CAIRO: Egyptian stocks may be boosted by optimism following the downfall of Hosni Mubarak when markets reopen, but confidence is unlikely to be fully restored until political stability is achieved.
Mubarak’s overthrow may also help the Egyptian pound which had strengthened from a six-year low on Tuesday after the central bank intervention before trading closed on Thursday, a day before protests forced the authoritarian leader from power.
Political unrest has twice delayed the stock market’s reopening since its last session on Jan. 27. The bourse will now open on Wednesday after having earlier been scheduled to start trading on Feb. 7 and then on Sunday, Feb. 13.
"I think there could initially be some upside to the market, given the post-Mubarak jubilation, but still international investors could very well sell off Egypt and its stock, only because of the unknown," said John Sfakianakis of Banque Saudi Fransi.
"Local investors could well take an opposite view. They could play on the post-Mubarak jubilation and enter the market, and that could initially keep the market going up, probably for the first half of the day."
The stock market lost LE 69 billion ($11.7 billion) and its main index 16 percent of its value in the two days it was open after countrywide protests broke out on Jan. 25.
The regulator said last week that when the bourse does reopen it would suspend trade for a half hour if its broad 100-share index declined by 5 percent and for even longer if it fell by 10 percent. It also said trading on the exchange would end an hour earlier than usual.
Pound may strengthen
Analysts said the Egyptian pound may strengthen on Sunday, the sixth trading day at Egyptian banks after a week-long closure caused by the unrest. It closed at 5.879 to the US dollar on Thursday, down from 5.816 on Jan. 25.
"I think you’ll see a slight firming in the pound," said Angus Blair, head of research at Cairo-based Beltone Financial, who added that all Egyptian markets stood to benefit from an easing of political tension after Mubarak’s resignation.
"The one proviso on this is that there has to be very quick moves on a whole variety of fronts to try to reduce the uncertainty," Blair said. These include the management of the economy and progress in changes to the constitution.
Analysts said telecoms stocks such as Telecom Egypt and Mobinil could be boosted by a surge of telephone calls during the crisis and after.
Banks may be boosted by a surge in deposits, but some could be hurt in the medium term if the economy were to slow down and borrowers were unable to repay loans, or if the state were to go after important clients with ties to the former government.
Companies whose revenues are in dollars or who have much of their business outside Egypt, such as Maradive Oil Services, Orascom Construction Industries (OCI) and El Sewedy Cables, may weather the crisis well.
"We still like CIB (Commercial International Bank), we still like OCI," Blair said. "I think the telecoms will end up doing well. In this kind of environment everyone’s talking."
Consumer goods and export sales may enjoy a spurt of pent-up demand, helping boost the shares of those stocks, analysts said.
Blair said the government would be under pressure to ferret out corruption and that this would make it easier to do business in Egypt. "I think there is going to be an almost zero-tolerance policy towards corruption and petty corruption."
"The change in sentiment in Egypt is palpable, and this change in sentiment is incredibly positive. This means the recovery will happen not only more quickly, but more profoundly than we had expected."
