Egypt Stock Index Rebounds Before Planned March
Egypt’s benchmark stock index was able to rebound 0.75 percent in the last trading session before an expected "million-man" march on Friday. More than 20 political movements, including the influential Muslim Brotherhood, have announced their support of the demonstration.
The market lost more than 2 percent on Wednesday amid renewed worries about the country’s stability.
However, EGX chairman Mohamed Abdel-Salam told a press conference on Thursday that there would be no repeat of the prolonged market closure witnessed earlier in the year, even if the planned protests escalate. The lengthy closure of the EGX at the time almost resulted in a review of its emerging market status by MSCI, a manager of global market indexes.
On Thursday, bargain hunters moved in, with foreign investors net-buyers in the market. Despite opening lower, the benchmark gradually climbed to close at 5360 points. Although still some 600 points clear of the year’s low, it is down 25 percent year-to-date and trades at a substantial discount to its emerging market peers.
Commercial International Bank added 1.4 percent, while OrascomConstruction Industries, the country’s biggest listed firm, gained 0.54 percent. OCI was awarded projects worth $450 million in Saudi Arabia, which Cairo-based CI Capital believes “might cater more opportunities in the country and should reflect positive to [the] company’s backlog,” suggesting a buy with moderate risk.
Five months after the revolution, the Supreme Council of the Armed Forces (SCAF) remains in power. The thousands who are likely to pour into Tahrir Square on Friday are frustrated with the status quo. Demands are many, including the sluggish pace—and often controversial outcomes—of bringing former regime officials to justice. The sweeping civil and legislative reforms that were expected have not taken place, protestors say—a development that is seen as indicative of a political system that still contains elements of the previous regime.
Egyptian Prime Minister Essam Sharaf told CNBC on Wednesday that the interim government remains committed to the transition and thatprogress was being made in rebuilding the nation’s security. The use of tear gas and rubber bullets by security forces last week prompted widespread outcry and raised suspicion about security forces' internal workings.
In the midst of what has been described as a growing Islamist-secular divide on the Egyptian political spectrum, the Muslim Brotherhood earlier opposed joining the rally, concerned it may be used by others to pressure the SCAF to postpone elections until a new constitution is drafted. Parliamentary elections are slated for September, and the cabinet has approved draft laws for a partial, proportional representation system.
Investors Look for Stability
Angus Blair, head of Cairo-based Beltone Financial, told CNBC on Thursday evening that investors “require stability, a factor that will not be present fully until all the elections and vote on the new constitution is passed.”
The IMF lowered its 2011 growth forecasts for Egypt to only 1 percent from 5.1 percent in 2010. Unlike the petrodollar economies of the Gulf, the unrest in Egypt has hit key growth drivers such as tourism, foreign direct investment and remittances from abroad.
As far as investments are concerned, Sharaf admitted that although progress had been made, more was needed.
Meanwhile, Suez Canal revenue has remained mostly resilient. Despite violence in the area, the bottleneck passageway waving through 2.4 million barrels of oil every day remains unaffected.
It's unclear how long the upcoming Tahrir demonstration will last, or how it could induce further political or economic change. Some have vowed to maintain a sit-in in the famous square until their demands are met. Post-revolutionary periods, as history has proven over and over, are often protracted and fraught with uncertainties.
“The investment community will be watching the demonstration and any resultant directions in the domestic political space keenly,” Blair said.
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