Egyptian stocks took an unexpected plunge into the red Wednesday, seeing more than LE10 billion wiped from their value as a perfect storm of economic worries and political pressures swept the market a day after the ruling military finally announced a timetable for elections.
The benchmark EGX30 finished 3.58 per cent down at 4,095 points following a four-hour session that saw stocks take an across the board battering.
“I have been working in the market for almost 20 years -- today could be considered a black day for the exchange," said Mostafa Badra, a capital markets expert.
It was the third largest daily loss for the Bourse since trading resumed on 23 March after seven weeks of closure. The main index has plunged 42.7 per cent in the aftermath of January’s uprising.
Just eight of the 187 stocks listed on the exchange made gains on Wednesday, a performance reflected in the 6.86 per cent tumble of the broader EGX70. All sectors either remained stagnant or finished in the red, with basic resources the biggest loser.
Total turnover was a comparatively healthy LE310.4 million, bolstered by a strong foreign contingent that bought a net-total of LE26.39 million of stocks.
“Some foreign investors are taking advantage, buying at low prices and waiting for the rebound of the market,” said Issa Fathy, vice president of the securities division in Cairo's Chamber of Commerce.
Trading was suspended for 30 minutes after the EGX100 fell 5 per cent in its opening hour. Such measures -- dubbed ‘circuit breakers’ -- have been used four times since they were introduced to the Bourse on its reopening six months ago.
On Tuesday, Egypt’s ruling military finally unveiled the dates for long-awaited parliamentary elections. But the announcement was overshadowed by the prospect of demonstrations against military rule planned for the weekend.
“[The market’s weakness] all came from fear from the protests and strikes that are expected on Friday,” said Nael Sedky, an equity trader at Naeem Brokerage.
Several commentators, for once downplaying the effect of tottering global markets, said a lack of government initiative was also hampering confidence in the economy.
“We can say the government's failure to layout a clear economic direction for the country has been very harmful to the business environment in general and the stock market specifically,” said Badry, who called for brokerage companies to play a role in calming the market and control what he called unjustified investor ‘panic’.
“The government seems to ignore everything about the economy. There are no declarations to make investors feel secure,” agreed Fathy.
He pointed to recent rumours over the re-nationalisation of key companies, like Nile Cotton and Arab Cotton, following last week’s return of three non-listed firms to public ownership.
Orascom Construction (OCI), the market’s biggest listed firm, led trade with around fifth of the total turnover, finishing down 4.43 per cent.
Other high-caps plummeted further yet, with Pioneers Holding, spiraling 9.7 per cent and Ezz Steel and Mobinil losing 7.2 and 3.6 per cent respectively. Biggest losses remained the province of lower-cap stocks, with mid-cap real estate and resources firms suffering the most.
The liquidation of margins used to finance investors could also have contributed to the decline, said Ashraf Abdel Aziz, institutions sales head in Arabeya Online Securities.
"As stock prices go down, investors sell their customer's shares to cover their exposure and close the position. This acts as a catalyst to the deterioration of the market,” he suggeste
But analysts were united in predicting further ‘bad days’ ahead, with forthcoming company results for the third quarter of 2011 unlikely to offer much respite.
“Judging from general economy indicators as well second quarter results, I don’t expect company results that will be announced to be of any help to stocks," said Mostafa Badra.