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Market Report: Egypt market slips 2.7 pct on political and IMF loan uncertainty

Unresolved issues between government and Islamist-dominated parliament undermine investor confidence in stocks

Ahram Online, Monday 9 Apr 2012
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(Photo: Reuters)
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Political instability and fresh uncertainty over a long-awaited IMF loan saw Egypt's stock exchange plunge for another day with the main index falling to its lowest level in eight weeks.
 
The benchmark EGX30 tumbled 2.73 per cent to land at 4,594 points. The broader EGX70 also lost 2.14 per cent.
 
"There is a crisis across the political spectrum, whether it is in forming the constituent assembly, the fate of the cabinet or even over the eligibility of some presidential candidates," Eissa Fathy, vice president of the securities division at Cairo's Chamber of Commerce, told Ahram Online. 
 
The Muslim Brotherhood (MB) and its political arm, the Freedom and Justice Party (FJP), have called for the dismissal of Kamal El-Ganzouri's cabinet. The ruling Supreme Council of Armed Forces (SCAF) has so far ignored such calls, dubbing them unconstitutional.
 
"I think there is a fear among investors that the crisis might undermine Egypt's state institutions and knock confidence in the market," Fathy said.
 
The latest standoff between SCAF and FJP members of parliament is over the $3.2 billion loan from the International Monetary Fund which Egypt was thought scheduled to agree in June.
 
The MB's second in command – and now presidential candidate –  Khairat El-Shater, said on Sunday that the interim government must resign and a new cabinet must be formed before the loan is approved.
 
"It is not logical that I approve a loan that the transitional government would take for two or three months, then demand that I, as a permanent government, repay," Shater said in an interview with Reuters.
 
This loan is seen by many experts as one of Egypt's few hopes to overcome its swollen deficit and balance of payment problems and maintain a stable exchange rate. Some also claim an IMF agreement would boost investor confidence.
 
Shater's comments are "definitely a negative and no one will be buying in the market until there is clarity on the government's IMF loan talks," Teymour el-Derini of Naeem Brokerage told Reuters.
 
Total turnover continued its recent plunge, falling to LE307 million ($50.8 million). Just 15 shares gained in value while 153 lost ground.
 
Telecom Egypt was the most prominent loser in today's trading, losing 9.02 per cent to close at LE12.5 per share. The company's LE1.1 per share dividend
payment ended on 8 April and is though to have driven investors to sell stock.
 
Sister companies, Orascom Telecom Holding (OTH) and Orascom Telecommunication and Media Technology (OTMT) made up a combined LE93 million in turnover, around one third of the day's total.
 
While OTH did not witness much change in price, OTMT dropped 5.11 per cent to close at LE1.3 per share.
 
OTMT signed a preliminary deal in February to sell its stake in Egyptian mobile operator Mobinil to France Telecom.
 
Concern that the French company has not yet made a tender offer for Mobinil minorities is likely to weigh on the stock in coming days if no such offer emerges, Derini said. He added that fear of a drop in Egypt's currency could overshadow the deal.
 
"If investors are holding Mobinil as they see a 10 per cent gain when the tender offer happens, if the currency loses 5-6 per cent in the next month there's no point holding the name. Mobinil is meant to be one of the safer players," Derini said. 
 
Mobinil also dropped 0.63 per cent to close at LE173 per share.
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