A rally of telecom and real estate shares have triggered the market’s main benchmark EGX 30 index to improve by a significant 30% during the reporting period from January 15 to February 15 registering 5,003 points. Following this lead, the EGX 70 index inched up 17% month-on-month (m-o-m) to 493 points.
Investment appetite has been whetted by news of France Telecom’s (FT) plan to buy Mobinil shares and the prevailing stability and positive political sentiment. Telecom stocks witnessed an uptrend on the back of the FT acquisition of Mobinil at LE 202 per share, making the total value of the deal LE 6 billion.
Consequently, Mobinil witnessed a remarkable increase this month of 120% settling at LE 166.80 after having traded 3.8 million shares worth LE 404 million.
The deal hasn’t been finalized yet as the government requires further investigations about the deal and its pricing, which led to a moderate decline in the market during the month. Orascom Telecom rose 38% to LE 17.10 booking volumes of 261 million shares worth LE 916.3 million. Also, Orascom Telecom Media and Technology Holding came in 18% higher at the end of the period, closing at LE 1.48. They recorded the highest trading value of LE 942 million and the highest trading volume of 795 million shares. Fixed-line incumbent Telecom Egypt followed the same upward trend, closing up 17.9% m-o-m at LE 16.10 per share.
The real estate sector was led by Six of October for Investment and Development as it rallied to close 66% higher at the end of the reporting period to LE 13.91, with 9.5 million shares changing hands at a total trading value of LE 98 million. Also recording double-digit gains was United Housing for Development, which ended the period 48% higher at LE 5.93.
Palm Hills for Development closed up 46% reaching LE 0.74, recording a total trading turnover of LE 296 million with a total of 203 million shares. Moreover, El Shams Housing closed at LE 3.36 per share with 17.9 million shares traded for a total value of LE 50.6 million.
Talaat Mostafa Holding recorded gains of more than 40% this reporting period to close above LE 4 at LE 4.57, with 159.8 million shares traded worth LE 618 million. Meanwhile, Nasr City for Housing edged up 37%, ending the period at LE 15.2 per share. Within the same sector, Heliopolis Housing & Development climbed 34% m-o-m, settling at LE 15. Amer Group, which had recorded losses of 10.8% at the end of the previous reporting period, made a comeback as the stock gained 25.9% to conclude the period at LE 0.73. Trading volumes on the Amer stock remained among the highest on the market, with 227.4 million shares changing hands for a total trading value of LE 145.8 million.
On the downside of the market, Beltone Financial Holding changed its upward performance this month, slumping 9.2% to LE 12.70 due to the failure of the preliminary negotiations for the sale of Beltone Chairman Alaa El Saba’s stake in the company. Also in the red, Oriental Weavers closed 5.6% lower at LE 28.27 per share on thin volumes of only 406,000 shares. The stock recorded trading values worth LE 11.9 million.
Upper Egypt Flour Mills was among the losers for this reporting period, down 4.6% to LE 46.99. With only 139,000 shares traded, the stock recorded a turnover of LE 6.6 million.
Among the most active stocks was Arabiyaa Lel Istithmaraat (AIC) which nabbed a huge volume of 158 million shares worth LE 92.7 million after adding 12.7% to its value to finish off the month at LE 0.62.
Likewise, the Egyptian Company for Touristic Resorts Company followed AIC, capturing high trading volume of 92.3 million shares at a total value of LE 94.2 million while closing at LE 1.13. The stock recorded a 27% increase m-o-m. Citadel Capital was up 34% at LE 3.42 while valuing LE 261 million on a volume of 87 million shares.
El Ezz Reinforced Steel Manufacturing closed 68% higher at LE 6.86 with a trading volume of 87.3 million shares. Following suit, Pioneers Holding advanced 65% to LE 3.90 on a trading value worth LE 268 million with 80.5 million shares traded. Moreover, Electro Cable Egypt was up 16% at LE 1.01. With 66.9 million shares traded, the stock recorded a turnover of LE 62.9 million.
Annual inflation was 9.2% in January 2012 compared to 10.4% in December 2011, with a monthly increase of 0.1%. Food prices constituted the main source of inflationary pressures, showing a 11.4% y-o-y increase. Communication prices (2.6% of the CPI basket) declined 4.5% y-o-y and hotel prices (0.05% of the CPI basket) 22% y-o-y.
Average inflation recorded during 2010 and 2011 was 11.3% and 10.5%, respectively, seemingly cooling off. However, the current situation as a period of stagflation, illustrated by a number factors: muted GDP growth of 0.26% y-o-y in 1QFY2012 due to investments being slashed 22.8% y-o-y and private consumption surging 5% y-o-y in 1QFY2012 despite the high 12.4% unemployment rate. Also contributing to stagflation is overnight deposits increasing 100 basis points to 9.25% and the overnight lending rate 50 basis points to 9.75% in November 2011. The slumping demand for different sectors, indicated by a 21.8% y-o-y decline in hotel rates, is also a contributing factor.
In this respect, inflation is still a dormant threat in the Egyptian economy and is expected to accelerate to an average of 15% over 2012 due to several reasons, including an increase in oil and gas shortages resulting in surging black-market prices. This is also expected to be reflected in higher prices of food and bread products. Also, the low foreign currency inflows from tourism and FDI and outflows of portfolio investments are expected to result in the Egyptian pound depreciating to a low of LE 7 per US dollar later during the year.
Furthermore, net international reserves contracting to $16 billion (LE 96.62 billion) in January complicate the picture. Shrinking foreign currency reserves are expected to result in the dual effect of the Egyptian pound depreciating and import bans. Currently, the government is considering banning the import of yet unspecified products. Both factors are expected to result in staggering inflation due to high dependence on imports as Egypt imports 40% of its food needs. bt