 2008.
The first from the Gulf region is Saudi's only stock exchange, Tadawul or Tadawul All-Share Index. The largest of the sector-specific indices is banking and financial services, closing at 13,582 points. By comparison, the petrochemical industry closed at 3,130. The most volatile of the lot is insurance, which lost 78.86% of its value over the past year.
The Kuwait Stock Exchange is second largest in the Arab world, and is an all-listed index. Trading was halted on the exchange for four days in mid-November, after authorities launched an inquiry into why the index lost 43% of its value since June 2008.
Representing the North African Market is the Moroccan CFG 25 Index and the Tunisian Tunis Stock Exchange TUNINDEX.
In Morocco, the CFG 25 Index is made up of 25 companies listed on the Casablanca Stock Exchange, making up 85% and selected to accurately reflect all of the sectors listed on the exchange. The CFG 25 is a price-only market cap weighted index, and is calculated in Moroccan dirhams on a monthly basis.
TUNINDEX in Tunisia is an index open to all companies listed on the Tunis Stock Exchange. It is a capitalization-weighted index, though the only requirement for joining is a minimum listing time of six months on the exchange.
By Tamer Hafez
© Business Today Egypt 2009
