The sectarian unrest in Egypt added another reason for the stock market woes. Al-Ahram Weekly looks at the market's reaction to Imbaba's incident, Sherine Abdel Razek reports With developments on the political, macro- and microeconomic levels anything but encouraging, the market least needed another reason to push it further downwards. But unfortunately, clashes at the district of Imbaba on Saturday night stripped the EGX30 index a 1.2 per cent on Sunday's transactions. The events came as the market has been muddling through many problems on top of which is the fact that almost half the heads of the blue chips facing accusations of illegal profiteering from their relations with the previous regime. The vagueness of what the future holds made the market's appeal at its weakest level in years as reflected by the decline in average daily transactions from around LE1.5 billion before the financial crisis and LE1 billion in 2010, to around LE400 million during the last three weeks. On Sunday, the EGX30 fell to its lowest level since 24 March after Saturday's clashes led to renewed concern that social tensions will hit tourism and investment. But traders believe that while the unrest weighed down on the market sentiment, the reaction came very mild. "The sectarian strife is not the only reason behind the decline as Sunday marked the fourth session in a row that the market ends in the red. Moreover a 1.2 per cent loss in not what can be considered a steep decline," said Mohamed Sedik, head of research at Prime Securities. "After all it is a minor event. We do not have a civil war as Lebanon had. The market did not totally ignore the news, but we can say it had a relatively careless attitude towards it." Sedik points out that the marginal gains which the market realised on Monday and Tuesday reveal that the unrest between Muslims and Copts is not the only reason behind the market's fall. The market gained 1.7 points on Monday and 0.48 points on Tuesday with foreigners being net buyers on both days. The market lost 30.59 per cent since the beginning of the year that saw the toppling of Mubarak's 30-year-old regime. Ahmed El-Naggar, a stock market expert, seconded Sedik's opinion pointing out that the market's losses are among the repercussions of the uprising. Even the relative gains on Monday and Tuesday were not due to the end of the unrest, as the unease is still there, according to El-Naggar. He believes the revival came as a correction for the previous sessions as some blue chips, like the Talaat Mustafa Group and Palm Hills, reached historical lows at which it was hard to be ignored. El-Naggar said that going through the market's performance in countries that had a kind of revolution or change in regime like Chile and Thailand, and even Tunisia, it is the norm to have a long period of instability and declines until the economy and companies digest the changes. In Addition, according to El-Naggar, the market is reacting to a lot of negative news on the macroeconomic levels; the decline in FDIs from $1.8 billion in the first quarter of 2010 to only $400 million in 2011, and the international reserves losing $8 billion in three months are just two examples. Both El-Naggar and Sedik agree that due to the weak liquidity, the market is not reacting daily to news as it is in a wait- and-see mode and would not show obvious moves unless there is a real shift in policies and plans. Another factor limiting the depth of market's reaction, according to El-Naggar, is the restrained activity by foreigners due to the fact that the country risk became very high and it is factored in the prices of different traded shares, thus making it less appealing.
