The ratings are indicative of the recent economic progress that has pushed economic growth to 7.2% for 3QFY2006-07 up from 6.9% during the same period in 2006, and raised total investments during the quarter by 42% to LE 41 billion; 71% of which were made by the private sector. The Central Bank of Egypt (CBE) revealed that foreign direct investments (FDI) almost doubled from $4.6 billion recorded during the first nine months of FY2005-06 to $ 9.4 billion the first nine months of FY2006-07. Foreign reserves hit $28.04 billion at the end of May 2007 compared to $27.1 billion at the end of April 2007.

The budget deficit has dropped to LE 14.7 billion for 3QFY2006-07 compared to LE 16.5 billion in 3QFY2005-06. The balance of payments recorded a surplus of $3.1 billion for the nine months to March 2007 compared to a surplus of $3.3 billion during the same period of the previous fiscal year, which has been attributed to a $3.3 billion surplus in the current account balance.

An 11.1% increase in tourism revenues and a 16.3% increase in Suez Canal receipts triggered a 43.5% increase in the balance of services surplus to $8.6 billion for the quarter, while export of goods surged 18.1% and imports of goods increased by 21%. Official reports also showed that the industrial sector grew 7.5% during 3QFY2006-07 with total investments worth LE 34 billion versus LE 16 billion during the same period of the year before.

Meanwhile, inflation has fallen to 10.5% in the twelve months to May, from 11.7% in April, with the government vowing to bring it down further to 8% in the coming months.

On the Cairo and Alexandria Stock Exchange (CASE) in June, the CASE30 Index showed strong activity with an increase of almost 500 points, nearly breaking the 8,000-point mark — a level it last hit at the end of January 2006.

In mid-June, the Capital Market Authority decided to remove price limits on the 45 most active stocks listed on the CASE, effective June 17, 2007. This brings the total number of stocks with no price change limits to 100. Additionally, the CASE listed Egyptian Tourism Resorts (EGTS, bt100 number 54), Orascom Telecom (OT, bt100 number 1) and Extracted Oils and Derivatives (ZEOT, bt100 number 75) among the stocks allowed same-day trading.

On June 6, Prime Minister Nazif issued a decree appointing Ahmed Saad as chairman of the Capital Market Authority (CMA), replacing Hani Sarie El-Din, while CASE Chairman Maged Shawki was reappointed to his position. At press time, Saad was set to assume his position as CMA boss on June 28, 2007.

Sarie El-Din had been appointed to head the CMA in 2005 and is credited with having helped expanded the market with the introduction of margin trading, same day trading, short selling and e-trading. He also implemented new CASE membership rules for brokerage firms, set regulations to prevent price manipulation and insider trading and has disclosed the guidelines for appealing CMA administrative decisions. Additionally, the CMA has exerted considerable efforts in promoting investment awareness through campaigns, upgrading its website and the establishment of a call center to field market inquiries.

Regional investment bank EFG-Hermes (EFG, bt100 number 23) gained LE 9 last month, from LE 37.84 to LE 46.84, as our reporting period came to a close, reflecting investor confidence in the company and its regional expansion plans. The Abu Dhabi Investment Authority (ADIA) increased its stake in EFG to 8%, giving ADIA a new seat on the board.

As part of the investment bank’s regional expansion plans, EFG has signed a joint venture contract to establish EFG-Hermes Qatar Limited at the Qatar Financial Center with the main purpose of undertaking brokerage activities in the Qatari market along with other financial activities such as asset and portfolio management.

In the spotlight this month was Al-Watany Bank of Egypt (Al-Watany, bt100 number 29) for which three regional banks are in a bidding war. The CBE’s shortlist of bidders includes the National Bank of Kuwait, Dubai-based Mashreqbank, National Bank of Greece, Jordan’s Arab Bank and Greece’s EFG-Eurobank, each of which will begin their due diligence on WATA. Eurobank had been one of the contenders for an 80% stake in the Bank of Alexandria sale, which Italy’s Sanpaolo finally won in October 2006 for a whopping $1.6 billion.

The bidding war for Al-Watany has been going strong as the bank is one of the few remaining acquisition opportunities for foreign banks that wish to tap the potential of the Egyptian market, especially as the CBE has denied allowing the establishment of new banks. Banking authorities aim to clean up and consolidate the banking sector, in the hope that it will become more efficient and become attractive to more than the 10% of the adult population that it has as customers today.

Just off the auction block is the National Bank for Development (NBD, bt100 number 42), which recently signed a memorandum agreement with an Abu Dhabi Islamic Bank-led consortium to acquire 100% of NBD’s capital. The consortium will acquire a minimum 51.29% up to 100% at LE 11 per share, subject to CBE and CMA approval.

The consortium has agreed to raise NBD’s paid-in capital to LE 500 million after the transfer of the bank’s ownership, raising it to LE 1 billion before December 31, 2007, LE 1.5 billion before June 30, 2008 and LE 2 billion before the end of 2009. The CBE’s requirements for investors acquiring local banks include a commitment from the consortium to cover the shortfall in the bank’s provisions within a specific, CBE-approved timeframe and to protect employee rights.

Orascom Construction Industries (OCI, bt100 number 2) released its consolidated 1Q results showing a 54% year-on-year growth in net profits to LE 800.4 million, compared to LE 525 million recorded in 1Q2006. Total revenues grew 46% to LE 4.8 billion, up from LE 3.3 billion recorded last year. The company’s cement operations yielded a 55% y-o-y growth in EBITDA with a 61% growth in cement volumes during the first quarter. Construction operations’ EBITDA grew 22%.

During our reporting period, OCI announced plans to feed Syria’s yearly two-million-ton shortage of cement by setting up a joint venture greenfield cement plant there, with an initial capacity of two million tons per year. The plant would be 75% owned by OCI and 25% owned by a Syrian business group with investments of about $440 million, with production scheduled for 2009. The shortage comes at a time when construction is booming in Syria, fuelled by market reforms.

El-Ezz Steel Rebars (bt100 number 3) also released its consolidated results for 1Q2007 showing a 55% increase in net profits, which grew to LE 278.2 million compared to LE 179.6 million in 1Q2006. The stock closed at LE 58.79, gaining almost 10% throughout the reporting period.

In June, Prime Minister Ahmed Nazif announced the establishment of two new mortgage finance companies and approved that part of the proceeds from the duties on steel and cement exports would help finance low-income housing projects. With the new companies coming online, the market now has six mortgage finance companies operating in a market that has potential to reach LE 2.5 billion in lending this year after having hit LE 1.1 billion at the end of March 2007.

The long awaited international calls licenses will be up for grabs in July according to the financial weekly Al-Mal. The National Telecommunications Regulatory Authority (NTRA) stated the licenses would be offered for a fixed price, which has yet to be determined.

Meanwhile, OT officials have confirmed that the regional telecom operator is no longer pursuing Telecom Italia’s stake in Brasil Telecom Participacoes SA, adding that the company would continue to seek other investment opportunities in emerging countries that offer large markets with huge potential demand. The OT stock closed the reporting period at LE 74.36 after having nearly broken the LE 76 barrier.

Closer to home, Mobinil (bt100 number 7) chief Alex Shalaby announced that the company was probably going to give in and apply for a 3G license this year to be on par with its competitors, Vodafone Egypt (Vodafone, bt100 number 6) and Etisalat. Vodafone had acquired a 15-year 3G license for $586 million earlier this year and Etisalat paid for its license in July 2006 when it won the country’s third mobile license. With the announcement, the Mobinil shares jumped 15% to close our reporting period at LE 189.36 as the potential for growth just got a whole lot bigger.

In fixed line telephony, national incumbent provider Telecom Egypt (TE, bt100 number 4) announced its plans to invest LE 11 billion in regional expansion, with a particular focus on Algeria, where company officials see major potential for growth in light of the country’s privatization program.