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Egypt stocks battered by political, economic uncertainty EGX30 loses almost 1 pct after nearing 3-month high late last week; Experts say catalyst is needed to kick-start awaited market recovery
The Egyptian stock exchange finished trading on Sunday in the red, maintaining its recent uneven performance. The main EGX30 index fell 0.92 per cent to 5,701 points, while daily turnover stood at an unimpressive LE410 million (some $63 million). The market started to dive last Thursday after nearing a three-month high the day before. It has gained a total of 4.38 per cent since the beginning of 2013. Bad economics, politics "There are many factors hampering the stock exchange's recovery, not least of which is the state of the economy," said Ashraf Akhnoukh, co-head of the international desk at Cairo-based Commercial International Brokerage Co. Egypt's economy has recently fallen prey to uncertainty, with foreign currency reserves dropping to "critical levels," according to Egypt's central bank. The local currency shed some 6 per cent of its value since the beginning of 2012. Meanwhile, tighter capital controls have been put in place to prevent dollarization frenzies. The political front, meanwhile, has not made sufficient progress to give the market a new lease on life. "Political stability is lacking. Nobody knows if and when the next wave of violent clashes will erupt," Akhnoukh asserted. Mass protests are planned on the second anniversary of Egypt's 25 January uprising, and many observers expect a large anti-Muslim Brotherhood turnout. The following day, 26 January, is also expected to be eventful, as a court will rule on those accused of being responsible for last February's bloody Port Said stadium disaster. Hardcore football fans, the Ultras, who have effectively prevented the local football league from resuming, are expected to hold mass rallies calling for the conviction of stadium, security and club officials. In need of a catalyst Over the course of the last two years, the stock exchange has seen its best performances following major positive events. For example, the market gained more than a thousand points after a relatively trouble-free presidential election last summer. Akhnoukh believes the market needs a similar push to kick-start recovery. "We lack a catalyst that would drive the market forward. Even the fate of the IMF deal is very uncertain at this point," he said. Egypt's much-touted proposed $4.8 loan from the International Monetary Fund was delayed for the third time last December. Negotiations with the international lender are currently ongoing, but the fate of the loan remains unclear. Foreign hands, weak currency Sunday's trade session witnessed a solid presence by non-Arab foreign investors, who contributed 19.16 per cent of market activity. They were net sellers at LE8.2 million. In recent weeks, however, this group of investors was very active in the market. Some attribute the activity to the devaluation of the Egyptian pound versus the US dollar. "Foreign investors have had a solid share of total trading recently. But in absolute terms, their participation remains insignificant due to the already weak market volume," Akhnoukh explained. He also downplayed the role of a weaker pound in triggering a recovery in Egypt's struggling bourse. "A weakening Egyptian pound definitely increases the attractiveness of the stock market as prices become cheaper for foreign investors," Akhnoukh noted. "But the exchange rate needs to be stable," he added, "because investors worry about future fluctuations in the value of the local currency, which could end up biting into their holdings." http://english.ahram.org.eg/News/62409.aspx
