The Egyptian bourse has been one of the hardest hit in the region by the global financial crisis, but in recent weeks the prices of bellwether shares have started to pick up. This has prompted cautiou...

The Egyptian bourse has been one of the hardest hit in the region by the global financial crisis, but in recent weeks the prices of bellwether shares have started to pick up. This has prompted cautious hopes that the market may have bottomed out. Analysts report increased buying by foreign institutions interested in blue chips, including Orascom Telecom, Orascom Construction Industries and Ezz Steel Rebars. "These have been the first solid moves up that we've seen across the board and that suggests we've turned a corner," says Angus Blair, head of research at Beltone Financial, a regional investment bank. "It is unlikely that we will test the lows we have seen earlier." Trading volumes of around $180m are still at less than half last year's peak, but there are also signs that some local retail buyers are regaining their appetite for stocks. The Egyptian stock exchange has lost some 65 per cent of its value in the past 10 months. Mr Blair points out that price-to-earnings ratios at the peak of the market last year were in the mid-teens and now average about six times 2009 earnings which, he argues, make Egyptian blue chips attractive. Beltone forecasts the economy will grow at 3 to 4 per cent in the year to the end of June, and at 2.5 per cent next year. But he and others warn that it takes three or four months to verify a bottom in the market, and that the length and depth of the recession in Europe and the US will have an impact in Egypt. The main drivers of its economy - tourism, exports, remittances, Suez Canal revenue and foreign direct investment - are closely tied to the health of the global economy. All have suffered recently. "We have seen signs of improvement over the past month in terms of volume and price," says Wael Ziada, head of Egypt research at EFG-Hermes, the regional investment bank. "But is it sustainable? We don't know." He says the rally in some blue chips is because their prices have fallen dramatically, offering "compelling valuation", and that foreign buyers believe the outlook for earnings is less uncertain than before. Two stocks have led this month's rally. Orascom Construction Industries, the fertiliser and construction group, is trading at less than a quarter of its 12 months' peak, while Orascom Telecom, which owns mobile networks worldwide, is at just above a quarter. But Mr Ziada remains cautious. "I don't see a second leg to this rally, there could be some profit taking and that would still bring the market near where we came from," he says. (Source: Financial Times)