(Others) – Egypt's benchmark stock index surrendered its spot as the world's best performer this year after renewed political unrest in the country triggered the worst drop since last year's uprising. The EGX 30 Index (EGX30) tumbled 9.6 percent to 4,917.73 at the close in Cairo yesterday, the biggest decline since Jan. 27, 2011, trimming this year's gain to 36 percent. The measure lost the top spot to Pakistan's Karachi 100 Index and fell to fifth place among 93 indexes tracked by Bloomberg. The government's borrowing costs for nine months rose to the highest level in six weeks at a sale of treasury bills yesterday. Clashes broke out between supporters and opponents of President Mohamed Mursi after he issued a decree granting himself sweeping powers, which his critics likened to policies of the regime hundreds died last year to topple. Opposition groups called for more mass protests in Cairo's Tahrir Square tomorrow, fueling concern the crisis may escalate. “This week will be key in Egypt's future,” Teymour El- Derini, Cairo-based director of Middle East and North Africa sales trading at Naeem Brokerage, said in a report yesterday. “Everyone will be watching and everyone will be down in Tahrir on Tuesday. It's definitely far from over.” Molotov Cocktails Companies listed on the benchmark index lost 22 billion pounds ($3.6 billion), or almost 10 percent of their market capitalization. Commercial International Bank Egypt SAE (COMI), the country's biggest publicly traded lender, dropped 9.8 percent. Orascom Construction Industries (OCIC), Egypt's biggest publicly traded company, tumbled 9.9 percent. Mursi, an Islamist politician elected in June to succeed Hosni Mubarak, issued a decree Nov. 22 shielding all his decisions from judicial oversight. The president's decree fired the public prosecutor and protected a disputed panel drafting the constitution from court challenges. In response, a “large number” of Egypt's judges and prosecutors halted work in protest, the state-run Middle East News Agency reported yesterday. Mursi's opponents and supporters of the Muslim Brotherhood, the group from which he hails, hurled rocks and Molotov cocktails at each other in Cairo and other cities over the weekend. Mursi's decrees were “a big blow to the revolution, the transitional period and the democracy Egyptians were hoping to establish that could have dire consequences on the political scene,” Khalil el-Anani, a political analyst at the U.K's Durham University, said by phone. IMF Support Bets that Egypt will move forward in its transition to democracy and secure foreign aid have helped shares rally this year. The government reached preliminary agreement with the International Monetary Fund Nov. 20 for a loan of as much as $4.8 billion. Authorities say the loan will help restore investor confidence and lower the budget deficit, which widened to 11 percent of economic output last year, the highest in at least five years. Mursi met yesterday with his top advisers for the second time in two days amid efforts to defuse the crisis. The presidency, in an e-mailed statement, said Mursi's decrees were temporary and that the president will “engage all political forces in the inclusive democratic dialogue to reach a common ground” and bridge differences over the new constitution. Representatives of Egyptian churches have already walked out of the committee drafting the charter, which they say is dominated by Islamists. Risk Premium “The lack of stability is creating an overhang on the risk premium of the country and will not attract foreign investors regardless of the underlying prices of the stocks,” Yazan Abdeen, who helps oversee about $300 million as ING Investment Management's Middle East and North Africa fund manager in Dubai, said by phone yesterday. The 30 stocks listed on Egypt's benchmark measure are valued at 1.2 times book value, according to data compiled by Bloomberg. The compares with an average of 2.43 times book value for Morocco's Madex Free Float Index and 1.7 times book value for Saudi Arabia's Tadawul All Share Index. Egypt raised its target 5 billion pounds ($819 million) at an auction of treasury bills yesterday, according to central bank data on Bloomberg. The average yield on 3.5 billion pounds of nine-month notes gained 30 basis points, or 0.3 of a percentage point, to 13.19 percent, the highest level since an Oct. 14 sale. The yield on 1.5 billion pounds of three-month bills increased 20 basis points to 12.5 percent. “Banks are becoming more conservative in anticipation of political developments,” Sherif Othman, head of treasury at Arab Bank Corp., said by phone yesterday. “Investors will be concerned any time there's blood on the streets, so the government has to start a dialogue to resolve the current situation.”
