CAIRO: Mass protest on Egypt’s streets have walloped the country’s stock market, with the main EGX 30 index plunging 6.14 percent on Wednesday and the pound dropping to a six-year low.
A day after thousands protested in the streets on what was dubbed the “Day of Anger,” the market closed at 6,310.44 points, one of the sharpest drops in recent years. The Egyptian pound fell to its lowest level since January 2005, according to Reuters, reaching a low of 5.830 against the US currency.
A trader at investment bank CI Capital described what happened on Wednesday as "panic about political stablity which greatly affected the markets."
"This is an expected reaction," he said, adding that "nobody knows what will happen tomorrow or during this time period. It is hard to imagine that there will be an inflow of investments soon."
Tuesday’s unprecedented protests around the country coincided with Police Day, which is a national holiday when Egypt’s banks and markets were closed.
When the market opened on Wednesday, it lost more than LE 22 billion, nearly $4 billion, trading at 6,410 points in the early hours. By mid-day the market had fallen 4.95 percent before falling further to close at 6.14 percent.
The broader EGX 70 was down more than 10 percent while the EGX 100 fell 9.14 percent.
Early in the day, one trader told Daily News Egypt on condition of anonymity that the market was being hit hard: “Everyone’s selling, foreign investors, everyone.”
AlembicHC’s chief economist, Tudor Allin-Khan, told Daily News Egypt from Dubai, "The main sellers are locals and they have forced the market down."
According to an emailed summary of the day’s trading from the exchange, Egyptians sold stocks in the amount of LE 798 million and bought stock worth LE 738 million, while foreigners sold stocks worth LE 568 million and bought stock worth LE 656 million.
Egyptians were the highest sellers followed by foreign and then Arab investors. Institutions constituted 47 percent of the day’s trading and individuals 47 percent.
Looking forward, Allin-Khan said, "It all depends on what unfolds, whether we see more demonstrations and what the government does to placate [the situation]."
Reacting to a risk of uncertainty resulted in speculative buying by some foreigners, he added, while some opportunistic foreign buyers see the market selloff as an "overreaction," taking positions on key blue chip stocks.
Allin-Khan stated that it would be wise "to wait to see how things develop" before making any concrete predictions about the future performance of the EGX, adding, "We cannot predict with certainty" what will happen going forward.
Ezz Steel fell 8 percent, Commercial International Bank fell more than 3 percent while Orascom Construction Industries fell 7 percent. The biggest losses were incurred by Tourism Urbanization (17.8 percent) and the biggest gainer was Golden Textiles and Clothes Wool (9.88 percent).
Mona Mansour, director of research at CI Capital, said that in general, "social unrest has a negative impact on the stock exchange" and if the current situation is exacerbated, "it could drop the market further."
The Egyptian pound’s fall was characterized by Mohamed Rahmy, analyst at Beltone Financial, as a "knee-jerk reaction.”
Beltone, he said, is holding its outlook on the pound steady, noting that the main determinants of the exchange rate with the US dollar "will continue to be the local supply and demand of foreign exchange."
Thus, "we maintain our view on the pound unchanged until there’s more visibility on where the market is heading," Rahmy stated.
Fears are mounting that the tourism sector, one of the major pillars of Egypt’s economy, may be next in line.
Allin-Khan pointed out that the Egyptian market is very seasonal, noting that the first quarter is usually the strongest with second quarter being seasonally weaker. He expects that people may delay booking their holidays leading to weaker third quarter revenues.
"The events, however, may not negatively impact tourism revenues in general, because most of the revenue is usually realized in the first quarter, but this depends what happens politically," Allin-Khan said.
Generally he expects a small dip in tourism revenues for the third quarter of 2011.
A representative from Emeco Travel, a local travel agency in Egypt, said that their business hasn’t been individually affected and she doesn’t foresee a drop in business.
Another tourism industry insider had a different view on this week’s events. "We have already gotten emails and calls from customers wanting to cancel trips they already booked," said Karim Elemam, co-CEO of Tour Egypt.
"We’ve also seen the overall number of people requesting tours already drop as well as emails wanting to know more information about the situation here," he added.
Minister Zoheir Garranah will not be issuing any comments surrounding the protests nor their repercussions, an official spokesperson from the ministry told Daily News Egypt.
While it is too early to tell how long protests and their effects will last, Elemam says that the amount of media coverage internationally has definitely made it a legitimate concern for people traveling to the country.
"If the protests and media coverage continues, it could be destructive for the industry, but it could also only go on for a few days and be forgotten," he explained.
It may be unlikely that the market volatility witnessed on Wednesday will come to an immediate halt, as protestors have hit the streets once again with reports of violent clashes with security forces. –Additional reporting by Amira Salah-Ahmed and Sarah Daoud.
