With Egypt’s presidential election approaching fast, representatives from the Egyptian government and financial community travelled to London this week to seek support from international investors for the country’s much needed reform programme.
Speaking at an Egypt day event at the London Stock Exchange on Friday, Hany Kadry, Egypt’s foreign minister, said he hoped to see “massive participation” in the presidential election on May 26 and 27 and parliamentary polls that will follow in the autumn.
Who says military rule is bad for stock markets? The EGX30, Egypt’s main stock index, is now over 7,700 – a level not seen since mid-2008.
The index has surpassed the previous post-Lehman high before the removal of president Mubarak, which was just over 7,600 in April 2010.
Egyptians queue up to cast their vote on a new constitution in Al-Haram in the southern Cairo Giza district on January 14, 2014.
Egypt goes to the polls – again. This time on a new constitution, which would give the military freedom from civilian oversight. Here are the main news and views.
The news out of Egypt may seem unremittingly bad of late but here’s something to cheer equity investors: the benchmark Cairo index, the EGX30, is back above 6,000 points this week, a level not seen since before the toppling of former president Hosni Mubarak way back in January 2011.
In fact, the EGX30 was one of the best performing indices worldwide in the third quarter this year, rising 20.5 per cent. Nevertheless, its new high may be little more than symbolic.
Here’s a question: why are Egyptian equities and Egyptian CDS spreads moving in tandem? In normal circumstances, you’d expect them to move in mirror image of each other. If equities go up, you’d think investors were optimistic about the country’s prospects (good); if CDS spreads go up, you’d think they viewed default as increasingly likely (bad).
So if both go up, is that good or bad?
Egyptian shares leapt at Thursday’s opening, suggesting investors are happy at the latest turn of events. The benchmark EBX 30 index was up 6.4 per cent as trading started, making up a big chunk of the index’s 9 per cent slide since the beginning of the year.
The surge was the biggest for more than a year and forced a halt to trading, as it broke the Egyptian Exchange’s 5 per cent limit on daily movement in the index.
A reminder – as if any were needed – of the dim view that the markets is taking of the ongoing political crisis in Egypt that led to the ousting on Wednesday of Mohamed Morsi, the country’s first freely elected president.
Yields on Egypt’s 2020 debt, just shy of 10 per cent a day ago, punched through that barrier to hit a new high of 10.44 per cent on Wednesday.
Egyptian debt premiums might be at an all time high (see beyondbrics 1 hour ago), but equity investors are taking a bet that things will improve for Egypt.
The cairo bourse was closed on Monday for a holiday, but opened on Tuesday with a flourish, surging nearly 5 per cent.
Having rallied by about 8 per cent since last month mainly on expectations that the government would reach a deal with the International Monetary Fund, Egypt’s EGX 30 index has not significantly reversed its gains despite the departure of the IMF team this week without an agreement, writes Heba Saleh in Cairo.
The reason for the apparent resilience, analysts say, lies in announcements that Qatar and Libya had agreed to give Egypt $5bn in aid helping to prop up its floundering economy and shoring up dangerously low foreign reserves.
By Andrew Bowman and Rob Minto
This weekend sees large protests in Egypt against president Mohamed Morsi on the second anniversary of the revolution which toppled Hosni Mubarak. Two years on, where has Egypt got to? These four charts provide an insight.
By David Edgerly
The international jury may still be undecided on the development of Egyptian politics and economics, but local investors have already handed down their verdict of enthusiastic support. The Cairo Stock Exchange has been one of the stellar performers this year with a gain of over 40 per cent.
Investors have broadly welcomed Egyptian president Mohamed Morsi’s bid to assert his power over the country’s strong military leaders.
Egyptian equities rose 1.5 per cent on Monday after Sunday’s dramatic announcements and the central bank successfully completed a regular bond auction that netted 5.1bn Egyptian pounds, 100m more than planned.
But the latest developments don’t herald the end of the long-running political conflict between the Muslim Brotherhood backing Morsi and the army. The president has won an important battle but he has not won the war.
The results of Egypt’s presidential run-off may still be in the balance but investors are already reacting with their cash.
On Monday, the EGX30 index fell 3.42 per cent. On Tuesday, it lost a further 4.23 per cent, back to levels of late January and heading south towards eroding all its gains since the start of the year.
The Egyptian regulator has given approval for France Telecom to take almost full control of its Egyptian mobile phone joint venture, Mobinil. The markets were keen on the news, with the EGX 30 index up 2.5 per cent at the close of business.
But with the country on something of a knife-edge, is $2bn to buy out your partner a good deal?
EFG-Hermes, the biggest publicly-traded investment bank in Egypt and the Arab world, has found a potential partner after the battering its stock has suffered in Cairo’s political turmoil. Deep-pocketed Qatar may be coming to its assistance.
EFG and Qatar’s QInvest said in a statement on Monday that they are in talks to create a “strategic alliance”. While nothing is certain, investors are betting that something will come out of the discussions: EFG stock jumped 7 per cent.