CAIRO: Egypt’s stock market lost LE 12 billion of its total market cap on Tuesday as democracy protests once again rocked the nation with Tahrir Square as the epicenter.
Total market cap has dropped LE 29 billion this week after losing LE 10 billion on Monday and LE 7 billion on Sunday due to continued unrest.
Meanwhile, the Egyptian pound fell to its weakest against the dollar since January 2005, Reuters reported, and traders said the pound could soon break through 6 to the dollar as investors run for cover.
The pound touched 5.992 to the dollar compared to 5.8 before the January uprising.
Trading on the Egyptian Exchange was halted for an hour earlier in the day as many stocks reached the 10 percent circuit breaker in place as a precautionary measure since the market reopened in March, after closing for almost two months due to the uprising that toppled Hosni Mubarak. The broader EGX 100 index had also reached the 5 percent circuit breaker.
Egypt’s benchmark EGX 30 index closed 4.77 percent lower, ending the day at 3,676.73 points.
Protesters have been facing off with security forces since Saturday, as the rising death toll reached 28 with hundreds of injuries. As the million-man march called for by activists got underway early Tuesday, investors were quick to pull out of the market.
Nationwide protesters are demanding that the ruling Supreme Council of the Armed Forces (SCAF) swiftly cede power to a civilian authority. Since Saturday evening, when protests picked up after a peaceful Tahrir sit-in was violently dispersed, police and military forces have used batons, tear gas and birdshot in attempts to clear the iconic square.
On Tuesday, the broader EGX 70 dipped 6.43 percent while the EGX 100 fell 5.54 percent, with only four stocks making gains and a total of 174 seeing losses.
Egyptians were net-sellers at a value of LE 139 million, followed by non-Arab foreigners at LE 107 million and Arab investors at almost LE 6 million.
The unrest has added further pressure to the already battered stock market, which has lost close to 48 percent of its value since the beginning of the year.
"Business is a long-term issue, the stocks are in and out,” said Alaa Ezz, secretary general of the Federation of Egyptian Industries.
“When you are talking about stock exchange or depletion of reserves, our loss of reserves are a lot less than what is happening in other markets. This is what you call hot money," he said.
Investors and analysts had predicted that the market would gradually pick up after Mubarak’s ouster, in hopes that putting an end to the regime’s corruption and getting rid of the lingering question of succession would boost investor confidence and the overall economy.
However, the transition phase has been marked by uncertainty and an unclear path to the democratic civilian rule Egyptians have been demanding.
Upon taking over power in February, SCAF said it would cede power by year’s end after holding both parliamentary and presidential elections. In the past months the ruling generals indicated they would stay in power until the end of 2012 or early 2013.
Parliamentary elections slotted for November 28 are looking increasingly unlikely as candidates and political parties freeze their campaigns until the situation is clearer.
Meanwhile, foreign reserves have dwindled to $22.1 billion, from $36 billion in January, and tourism — one of the pillars of the economy — has not nearly recovered.
Similar scenarios
The sentiment by Tuesday was strikingly similar to the beginning of the 18 days preceding Mubark’s fall.
As protesters gathered in major squares around the country and Tahrir Square grew packed, many employers sent their staff home early as schools and universities also evacuated students.
Traffic on the typically congested streets of Cairo was thin as protesters flowed into the square.
Mark Millar, head of research at Naeem Holding, told Daily News Egypt, “As far as the market is concerned, it’s always going be a risky period in the run up to elections. It’s not really a surprise that this is happening because market turnover is very low, and when you have lack of liquidity like that, you can get very volatile movements in the market.
“Then you get an event like [these protest], it can send the market quite considerably to the down side,” he added, speaking from a crowded supermarket where he was stocking up on food just in case stores close up like what happened in early February.
“The only thing I think can improve the situation in the market is if we see the SCAF doing what the people are asking for, a civilian committee in the short-term until elections are over, if they put technocrats in place temporarily to manage the situation, the market might respond positively,” Millar said.
Ezz was in a meeting with a German business delegation at a hotel near downtown Cairo. “You can imagine…the conference is still going on amidst this violence,” he said, coughing from the amount of teargas being fired in the area.
Several other planned business conferences as well as cultural and political events, however, have been postponed.
The delegation was in town to promote energy efficiency, and is more interested in long-term policies than the current unrest.
"They are questioning if the government will decide to reduce the energy subsidies, they are not questioning political or security issues, that’s not on their agenda. The only security question that comes up is when the delegation wants to visit other factories,” he said.
They are also unconcerned with whether the Egyptian Cabinet will remain or whether their resignation will be accepted by SCAF.
"Naturally, what’s happening is not good for the economy by any means. If there was a company who was thinking twice about investing in Egypt, they are now thinking five times," he said.
He sees the problem with both continued protests as well as authorities’ decision-making. “Authorities are not responding to the people correctly, and the people are impatient with their demands," he added. –Additional reporting by Reem Abdellatif
