By Nasser Nasser News in brief A New Dawn? Bump in the Road The ongoing crisis in Greece reminds companies that the global recovery is far from certain. EGX 30

By Erik Stier

Following two consecutive months of losses and foreboding news from Europe, Egyptian market activity appears to have finally stabilized this reporting period, though not without some turbulence along the way. The benchmark EGX 30 fell slightly from 6,421 points on May 20 to 6,418 on June 17. The minimal three-point drop comes after a swift recovery of the market from sinking to its lowest point in more than six months.

On May 25 the index plunged 384 points to close the day at 5,937 — the lowest level since November 2009. The drop is largely attributed to widespread concern over the fate of market heavyweight Orascom Telecom (OT), which fell almost 7% on the same day. OT’s attempts to sell off its Algerian subsidiary Djezzy to South African mobile operator MTN were thwarted last month by the Algerian government, which cited its legal right to bid on the company before any potential foreign buyer. Talks between Algiers and OT have yet to take place.

Analysts point to investor frustrations with the prolonged uncertainty surrounding Djezzy, OT’s most valuable asset, as a catalyst for profit-taking and negative market activity.

But after the fall, a wave of confidence-building news emerged from both the banking and construction sectors, pushing the EGX back to its former level.

On May 26, Misr Cement Qena and Citadel Capital unit ASEC Cement jointly launched a LE 43 million plant in Minya that will have an estimated annual production of 1.7 million tons of ready mix cement. The current emphasis on infrastructure projects within the country is a welcome assurance to tense local and foreign investors. Both Misr Cement and Citadel saw stock prices jump in response to the announcement.

Meanwhile, Egypt’s small and mid-sized companies received a boost with the launch of trading on the Nilex, the first exchange in the region to focus specifically on small and medium enterprises. The EGX’s new index is set to increase capital for the country’s much-overlooked small enterprises, which account for roughly 80% of GDP. Ten companies were listed when the index launched on June 3.

Juhayna Food Industries launched the EGX’s first IPO in two years when it offered 41.2 million shares at LE 4.7 per share on June 6. The private offering was oversubscribed 1.8 times and amounted to LE 807 million. But the tide changed for its first day on the market. The company closed down 7.7% at LE 4.3 per share and spent the rest of the week trying to recover.

In real estate, Sixth of October Development and Investment Company (SODIC) announced its intention to purchase 50% of Syrian developer Palmyra at a cost of $40.5 million (LE 230 million). The deal places SODIC among a growing number of Egyptian companies expanding operations in Syria. El-Sewedy Cables operates a factory out of Damascus and in March EFG-Hermes announced the establishment of a $250-300 million (LE 1.4-1.7 billion) private equity fund in the country. The Dubai real estate crash last year shifted the regional investment focus to the Levantine, with Syria proving to be fertile territory.

But back in the drama of telecoms, at the end of May Telecom Egypt (TE) closed its discussion with Vodafone Egypt without reaching a deal over increasing TE’s 45% stake in the country’s second-largest mobile network. TE, the nation’s largest landline provider, lost 2.2 million customers over the past year and has shown interest in expanding operations in the mobile market.

Never one to miss an opportunity, OT’s Executive Chairman Naguib Sawiris expressed interest in competing for a stake in Vodafone after talks with TE dissolved, though official telecoms regulators were quick to point out the potential conflict of interest generated by owning management stakes in the nation’s two top mobile firms. bt