The Egyptian Stock Exchange is set to open Wednesday, at least that’s the way it looks at the moment. Remember it has been postponed, in some cases at the last minute, several times before out of various reasons.
In a new development ahead of the reopening, the Ministry of Interior, another symbol of state power, was set on fire. State TV reported that the blaze at the communications center of the building was extinguished. Eight people have so far been injured.
The fire came after a protest outside the compound by several thousand policemen demanding better pay and working conditions. The Ministry is close to the Egyptian Stock Exchange in downtown Cairo, but more importantly, the event will only exacerbate the perceived geopolitical risk for both domestic and foreign investors.
It underscores once again, the uphill struggle the country faces as it tries to get back to work during a historic political transition.
And it seems almost certain that the market will hit the circuit breakers if it does resume trade on Wednesday. Both EFG Hermes and CI-Capital have forecast losses in the vicinity of 20-30 percent. But if you’re looking for other specific indicators of sentiment to support a similar view, you may want to take a closer look at the Global Depositary Receipts (GDRs) of some of the heavyweight Egyptian companies that are traded in London. I’m thinking here of Orascom Telecom (OT) and Commercial International Bank (CIB) for example.
Here’s how the circuit breakers are expected to work: If the wider EGX 100 loses more than 5 percent, trading will be suspended for 30 minutes. If the index falls further to reach a total of 10 percent, trading will be suspended for the entire session. For the narrower EGX 30, the percentages are at 3 percent (for a suspension of 30 minutes) and 6 percent (for a suspension of the remainder of the session). Existing circuit breakers governing individual stock trading will remain in place.