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CASE responds to ceasefire with reserve

Index flattens after flurry of activity during conflict CAIRO: After a full week of sideways trading, Cairo & Alexandria Stock Exchange (CASE) investors were beginning to wonder if the trend meant the end of the rally experienced by the CASE 30 Index over the past month. And it all showed on Thursday when, by midday, …


Index flattens after flurry of activity during conflict

CAIRO: After a full week of sideways trading, Cairo & Alexandria Stock Exchange (CASE) investors were beginning to wonder if the trend meant the end of the rally experienced by the CASE 30 Index over the past month.

And it all showed on Thursday when, by midday, 28 of the benchmark s stocks were seeing red. Still, the index rebounded to close down just 1 percent on the day and 0.6 percent down on the week. While most market watchers remain optimistic the CASE has found its way out of the February to June correction, others say the uninspired performances of some big caps along with continued regional instability continue to fuel their negative outlooks for the rest of 2006.

Amr El Maghrabi, chief technical analyst at Beltone Financial, says the recent trend of steady growth of small and large caps alike signals the market has stabilized and is, therefore, more immune to exterior factors that might affect its performance.

Right now, this rally is spread among different sectors, which is quite healthy, says El Maghrabi. So we might see a nice bull market toward the end of the year.

At the height of the Lebanese conflict, the CASE saw trading volumes exceeding LE 1 billion almost on a daily basis, which most analysts then credited to the influx of Gulf capital being diverted away from Lebanon. After the declaration of the ceasefire last Monday, the market saw considerably lower Arab and foreign trade volumes, with Egyptians, for example, accounting for nearly 85 percent of trading on Wednesday compared to just 10 percent in Arab trade on LE 724 million in volume.

Egypt and turkey are two of the countries that have benefited the most from increasing oil prices in the region, says El Maghrabi. There has been a lot of money pouring into both markets and that trend should continue.

HC Securities Technical Analyst Wael Hazem says one positive sign has been the ability of the CASE 30 to surpass the 5500 point mark in late July, but having flattened out since then, he maintains a conservative outlook.

It is too early to say we have broken out of the downtrend, says Hazem. Until the market breaks the 6000 level, you cannot say yet that we have run out of this trend. What we ve experienced is a minor [rally].

But El Maghrabi says as modest as the market s seeming comeback has been, its ability to sustain stability since the beginning of July and the fact that index stocks have been moving forward across all sectors indicate this rally is different from past ones.

The nice thing is this rally is general, says El Maghrabi. There are out-performers and underperformers in every sector so we can t point the finger at one or two companies like we used to in the past. This shows how mature that market has become. We might even see a small correction in the next couple of weeks which would confirm that this is a nice bull market.

The market s dipping performance on Wednesday and Thursday of last week came in light of the government s announcement that the inflation rate has increased by 2 percent during July alone to reach 8.4 percent and rumors that the Central Bank was preparing to raise interest rates in response. Inflation had reached just 4.3 percent in July 2005, down from more than 16 percent during the summer of 2004.

Topics: FJP

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