Egypt stock market resumes decline after reopening
Thursday, March 24, 2011; 9:01 AM
CAIRO -- Egypt's benchmark stock index fell for the second consecutive day on Thursday, closing almost 4 percent lower but paring steeper losses earlier in the session as investors looked to unload holdings after the market's nearly two month closure.
The Egyptian Exchange's benchmark EGX30 index closed 3.73 percent lower, hitting 4,950 points. It rebounded from earlier losses of over 6.7 percent that led to a 30-minute suspension of trading just minutes after the opening bell. The slide brought the benchmark's year-to-date losses to almost 30.7 percent.
The reversal came as a welcome surprise to many who had feared a repeat of Wednesday's 8.9 percent plunge as the market ended its first day of trade after it shuttered on Jan. 27 amid mounting mass protests that eventually ousted former President Hosni Mubarak.
"Let's see how it performs over the next few days and weeks," said John Sfakianakis, chief economist with the Riyadh, Saudi Arabia-based Banque Saudi Fransi. "The performance today was contrary to the view that the market would continue to decline."
"Is this a signal that we're gong back into positive territory? It's certainly good news, but we don't know yet how the market will react" in the coming period, he said.
The broader EGX100 index, defying expectations of days of losses, moved to the black, gaining almost 0.9 percent, according to the exchange's Web site.
"I think things will stabilize again next week and I wouldn't be surprised if the index was up 2, 3 or 4 percent" then, said Khaled Naga, a floor trade with Mega Investments.
Prior to its January closure, the market lost over 16 percent in two consecutive trading days, reflecting investor fears about the descent into apparent chaos of a country once viewed as the most stable in the Arab world. Those fears were also reflected in the country's currency, with the Egyptian pound again coming under pressure as the market reopened.
Traders said that mutual funds and institutional investors were roughly evenly split in terms of buying and selling on Thursday, and there were indications that Egyptian and Gulf Arab buyers were stepping into the market after its sell-off the previous day.
Analysts and economists had feared that the prolonged closure of the market would undercut already shaky investor confidence in post-Mubarak Egypt. Many have been unable to access their capital fully for the past few weeks, in part because of the market closure and because of currency outflow restrictions aimed at stemming capital flight.
Unlike the broad sell-off on Wednesday, activity was more subdued in the current session with more buying interest surfacing, traders said.
Several blue chip stocks remained near their 10 percent limit down. Shares of the Commercial International Bank, the country's biggest lender, were down 9.4 percent to 29.77 pounds, while investment bank EFG-Hermes Holding's stock was down 9.97 percent to 21.41 pounds, according to financial data provider Zawya.com.
Paring losses from Wednesday, Orascom Construction Industries was up almost 0.2 percent, at 204.76 pounds while Orascom Telecom was up 9.94 percent to 3.87 pounds, according to Zawya.
Separately, the Egyptian pound posted a moderate recovery Thursday, trading at 5.949 to the U.S. dollar from an earlier high of 5.9675 to the dollar. Hisham Ramez, the deputy governor of Egypt's Central Bank, told The Associated Press the CBE had not intervened to support the currency, and bankers said it may be a result of some investors selling off the U.S. currency.
Egypt's economy, forecast just months earlier to grow at 6 percent in the current fiscal year, is expected to see GDP growth roughly halved with the exodus of tourism revenue and a likely drop in foreign direct investment. In addition, labor strikes that surged after Mubarak's ouster have hammered the economy, undercutting manufacturing and production as workers demand more pay and benefits.
The caretaker government on Wednesday proposed a new law that would criminalize protests - a measure aimed at putting an end to the labor unrest that many say has crippled the country as it tries to move forward with its political reform program. Traders said the measure may have helped boost sentiment in the market.
Looking to stave off a potential market collapse, officials delayed the market's reopening several times and set in place a host of new measures they hoped would allay investor fears and lead to a smooth restart.
Among those was the establishment of "circuit-breakers" designed to calm the market. Trading would be suspended for 30 minutes if the broader EGX100 index moves by more than 5 percent and prices would be frozen for the day if it moves 10 percent.