Problems Grow as Egypt's Exchange Stays Closed

Egypt's capital city of Cairo does look much healthier, if public activity in itself were to become a sufficiently accurate gauge.

Egyptians celebrating in the streets of Cairo
Egyptians celebrating in the streets of Cairo

The heavy traffic, or "organized chaos", as some have dubbed it, is back. Most businesses are open. Tourists are reappearing again at hotels and various historic sites.

But as I turned onto the road that leads to the Egyptian Stock Exchange, I was more surprised by the unusual tranquility surrounding the building than by the two military tanks still parked in front of it.

One of the oldest stock markets in the region, officially tracing its origins to 1883, remains closed. Trading was suspended on January 27 after the index fell over 10 percent.

That was before President Hosni Mubarak stepped down after almost three decades in power and the military took over.

Indeed, the regional situation has changed dramatically since, and remains very fluid at the time of writing.

The longer officials wait, the harder it will be to do the valuations.

The Chairman of the EGX, Khaled Serry Seyam, arrived only minutes later at the scene, on his way to a meeting.

"There's nothing new … really", he told me during a brief chat. "We're trying everything we can to reopen the market".

Meanwhile, in an interview with CNBC Egypt's Finance Minister Samir Radwan said he expects the exchange to reopen by the middle of next week.

"We are trying to ensure sufficient demand, so that when the stock exchange opens, there will not be a strong crash," Radwan said.

He admitted that he expects "a landing, but we want it to be a soft landing. That's why we wanted to put everything in place before reopening."

Avoiding the Issue?

But a senior source who did not want his name to be disclosed for security reasons, told CNBC that the prolonged suspension of the market appears to indicate that "the government is avoiding the issue."

That, he added, is "likely to make international investors more nervous."

Foreign investors have repeatedly made clear that they are becoming increasingly frustratedby the continued closure of the exchange

On the other hand, smaller investors have been demanding that authorities wait with opening the market until the political situation becomes clearer.

Middle East Turmoil
Middle East Turmoil

A referendum on constitutional amendments that is set to take place on Saturday is seen as a milestone on the way to presidential elections expected later in the year.

What complicates the situation is that demands go further, including the establishment of a fund to help reduce the losses when trade resumes.

Others have asked the EGX to cancel the transactions of the last two days, January 26 and January 27, which saw losses estimated at $12 billion.

Information from CNBC's senior source shows that "some had reportedly threatened to torch the Exchange should the government decide to let it resume trading without having met those demands." "The government is understood to be unable to meet the request completely," the source added.

The MSCI begins to consider delisting markets if they are closed for more than 40 business days.

The EGX would then face the prospect of a reclassification to stand-alone status.

Although Egypt comprises only about 0.4 percent of the MSCI emerging market index, according to Reuters, its economy is widely acknowledged being of major importance to the region.

Egypt's Finance Minister maintained that the EGX would resume trade before March 28.