Optimism for the year ahead lifted Egypt's stock market on Monday and Egypt's benchmark index rose 1.6 percent as Egypt's central bank cancelled three-year and five-year bond auctions worth LE5 billion (US$829 million). The central bank gave no reason for the cancellation. Some investors took new positions in the tentative hope of equity gains this year after the market slumped by almost half in 2011. "It's extremely quiet but I think we are still building on some of the positive momentum of Thursday's session with fund managers adding some stocks to their portfolios," said Mohamed Radwan, head of equities at Pharos Securities. "Some market participants might be betting on a rebound this year." Commercial International Bank climbed 1.9 percent; Citadel Capital added 2.8 percent and Talaat Moustafa gained 1.7 percent. The bank auctions the instruments on behalf of the Finance Ministry, which had offered LE3 billion worth of the three-year notes and LE2 billion worth of the five-year notes. The three-year bond provided an annual 14 percent interest rate and the five-year bond provided an annual 14.25 percent interest rate. On Sunday, the state-run Al-Ahram newspaper reported that the government will increase natural gas and electricity prices for heavy industries by 33 percent this month to narrow its growing budget deficit. The higher rates would be applied to steel, cement and ceramics industries and are part of a plan to shave 20 billion Egyptian pounds ($3.3 billion) off the deficit, according finance minister Mumtaz al-Saeed, the newspaper said. According to Fitch Ratings, growth in FY2011/12 is likely to be no stronger than last year and remain under 2 percent. Unemployment, a contributing impetus to the 25 January revolution, is rising at a time when aspirations have risen as well. The global slowdown is likely to be a further drag on Egypt's economy. Fitch said last week that it downgraded Egypt's long-term foreign currency Issuer Default Rating (IDR) to “BB-” from “BB” and long-term local currency IDR to “BB” from “BB+.” The agency said that the Outlook on both ratings is Negative.
