With 2008 on the horizon, there’s much to look forward to considering the 2007 boom on the Egyptian stock exchange scene, reflected in some revamps, blazing corporate results, two new initial public offerings (IPOs) which lifted the bourse to all-time highs.The Cairo and Alexandria Stock Exchanges (Case 30 Index), which ranks the top 30 companies listed on the exchange, was updated this year. Three Orascom companies (Orascom Telecom, Orascom Construction Industries, and Orascom Hotels and Development) ranked in the top 10. On the other hand, shares in Vodafone Egypt have been removed and are no longer a liquid share since Telecom Egypt bought nearly every free-floating share in the company last year.This year also marks two changes to the Case 30 rules: the inclusion of dollar-denominated shares and the exclusion of companies that reported losses in three consecutive years.On an international front, Egypt inked this year the OECD Investment Declaration, making it both the first African and Arab nation to join the entity. Adopting the declaration will require the Case to enforce corporate governance policies and standards, which will in turn allow it and its listed companies to achieve a higher level of transparency and credibility when it comes to dealing with other stock exchanges. Moreover, the Case signed last summer a five-year memorandum of understanding (MoU) with Korea Exchange. The agreement incorporates cooperation on information exchange and communication regarding regulatory issues including listing criteria, membership standards, corporate governance measures, small-to-medium enterprises (SMEs) and traded products such as options, futures and Exchange Traded Funds (ETFs), investor education, as well as awareness and staff training.Further facelifts were effective in 2007, as the Case streamlined its sector classifications and added new performance indices. The stock exchange announced in September new sector classifications, reducing the number of sectors from 22 to 17. While most sectors will remain unaffected, some will be combined, and others will vanish completely as their sub-sector industries are reclassified into other sectors. The other change is the addition of new indices that will give sector-by-sector performance figures. The indices have a baseline date of January 1, 2007, with a base value of 1,000 points. The companies included are those traded with no price limits. These new indices are free-float market capitalization, weighted indices.In other news, the Case revealed plans to team up with the Egyptian National Postal Organization to launch a new postal savings account, accessible at post offices across the nation. The new account can be opened with as little as LE 100 with no ceiling value, while its returns are based on stock market investments overseen by experienced fund managers to minimize risk to the account owner.The bourse has been a busy bee this year. Topping the action was the well-received Ghabbour Brothers Automotives IPO, which made its debut last summer as a first for the automotive industry. Their private placement was covered seven-fold, with a final price settling at LE 37 per share, thus fixing the public placement price at the LE 37-per-share mark, which was covered only four-fold. There were 7,500,000 million shares offered. Investors who requested less than 150 shares got their full request, while investors who asked for more got 150 shares plus an allocation ratio of 20.33 percent. For a single session, G.B. Auto traded without price limits, and ended the day with a stock price of LE 42. This led to the company’s publicly traded shares having a market capitalization of over LE 5 billion. G.B. Auto capital currently stands at LE 129 million.However, the star of the show was the Talaat Mostafa Group IPO – the biggest in Case history – which indirectly boosted the entire real estate sector. The Egyptian real estate firm’s IPO of 65 million shares worth LE 715 million ($129.3 million) was covered an eye-popping 41.4 times. An earlier private placement of 330 million shares was 17 times oversubscribed, making it the biggest of its kind in Egypt. Shares in Talaat Mostafa ended their first trading day at LE 13.55, 23 percent above their IPO price.Nevertheless, with the sub-prime crisis in July and August, foreigners – who had become regular buyers on the Egyptian bourse – were exiting the market, pushing the Case down. Later with news of recovery from the US mortgage crisis, foreign investors breathed a sigh of relief, and soon enough, heat returned to the bourse, leading it to break the 10,000-point threshold for the first time in its history.Capping this news off was the ongoing buzz from the NileX SME stock exchange’s official launch in late October, the first of its kind in the region, which seeks to attract those firms not eligible for listings on the Case. Any company that has a paid in capital more than LE 500,000 and less than LE 25 million is a candidate for the new exchange. For a company to list on the NileX, it needs, in addition to the capital requirements, a commitment to offer 10 percent of its shares to the market within one year of listing, at least 25 shareholders within one year and a minimum of 100,000 shares floated. Quarterly, semi-annual and annual disclosure regulations will be in line with those of the Case.The bourse closed the year with news that the Capital Market Authority decided this year to remove price limits on the 50 most active stocks listed on the Case, bringing the total number of companies trading without price limits to 152. The decision aims to invigorate trading of the listed companies and increase liquidity in the market, as well as to counter manipulation of stocks that are allowed to move up and down by 5 percent on a daily basis.Overall, the market has performed well throughout 2007. Recent figures show that the total capitalization of the Egyptian market reached LE 696.4 billion (95 percent of GDP) by the end of October, while the benchmark Case 30 index gained more than 38 percent since the beginning of the year.The Egyptian stock exchange is poised to welcome 2008 with a breeze of optimism, amid expectations of more IPOs in the first quarter of 2008, as well as expectations of soaring high financial results due to come out in the first quarter of 2008.
Peaks and valleys: the stock market in review
