[2008-01-22]  Foreign investors dip warily into Tunisian stocks
Tunisia's small stock market is set for growth this year as foreign investors look beyond the risks of an illiquid market to increase their exposure to the north African country's fast-growing economy, analysts said.

Earnings of the banks that dominate the small Tunis bourse are expected to grow as they accelerate efficiency measures to face new foreign competitors due to arrive with a new wave of market liberalisation, they said.

Some 50 companies are listed on the Tunisian stock market, whose overall capitalisation of $3.83 billion is far smaller than Casablanca at $80 billion and Paris at $2,574 billion.

So far this year the benchmark Tunis index .TUNINDEX has risen 3.2 percent, after surging 44 percent in 2007.

With global markets hit by the U.S. sub-prime mortgage crisis, foreign investors have been boosting their exposure to Tunisian stocks. Some 27 percent of the money that flowed into the bourse last year was from abroad, according to brokerage Amen Invest.

"Tunisia's economic performance was above expectations in 2007. The (growth) rate of 6.3 percent will stimulate investors and drive up foreign inflows," said Kacem Gharbi, a trader at brokerage Cofib Capital.

The economy grew 6.3 percent last year, higher than an official target of 6.0 percent on buoyant manufacturing industry and services activity in the country of 10 million.

The government wants to quicken annual growth to 6.1 percent over the next decade from 5 percent in the previous 10 years to reduce joblessness, which stands officially at 14.3 percent.

Banking stocks, which dominate the local stock market, underperformed the wider market with a 26 percent gain last year, but analysts said painful reforms to clear up bad debts and big loan loss provisions could bear fruit in 2008.

"For the last several years, Tunisian banks have striven to align themselves with required standards and be ready for liberalisation and the arrival of foreign banks," said Karim Blanco, an analyst at Amen Invest.

He forecast the TUNINDEX would grow 12 percent this year, matching the gain in 2007.


LACK OF LIQUIDITY

Some foreign investors still remain loath to acquire a big exposure to Tunisia because a lack of equity market liquidity leaves them vulnerable to big swings in stock prices and the risk of being stuck with a security they cannot sell.

"Definitely liquidity is one variable that is a constraint when you consider the Tunisian market," said Rami Sidani, a fund manager at Shuaa Capital in Dubai.

"But north Africa remains on our radar screen and whenever we see Gulf bourse valuations getting expensive we will start redirecting our funds to north African markets."

Some analysts in Tunis recommend buying shares in lender Banque de l'Habitat BH.TN and retailer Monoprix MNP.TN, and selling loss-making tyre maker STIP STIP.TN, which is in the midst of a restructuring.

A newly-created Tunis alternative stock market is expected to bring as many as 20 companies to market over the next 12 months as the government tries to increase the efficiency of the private sector and create more investment opportunities.

Only one firm has listed on the alternative market so far: farming and food company SOPAT.

Analysts expect two initial public offerings on the main market in the first half of the year and more later, helping absorb money flowing into the bourse from abroad.

"We need firms with big capitalisations to create dynamism by providing new investment opportunities for foreigners and lure small local investors too," said an analyst who asked not to be named.


Source: © Reuters 2008