The Egyptian stock exchange expects more initial public offerings (IPOs) in the first quarter of 2008 after strong demand for real estate developer Talaat Mustafa Group, a senior market official said. Maged Shawky, chairman of the Cairo and Alexandria Stock Exchange, told Reuters in an interview that several investment banks planning new IPOs had already contacted him.
"But the execution will wait for the January-March (period), between Christmas and Easter," he said. "The Talaat Mustafa IPO success seems to have encouraged more newcomers." The Egyptian real estate firm's public offer of 65 million shares worth 715 million Egyptian pounds ($129.3 million), was covered 41.4 times. An earlier private placement of 330 million shares was 17 times oversubscribed, making it the biggest of its kind in Egypt, Shawky said.
Shares in Talaat Mustafa ended their first trading day on Wednesday at 13.55 Egyptian pounds, 23 percent above their IPO price. On Thursday they lost 5 percent to 12.90 pounds.
Shawky said the relatively small first-day premium, compared with Telecom Egypt which initially doubled in value on its IPO in December 2005 before losing those gains in the following week, showed the market was becoming more sophisticated. "It means the market is more mature and that market discipline, and not the regulator, is leading the action," he said.
The total capitalisation of the Egyptian market reached 696.4 billion pounds or 95 percent of GDP by the end of October and the benchmark CASE 30 index has gained more than 38 percent since the beginning of the year. Shawky said the growth of the Egyptian market was reinforced by foreign investors and a higher correlation with international markets.
An EFG-Hermes report in August said anecdotal evidence suggested that as a percentage of the free float, the Egyptian market is the Arab market which is most heavily owned by Western institutions, making it more vulnerable to external shocks.
But Shawky said: "True, we have more foreign money, but it is mainly long-term through pensions and insurance funds ... Even hedge funds have changed their emerging markets general strategy to a more mid-term one, meaning less aggressive fast exit moves."
Nevertheless, with the sub-prime crisis in July and August, foreigners, who had become regular buyers, were exiting the market, but Shawky said this was not a key concern. "This doesn't worry me as we have a diversity of investors: local, Arab, European, American and even now Asian, giving us a cushion to absorb shocks."
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