Egypt stocks drop for 3rd day on unrest

AP News
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Posted: Jul 12, 2011 8:03 AM
Egypt stocks drop for 3rd day on unrest

Egypt's benchmark stock index extended its decline for the third consecutive day on Tuesday, pulled lower by an escalation of tension in the country over the pace of reforms and accountability of police and former regime officials.

The decline came as protesters laid siege to a key government building and threatened to expand their demonstrations, drawing a stern warning from Egypt's military rulers against "harming public interests."

Earlier Tuesday, protesters said a group of men armed with knives and sticks attacked them in Cairo's central Tahrir Square, where they have been camped out for days in one of the largest gatherings since the mass uprising that ousted former President Hosni Mubarak. The military's warning, coupled with the new violence, heightened investor fears, and dragging the benchmark stock index even lower.

The Egyptian Exchange's EGX30 index fell was down about 3.4 percent by 1:30 p.m. local time, bringing its year-to-date losses to almost 31 percent, according to figures on the exchange's website.

Brokers attributed the declines to investor fears about the continuing protests in Cairo and other Egyptian cities, with demonstrators calling for the removal of police officers allegedly implicated in the death of more than 900 people during the January revolution.

"The sales pressure shows that people are unloading because of fears about the protests," said Ahmed Hanafi, head of research at Gothour Trading.

Hundreds of protesters remained camped in Cairo's central Tahrir Square days after one of the largest demonstrations to besiege the capital since the former leader handed over control in mid-February to the military. The protesters are demanding, among other things, the removal of police officers accused killing demonstrators during the mass uprising. Nearly 900 people died during the uprising.

"If there's a decision showing that people will get their rights, ... this could stabilize the market," said Hanafi.

Foreigners dominated the selling, as did institutional investors, brokers said, and the declines covered a range of sectors.

The latest declines came a day after the finance ministry for the first time set a new public sector maximum wage of 36 times the minimum wage _ a move aimed at tackling one of the many complaints leveled by striking workers and protesters who maintain that consultants in government ministries were pulling in exceedingly high salaries.

Egypt's market, and its broader economy, have been hard hit by the protests. Labor strikes and general demonstrations have continued five months after Mubarak's ouster, undercutting productivity and manufacturing in the country while a general collapse in the security situation has battered tourism _ a sector that generates billions of dollars in foreign currency for the nation.

Egypt's caretaker government and the military rulers are trying to accommodate a host of protester demands, many of which center on improving the livelihood of citizens of the nation in which, according to the World Bank, about 40 percent live on or below the poverty threshold of $2 per day.

Spending on social services has been boosted in the budget for fiscal 2011-2012 and a new minimum wage has been set at about 700 pounds ($118) per month for the public sector.

The finance ministry said in a statement that a salary cap amounting to 36 times the minimum wage, or 25,200 pounds ($4,270) had been set. The statement said a cap had been placed on so-called incentives or bonuses, but did not specify how much. Such incentives and bonuses often more than doubled or tripled the core salary.

The move is a key part of the government's efforts to show a commitment to narrowing an income gap that had mushroomed under Mubarak's regime.

Egyptians complained that the core salary paid in the public sector was so low that government workers either balked at performing their jobs, or do so only with a boost in the form of bribes.

Others claimed that consultants hired at the various ministries or government offices were paid salaries that would have Wall Street brokers envious.