Egypt stock market spikes on elections

AP News
Posted: Nov 29, 2011 8:41 AM
Egypt stock market spikes on elections

Egypt's stock market closed sharply higher Tuesday as the relative calm that characterized the first parliamentary elections to be held since the ouster of Hosni Mubarak in February temporarily eased investor worries about the country's political stability.

The Egyptian Exchange's benchmark EGX30 index closed nearly 5.8 percent higher, at 3,987 points, in its strongest showing in weeks. The rally began within minutes of the start of trade, with the broader EGX100 spiking over 5 percent in a surge that prompted a temporary halt in trading. That index closed almost 6.7 percent higher.

"We, as Egyptians, didn't expect the situation to play out like this," said Khaled Nagah, a senior broker at Mega Investments, referring to the elections that began on Monday and continued Tuesday. "There were expectations of violence, thugs and other troublemakers, but that hasn't happened."

The rally was a rare bit of good news in a market that has been among the worst performers in the world this year. Before the day's early rally, the EGX30 was down almost 48 percent so far this year, reflecting the broader troubles confronting the Egyptian economy in the months since Mubarak was driven from power in mid-February. Even with the day's gains, the index was still down 44 percent since the start of the year.

"This is the first time that Egyptians have felt this climate of democracy," Nagah said of the orderly way in which the voting was held on the first day of the election. "This gives people a sense of hope that their voices will be heard and that sense of optimism is contagious."

Nagah cautioned that the spike was more likely a temporary rebound and that it would take a few days for the market to settle and differentiate between fundamentals and sentiment.

The massive turnout at the polls _ despite security concerns and turmoil over deadly protests and violence in the pre-election week _ has upstaged the demonstration that is continuing in Tahrir Square, downtown Cairo's roundabout that has served as the epicenter of the Jan. 25 uprising against Mubarak. The activists there are demanding that the country's military rulers step down and expedite the transition to a civilian government.

They have also complained about the newly appointed prime minister, Kamal El-Ganzouri, who had served in the same post under Mubarak in the 1990s. El-Ganzouri's appointment came after the previous interim civilian government resigned after days of violent clashes last week that left over 40 dead around the country _ with most of the fatalities in Cairo.

The near daily protests have ravaged Egypt's economy, battering the vital tourism sector, driving away foreign investors, put the Egyptian pound under pressure and sharply raised the country's borrowing costs and the costs of insuring its sovereign debt against default.

Late last week, ratings agency Standard & Poor's downgraded Egypt's sovereign rating by one notch, driving it deeper into junk status on the back of the clashes and expectation of continuing political instability.

Analysts were concerned the latest election for the parliament's lower house would be marred by violence or irregularities. But the biggest worry that has emerged for many Egyptians is that the conservative Muslim Brotherhood and other Islamist parties could walk away with a large share of the vote.

The voting is staggered over the next six weeks across Egypt's 27 provinces, divided into thirds with runoffs held a week after the first round in each location.

Officials have said that 500 pound ($83) fines would be levied against voters who fail to participate in the elections _ a hefty penalty in a country where rising prices and rampant poverty were main catalysts in sparking the uprising that pushed Mubarak from office.