Egypt stocks rally, locals step in

AP News
Posted: Mar 27, 2011 10:19 AM
Egypt stocks rally, locals step in

Egypt's stock exchange rose more than 5 percent Sunday as investors cautious about its nearly two-month closure stepped back in the market, helping reverse losses accrued last week.

The rally reversed two days of declines last week that marked the relaunch of the Egyptian Exchange after its operations were suspended on Jan. 27 amid the mass unrest that led to the ouster of President Hosni Mubarak. The two days of losses _ almost 9 percent on Wednesday and 3.7 percent on Thursday _ had helped drag the index's year-to-date losses to nearly 30 percent.

Selling interest eased Sunday, however, with the broader EGX100 index rallying by over 5 percent within minutes of the opening bell and triggering a suspension of trade. Officials had set up "circuit-breakers" to suspend trading for 30 minutes if the broader index moves by 5 percent, and freezing prices if it moves by 10 percent.

"The next couple of days will help define the (course) the market will take in the coming week or 10 days," said Khaled Naga, a broker with Mega Investments. After shying away from the market because of heavy selling last week, Egyptian and Arab investors stepped back in, he said.

"The last couple of days were not surprising," said Naga. "Even if there's a correction tomorrow, it's not worrying. Things are stabilizing now."

The benchmark EGX30 index closed up 5.28 percent, at 5,212 points, and a number of stocks spent much of the day trading at their 10 percent upper limit.

The Egyptian Company for Mobile Services, or Mobinil, rose 9.9 percent to 136.91 Egyptian pounds while electronics manufacturer Olympic Group posted the same percentage gain to close at 32.92 pounds.

"It looks like investors see the market as oversold," said Mostafa Abdel-Aziz, a broker with Mideast investment bank Beltone Financial. "It doesn't mean that everything is perfect, but it does mean that many stock have been oversold."

Deep in the red was Ezz Steel, the steel giant whose chairman, Ahmed Ezz, is among the most prominent businessmen and former ruling party officials under investigation for corruption allegations. Ezz's shares fell 9.97 percent to close at 12.91 pounds.

Retail investors accounted for 37.5 percent of the buying activity, while institutional investors accounted for 62.5 percent, according to data released by Mideast investment bank Beltone Financial. Institutional sellers were again the main force behind the selling, accounting for 80 percent of sales.

Shares of several companies are still suspended from trading because the firms have yet to either provide their financial reports, or provided incomplete reports, to bourse officials.

The suspension stems from investigations by prosecutors into former regime officials and businessmen with links to the government. Egyptian officials want to make sure that those individuals, who have had their assets frozen, are unable to liquidate their holdings in companies.

A number of companies have been buying back shares to shore up the value of their stocks.