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Egypt Exchange to Stay Open Despite Turmoil: Chairman

Protestors in Cairo’s Tahrir Square were preparing for a million-man march on Friday to call on the ruling military council to step down, saying steps announced recently were insufficient.

    Egyptian protesters run for cover on the third day of clashes with security forces at Tahrir Square in Cairo on November 21, 2011.
Photo: Khaled Desouki | AFP | Getty Images

The march comes as Egypt’s Stock Exchange (EGX) Chairman Mohammed Omran rejected suggestions another closure could occur if turmoil persists in the country. The EGX shut its doors for almost two months on January 27, sparking outrage from both domestic and foreign investors. The lengthy closure had also prompted MSCI to warn that it may begin consultations to cut Egypt from its Emerging Market Index . But Omran says that is now history.

“There is no plan to halt the trading on the Egyptian Stock Exchange and this is the only way to ensure investors that we keep operating normally even during these difficult times,” Omran told CNBC in an interview late Thursday.

He estimated net selling for non-Arab foreign investors since the start of the revolution at around US $585 million, and current participation at 20 percent of total value traded. The benchmark EGX30 index has lost 47 percent since the beginning of the year, posting a 1.7 percent rebound in last trading session of the week on Thursday.

Omran saw momentum returning to the marketplace, describing the decision by the Supreme Council of the Armed Forces (SCAF) to hold presidential elections before July next year as “very important”. The calmer political situation would allow the “economic agenda to be on the front page again” which in turn “will have a positive impact on the performance of the Egyptian Stock Exchange”.

As the Egyptian government struggles to bring borrowing costs under control, Omran told CNBC that discussions with the Ministry of Finance and the Central Bank of Egypt were ongoing to activate the secondary bond market. Yields on domestic Egyptian treasury bills surged at auction on Thursday after Standard and Poor’s downgraded Egypt’s foreign and local currency credit rating to B+ from BB- with a negative outlook, reflecting a “weak political and economic profile”.

“I think people might be hungry for other asset classes, fixed income, and I think if we are able to activate the secondary market, this will allow the government to reduce the cost of borrowing and have a positive impact on the entire economic situation,” Omran told CNBC.

Omran also shrugged off contagion fears from the euro zone debt crisis, arguing Egypt would be able handle any further escalation better than other economies due to its diversity. The European Union is Egypt’s largest trade partner.

“We already came across an experience like the 2008 crisis and the Egyptian economy was able to grow by 4.7 percent. The impact would not be as severe as one might expect. But I am concerned of course. It’s part of the world economy, and if that’s growing, Egypt will have a better chance to grow further.

The IMF projects Egypt’s GDP (gross domestic product) growth to slow to 1.2 percent this year, from 5.1 percent in 2010.