Egyptian Stocks Face Another 10% Plunge

Monday, 31 Jan 2011 | 8:44 AM ET

The Egyptian stock market will likely tumble another 10 percent before investors put some cash in and try to stage a rally, after which the benchmark index could regain a third of its losses, according to historical trends, Robin Griffiths, technical strategist at Cazenove Capital, told CNBC Monday.

In times of crisis markets fall at least 25 percent, and with the EGX-30 index down 15 percent there's another 10 percent to go before meeting some resitance, Griffiths said.

Charting Egypt
"This is one of those rare charts that show markets don't always anticipate everything," Robin Griffiths, technical strategist at Cazenove Capital told CNBC while looking at the Cairo EGX-30 Index.

“And the rules about the rally are it will try to retrace about a third of what it’s lost," he said.

"If you have a rally and it can’t retrace a third of what its lost, it will go lower to the next level (of about a 33 percent drop)." “When we get into (political situations), where there is not enough data to make logical decisions, markets resort to emotional decisions and the way the human brain works, especially crowds of humans, is it goes in proportion,” he said.

Looking to the currency, the dollar was already "beating up the Egyptian pound" at a rate of 6.5 percent a year, and with the dollar to likely see strength as investors become risk averse, "the rate at which the dollar goes (up) will almost certainly go up now," he added.


Contact Europe News


    Get the best of CNBC in your inbox

    › Learn More

Europe Video

  • Jan Dunning, CEO of St Petersburg-headquartered hypermarket chain Lenta, says the situation in Ukraine has had no impact on the group, as consumer confidence remains unaffected in Russia.

  • Vincent Deluard, European strategist at Ned Davis Research Group, says the strong euro is a problem for the region's companies, especially for the large exporters.

  • European shares closed higher on Thursday as investors brushed aside concerns regarding Ukraine and focused instead on Wall Street earnings and the latest U.S. jobs data.