CAIRO: Egypt’s benchmark index declined as the formation of a new Cabinet was overshadowed by pessimism over the economy and fears that the success of Islamist parties in the first round of an election increased risk for the banking sector.
The country’s military rulers brought veteran politician Kamal El-Ganzoury out of retirement to lead a new government and he announced his new Cabinet on Wednesday after repeated delays.
The index dropped 0.6 percent to 3,970 points.
A relatively smooth first round of a parliamentary election pushed the market up last week from after touching its lowest level since March 2009. Religious parties, including Salafis who are strong advocates of Islamic banking, have taken the largest share of votes so far.
"There is concern about Islamists reaching power and what it will do to the banking sector so we might see some people selling out of banking stocks listed on the EGX30 and buying those involved in Islamic finance which are listed on the broader EGX70 for example," said Hisham Metwalli, trader at Arab Finance Brokerage.
Commercial International Bank shed 1.1 percent while EFG-Hermes was down 1.5 percent.
Islamic lenders gained. National Bank for Development, which was converting into a full-fledged Islamic bank, jumped 5.2 percent and Baraka Egypt Bank 1.4 percent.
The Egyptian pound continued to weaken after touching its lowest in almost seven years. Bids touch 6.0145 against the dollar, compared to 6.008 on Wednesday.
Foreign reserves have slid as inward investment, manufacturing and tourism tumbled in the wake of the popular uprising that ousted Egypt’s president in February.
"The central bank also came out with statements about why the foreign reserves had dropped so strongly as we were spending on food imports for example, which is worrying, it reflects the wider economic problem we are facing," Metwalli said.
