Tags: Egypt | stock | market | buy

Are Egyptian Stocks a Buy?

Friday, 05 Jul 2013 07:40 AM

By Michael Carr

Whenever there is a significant news event, investors wonder if they should buy or sell. This question can result from company-specific news, such as BP after the Gulf oil spill, or from international news events, such as the euro crisis, which has led to several trading opportunities.

Egypt is in the headlines again as protestors mass for the second time in less than three years. If stability can be restored to the country, the stock market could be a buy.

But the history over the past few years shows that the stock market has moved lower throughout the crisis, even though some events have led to short rallies.

Egypt's previous government seems to have been unable to deliver economic growth. Stock market prices are at least partly determined by the economic prospects of a country and the profit potential of individual companies.

In Egypt, investors have been hoping for the best at times, but the reality has failed to live up to the hope in each case.

The latest showdown will eventually be resolved at least on a temporary basis. No matter what happens, Egypt seems to be a high-risk buy for U.S. investors.

Prices could bounce if a strong government emerges, but that rally is likely to fail as the staggering problems of unemployment and poverty overwhelm the new government.

While it would be nice to buy at the stock market bottom in Egypt, that bottom probably lies a few years in the future.

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