EGYPT’s share market may be weeks away from losing its biggest stock, dealing a fresh blow to a market that is already grappling with political instability and a weak economy.
Under a deal announced last month, a group of US investors including Bill Gates committed to buying a $1bn stake in Egyptian fertiliser giant OCI NV. The deal is a vote of confidence in Egypt’s economy and provides a badly needed flow of hard currency into Egypt. But it includes an offer to buy out all the Cairo-listed shares of parent firm Orascom Construction Industries.
Analysts believe the result could be a delisting of Orascom Construction from the Cairo market, or at least a drastic reduction in the number of its shares that are available for trade there. Since Orascom Construction accounts for about 15% of the Cairo market’s total capitalisation of about $57bn, its departure could sap trading activity and investor interest in the market just as political and economic events are conspiring to do so as well.
"The OCI deal is sending a gloomy picture in terms of the liquidity and market cap," said Mohamed Radwan, director of international sales at Cairo’s Pharos Securities. "It’s not the kind of signal you want to send to attract more foreign direct investment," he said. (....)
In a nod to the national sentiment of Egyptians, Orascom Construction has insisted it will not disappear completely from the Egyptian exchange. In a statement, it said it would maintain its presence on the exchange either directly or through an Egyptian depositary receipts programme to be launched by the company (...)
The loss of Orascom Construction’s capitalisation could also hurt foreign fund flows into the Egyptian market.