CAIRO: Egyptian regulators authorized Credit Agricole France and a partner group to repurchase up to four percent of Credit Agricole Egypt’s shares earlier this week, potentially extending to a growing list of buybacks following Egyptian share prices’ huge tumbles this year.
Egypt’s benchmark CASE 30 index has slid over 60 percent since its peak in May, largely due to foreign selling. Regulators have since made it easier for listed firms to buy back their shares in an effort to reduce trade volatility.
Many companies have taken advantage of the new lenience, including Nasr City Housing and Development, investment bank EFG-Hermes, Orascom Telecom and Orascom Construction Industries, whose shares account for over a quarter of the CASE 30’s value.
But the buybacks have not stopped prices from deteriorating, said Mohamed Radwan, a broker at Pharos Securities.
“It’s like having a normal client in the market buying in a bearish mood, he said. The buybacks are mostly beneficial in that they could help firms profit if their stocks rebound, he added.
Credit Agricole and its Egyptian partner Mansour and Maghraby Group hold nearly 80 percent of Credit Agricole Egypt. Egyptian market authorities said the companies’ request “reflected a desire on the part of the buyers to lessen the harmful effects of the global financial crisis on trading in the bank s shares, as well as a concern to support the share price and protect small investors, according to a Reuters report.
Shares for Credit Agricole Egypt closed at LE 8.04 per share following the announcement on Tuesday.
The Egyptian Exchange will likely see more buybacks before trading calms, said Mark Rorison, head of research at CI Capital Holding, at a capital markets conference earlier this week.
But while many of the bourse’s losses have followed foreign selling, the ratio of foreign to local investors in CI Capital’s portfolio has actually increased this year, he added.
Foreigners should make up an even greater share over the next few years, particularly if Egypt maintains relatively strong growth while developed nations slump into recessions, he added.
“If the economy can grow, say 5 percent in this fiscal year and 4 percent in the next, it’s a huge slowdown in Egypt’s potential, he said. “But it’s a heck of a lot better than you see [.] in Western Europe.
There are still many hurdles. Foreign investors are particularly worried about the stability of Egypt’s currency, and about the substantial political risks here, Rorison said.
“Yes, there is a fear about politics, he said. “There is change coming in the next few years and people are waiting and seeing.
Rorison was speaking at a panel debate organized by the Egyptian Capital Market Association earlier this week discussing the economic crisis and its impact on Egypt’s listed companies.
