Much of the recent surge has been driven by the heavyweight soft drinks firm, Société Frigorifique et Brasserie de Tunis (SFBT), on the back of speculation that it was to obtain the licence to market Heinekenproducts. Others to outperform are Societe Tunisienne d'Enterprises de Telecommunications (Sotetel)and the banking groups Union Bancaire pour le Commerce et l'Industrie and Banque de Tunisie et des Emirats d'Investissement.

Among the losers this year have been national carrier Tunisair- heavily hit by the depressed global air-transport and weak tourism markets in the early months of the year - and the leasing sector, which has been troubled by non-performing loan problems.

Looking forward, the macroeconomic environment is likely to put more upward pressure on share prices. 'In terms of fundamentals, the Tunisian economy is not doing too badly,' says one local economist. 'We are expecting GDP [gross domestic product] growth of 5.5-6 per cent next year. Most companies will see improvement in bottom-line figures. A combination of a good harvest and good news concerning tourism is a signal to investors that the cycle is reversing and anticipation for 2004 is good. Any stock market increase of less than 25 per cent will be disappointing.'

Improving liquidity could further fuel a surge. 'Foreign investors have been coming back which will certainly boost trade levels,' says the economist. Domestic and international investors alike will be attracted to a new round of privatisation, if the schedule drawn up is adhered to. Highlights on the horizon include the part privatisation of Banque du Sud, Societe Tuniso-Algerienne de Ciment Blancand Tunisie Telecom.

Analysts pick out Sotetel and SFBT - strong performers this year - and Monoprix as stocks to watch in 2004.

Not everyone shares the optimistic view, however. 'Tunisia is a very special market,' says a local broker. 'It's composed of small investors and they treat it like a casino. They are only interested in short-term gains. We don't have a financial tradition in Tunisia.' The lack of a broader investor base - and comparatively thin trading conditions - will be a hindrance to the development of the market, even as the government adds some breadth with its privatisation programme.

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