Egypt’s shares tumbled, sending the benchmark index to the lowest level in almost two years, after a two-month suspension amid unrest that toppled the North African country’s president.
The benchmark EGX 30 Index, the world’s worst performing stock measure this year, fell as much as 9.9 percent. It lost 8.9 percent to 5,142.71, the lowest level since April 2009, at the 1:30 p.m. close in Cairo. Trading was halted today for 30 minutes after the EGX 100 index lost 7 percent. Orascom Construction Industries, the nation’s largest publicly traded builder, retreated to the lowest since July 2009. Commercial International Bank tumbled 10 percent.
Egypt’s bourse, North Africa’s second-largest after Morocco by market value, resumed trading two days before a deadline that could have led to its removal from the MSCI Emerging Markets Index. The bourse will allow the EGX 100 Index to drop as much as 10 percent, exchange spokesman Hisham Turk said. The measure plunged 9 percent at the close.
The drop “is normal given the lock-up period and the political and economic circumstances,” said Walaa Hazem, who helps oversee about $1 billion in Egyptian assets as vice president for asset management at HC Security & Investment in Cairo. Shares may fall another day or two, he said.
Slow Recovery
President Hosni Mubarak bowed to mass protests and resigned Feb. 11 after three decades in power. The uprising against his regime caused tourists to flee, companies and banks to shutter and raised the government’s borrowing costs.
The Egyptian Financial Supervisory Authority, which regulates financial markets, said last month trading will be halted for 30 minutes if the EGX 100 Index falls more than 5 percent. If the drop extends to 10 percent, trading will be suspended for a period to be set by the bourse chairman. Daily share price movements will be limited to 10 percent and trading reduced to three hours from four.
“The circuit breakers are hurting the market and they have to be removed soon so we can get back to a free market,” said Ashraf Akhnoukh, senior equity sales trader at Cairo-based Commercial International Brokerage Co. “We expected this to happen.”
Egypt’s stock exchange suspended trading of 46 shares today after the companies failed to meet disclosure requirements. Ezz Steel, the country’s largest traded steel producer, is among those whose shares were halted. Ahmed Ezz, the company’s chairman and a former senior official in Mubarak’s National Democratic Party, is on trial for corruption charges. He has denied any wrongdoing.
Best Performer
Orascom Telecom Holding SAE, North Africa’s biggest mobile- phone operator by subscribers, rose as much as 7.7 percent. The shares closed 2.8 percent lower, making them the best performer in the EGX 30. Moody’s Investors Service placed Orascom’s B2 corporate family rating on review for a possible upgrade on March 21.
Separately, a planned merger between VimpelCom Ltd. and Orascom’s parent Wind Telecom SpA may be completed within weeks even though a key shareholder opposes it, Khaled Bichara, Wind’s chief executive officer, said in an interview on March 17. Wind holds a 51.7 percent stake in Orascom.
Economic Toll
Egyptians voted in March 19 referendum to change the constitution, paving the way for presidential and parliamentary elections by the end of the year. The vote was the first since Mubarak’s ouster.
“While there have been positive developments on the political side, the protests in Egypt did take a toll on the economy,” Yong Wei Lee, who helps oversee about $1.2 billion as a senior fund manager at Emirates NBD Asset Management in Dubai, said yesterday. “It’s too early to consider bargain hunting. The Egyptian market will remain volatile for a while.”
Finance Minister Samir Radwan said in a telephone interview on Feb. 12 that economic growth may slow to 4 percent in the fiscal year through June from an earlier estimate of 6 percent.
The EGX 30 Index became the world’s worst-performing gauge this year after plunging 16 percent in the week ended Jan. 27, before the market closed, according to data compiled by Bloomberg. The measure rose 15 percent last year and 35 percent in 2009.
Further Declines
Orascom Construction fell 10 percent to 204.37 Egyptian pounds and Commercial International Bank, the biggest publicly traded lender, also slid 10 percent to 32.86 pounds.
Egyptian shares tumbled in New York and London yesterday, with the Market Vectors Egypt Index ETF, a U.S.-listed fund that holds Egyptian stocks, retreating 5.7 percent. London- listed global depositary receipts of Orascom Construction fell 2.9 percent today, declining for a third day.
“We expect that the Egyptian market may fall by 20 percent to 30 percent in the first few weeks of trading post-reopening, with the pace slowed by circuit breakers,” Simon Kitchen, strategist at Cairo-based EFG-Hermes Holding SAE, wrote in an e- mailed report before trading started today. “The market’s recovery will be slow and will depend on the pace of political developments and the extent of economic recovery.”