Tags: ML | Egypt | Economy

Egypt's Stock Market Resumes Decline After Reopening

Thursday, 24 Mar 2011 07:39 AM

Egypt's benchmark stock index fell for the second consecutive day on Thursday, sliding over 4 percent but paring steeper losses earlier in the session as investors looked to unload holdings after the market's nearly two month closure.

The Egyptian Exchange's benchmark EGX30 index plunged 8.9 percent on Wednesday, its first day of trading since it was shuttered on Jan. 27 amid mounting mass protests that eventually ousted former President Hosni Mubarak. Prior to its January closure, the market lost over 16 percent in two consecutive trading days, reflecting investor fears about the descent into apparent chaos of a country once viewed as the most stable in the Arab world.

The index was down around 4 percent at around 1:10 p.m. Cairo time on Thursday, to 4,934 points. It rebounded from earlier losses of over 6.7 percent that led to a 30-minute suspension of trading just minutes after the opening bell. The broader EGX100 index moved to the black, gaining 0.15 percent after losses of over 5 percent earlier in the day, according to the exchange's Web site.

Traders said that mutual funds and institutional investors were roughly evenly split in terms of buying and selling, and there were indications that Egyptian and Gulf Arab buyers were stepping into the market after it experienced a heavy sell-off by foreign investors the day before.

"Even if today was like yesterday, I'm not worried," said Khaled Naga, a floor trade with Mega Investments. "I think things will stabilize again next week and I wouldn't be surprised if the index was up 2, 3 or 4 percent" then.

Analysts and economists had feared that the prolonged closure of the market would undercut already shaky investor confidence in post-Mubarak Egypt. Many have been unable to access their capital fully for the past few weeks, in part because of the market closure and because of currency outflow restrictions aimed at stemming capital flight.

Broader concerns about the market, along with general unease about direction of the country, have also pressured the Egyptian pound. On Thursday, the currency continued to inch closer to the 6 pounds per U.S. dollar mark, and was listed at 5.963 on forex Web site, Xe.com.

Egypt's economy, forecast just months earlier to grow at 6 percent in the current fiscal year, is expected to see GDP growth roughly halved with the exodus of tourism revenue and a likely drop in foreign direct investment. In addition, labor strikes that surged after Mubarak's ouster have hammered the economy, undercutting manufacturing and production as workers demand more pay and benefits.

The caretaker government on Wednesday proposed a new law that would criminalize protests — a measure aimed at putting an end to the labor unrest that many say has crippled the country as it tries to move forward with its political reform program. Traders said the measure may have helped boost sentiment in the market.

Looking to stave off a potential market collapse, officials delayed the market's reopening several times and set in place a host of new measures they hoped would allay investor fears and lead to a smooth restart.

Among those was the establishment of "circuit-breakers" designed to calm the market. Trading would be suspended for 30 minutes if the broader EGX100 index moves by more than 5 percent and prices would be frozen for the day if it moves 10 percent.

Unlike the broad sell-off on Wednesday, activity was more subdued in the current session with more buying interest surfacing, traders said.

Several blue chip stocks remained near their 10 percent limit down. Shares of the Commercial International Bank, the country's biggest lender, were down 9.83 percent to 29.63 pounds, while investment bank EFG-Hermes Holding's stock was down 9.97 percent to 21.41 pounds, according to financial data provider Zawya.com.

Paring losses from Wednesday, Orascom Construction Industries was down just 1.47 percent, at 210.36. Meanwhile, Orascom Telecom was up 9.94 percent to 3.87 pounds.

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Egypt's benchmark stock index fell for the second consecutive day on Thursday, sliding over 4 percent but paring steeper losses earlier in the session as investors looked to unload holdings after the market's nearly two month closure.The Egyptian Exchange's benchmark EGX30...
ML,Egypt,Economy
650
2011-39-24
Thursday, 24 Mar 2011 07:39 AM
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