The Egyptian stock exchange is still shaking off the dust from the January 25 revolution, and stock trading has been on hold since January 27th.
Trading is expected to return before the end of the month, but the exchange faces the prospect of removal from the influential Morgan Stanley Capital International Emerging Markets Index.
Morgan Stanley set March 28th as the date when the Egyptian stock exchange will be removed from the international stock market records if the no-trade time limit, set at 40 consecutive sessions, is reached.
The Morgan Stanley Index is one of the most respected indexes as it provides guidance and a standard of comparison in emerging markets to aid investors. Global funds use it to determine whether they should invest in emerging markets.
"Failure to re-open the stock exchange will increase not only direct financial losses in the bourse, but it will also impact several sectors. The issue has affected Egypt's financial and economic reputation and the confidence of Arab and foreign investors who were beginning to feel optimistic after the departure of Hosni Mubarak," said Sami Abdel Nour, a financial analyst for a Cairo brokerage firm and a professor of economics at Ain Shams University.
He told Al-Shorfa that an international ranking for any stock market in the world is important because "it is the basic indicator that attracts or discourages investors". He said if the stock exchange is de-listed from the index, several large funds might leave Egypt.
Sayyed Abdel Ghani, a professor of economics at Ain Shams, was hopeful that stock trading would resume next Wednesday or Thursday (March 23rd or 24th) which would allow for trading for one or two days before it closes again Friday.
Abdel Ghani said there is close co-operation between three authorities – the General Authority for Financial Control, the bourse and the Egypt Clearing House – to decide on a date for the re-opening of the stock market and reduce anticipated losses when stock trading returns.
When asked whether some businessmen might manipulate the stock market in order to weaken it, Abdel Ghani, said, "This is possible, and many big names might do this. The only way to avoid this would be to provide evidence to the public prosecution to stop them from trading their stocks."
Abdel Ghani said some precautionary measures were taken against more than 150 Egyptian and Arab traders who were suspected of having connections with the former regime through financial and economic agreements. Punitive measures included freezing their funds and preventing them from travelling outside Egypt.
To compensate for possible losses Abdel Ghani said officials will seek help from the Egyptian Investor Protection Fund, a special fund that was created from insurance on stock market deals over five years and holds more than 830 million Egyptian pounds. The EIPF will help reduce losses during the first days of renewed trading, which he estimates will be 1 billion pounds.
"The initial shock will not last for more than two days, and the market and the investors will be able to absorb the shock of the return of trading," he said.
Mohammed Fathi, a financial company manager, said, "The future looks promising after the demands of the bourse employees to form a union were met. That was prohibited by the former regime."
He warned against the continuation of the closure of the stock exchange, saying this will reflect not only on financial dealings, but also on investments in general which "constitutes a direct risk to the economy, in addition to damage caused to a large segment of Egyptians who are involved in the stock exchange."