Arab Today, arab today egypt stock tumbles on uncertainty
Last Updated : GMT 05:49:56
Arab Today, arab today
Arab Today, arab today

Egypt stock tumbles on uncertainty

Arab Today, arab today

Arab Today, arab today Egypt stock tumbles on uncertainty

Cairo - Arabstoday

Egypt\'s stock market tumbled to the lowest level in almost four months yesterday amid growing concern among investors over whether a new government will be able to take on the daunting task of reviving the economy.The benchmark EGX 30 slumped 3.4 per cent in the first day of trade as the Muslim Brotherhood candidate Mohammed Morsi and the former premier Ahmed Shafik both claimed victory in the presidential election. New rules ushered in by the military also hung over the markets. Egypt\'s ruling military council issued a declaration on Saturday that effectively gives it legislative powers, control over the budget and over who writes the permanent constitution. It also strips the president of any authority over the army. But yesterday it vowed to hand over power to an elected president by the end of the month. The country\'s bellwether stocks led the losses as Orascom Construction Industries, the biggest publicly traded builder dropped 5.8 per cent, EFG-Hermes, one of the region\'s biggest investment banks, slipped 6.4 per cent and Orascom Telecom Holding, North Africa\'s biggest mobile phone company fell 8.7 per cent. Despite the profit-taking, volumes remained weak as just under 100 million Egyptian pounds (Dh60.7m) worth of trades changed hands, against a daily average trading volume of about 450m pounds this year. Lack of clarity over the political situation has kept foreign and domestic investors at bay, traders said. \"For the short-term outlook, everyone\'s going to be pretty cautious on who is going to be the next president as investors await the actual results of the elections,\" said Amr Reda, a trader at Pharos Securities Holding in Cairo. He said unofficial results that placed the Islamist Freedom and Justice Party candidate Mr Morsi as president would be received negatively on the market for at least the short term. \"First of all we\'ve never witnessed a Muslim Brotherhood candidate [as president in Egypt] and everybody will be awaiting how he\'s going to deal with political affairs internally and externally,\" Mr Reda said. Mr Morsi is seen by some as a good candidate for a quick democratic transition because of the support of the Freedom and Justice Party members who are likely to take a big chunk of a newly appointed parliament. But his inexperience in the political sphere has pushed some of the business community to back Mr Shafik, the rival candidate, who is regarded as a seasoned businessman with more experience gained under the helm of the regime of the former leader Hosni Mubarak. An ability to cooperate with the ruling military council also makes him a safe bet. After 18 months of tumultuous political jockeying domestically and with international institutions, business executives say they are evolving the way they do business to cope with ongoing uncertainty. \"Uncertainty is the new normal,\" said Ahmed Ozalp, the managing director and co-founder of Akanar Partners, a corporate finance and mergers and acquisitions advisory firm based in Cairo. The cloud of uncertainty has led businesses to adopt various techniques to weather the fiscal crisis, Mr Ozalp said. \"External factors prolong transactions so certain business are finding ways to deal with risk,\" he said. Some companies are adopting hedging strategies to minimise foreign currency exposure as the Egyptian pound falls, while others are making adjustments in their balance sheets to make up for losses or to mitigate mis-pricing in the future, he said. Egypt\'s economy is creaking under the weight of a messy transition prompting the central bank to spend more than US$20 billion (Dh73.46bn) in international reserves to prop up the domestic currency. The government has also dithered over signing an agreement with the IMF for a $3.2bn loan package that was first discussed a year ago. The country\'s balance of payments, one of the most closely watched indicators of an economy\'s performance, has doubled to $11.2bn in the nine months to March, the central bank said this month, as the impact of the revolution deeply affected tourism revenues and foreign direct investment. The ratings agency Moody\'s Investors Service said \"heightened political uncertainty will likely prove a setback to the economy, which was just regaining domestic and foreign creditor confidence\". The ruling that declared the country\'s parliamentary law unconstitutional is \"credit negative\", the firm said yesterday. \"The upshot is that we are heading for a period uncertainty … in the Egyptian way; it will take us much longer than Tunisians and others in the region,\" said Samir Radwan, formerly the Egyptian finance minister during the height of the revolution last year.from the national.

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