Egyptian stock exchange remains steady despite domestic tension

Traders work at the Egyptian stock exchange in Cairo. [Mohamed Abd El Ghany/Reuters]

Traders work at the Egyptian stock exchange in Cairo. [Mohamed Abd El Ghany/Reuters]

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The Egyptian stock exchange rose during trading this week despite the football riot in Port Said and the violence in Cairo and other provinces.

Analysts said trading was bolstered by a favourable political climate: the completion of the first round of elections for the Shura Council and the announcement of a date for candidates to enter the presidential race.

Egypt's EGX 30 index, which represents the country's top 30 performing companies, closed at the end of business this week at 4,753, up 169 points, a 3.7% increase.

A total of 544 million shares were traded during the week, compared to 841 million last week, a 35% drop. The total value of the trading this week was 2 billion Egyptian pounds ($324 million), compared to 2.7 billion Egyptian pounds ($443 million) last week.

Demands to lift precautionary measures

"The atmosphere around the stock index performance this week restored security, calm and confidence to investors, especially individual investors since many of them demanded that precautionary measures be lifted," Mohammed Azmi, a securities broker for a private company, told Al-Shorfa. "These measures were taken during the last few months out of fear of a total collapse in the stock index, especially when it came to price controls in the general index EGX 100."

Officials at the stock exchange decided last year that trading would be suspended for half an hour if the index changed more than 5% in one day. The president of the exchange would halt trading for a specified time if the index changed more than 10%.

"The fact that the stock exchange stabilised and did not collapse in the previous period amid recent events created a defence barrier, which is why it is time to get rid of the precautionary measures at least gradually," Azmi added.

He said it was important to maintain capital reserves in hard currency, especially dollars, because of the high demand and the low level of dollar deposits in Egypt's Central Bank.

Stock exchange 'passed the test'

Salah al-Mamlouk, a technical analyst at the stock exchange, said, "The stock exchange passed the test and proved it could maintain its strength during the most dangerous period in Egypt's history. The course of trading confirms that some investors are confident, especially investors in Egypt and the Arab Gulf, when it comes to the Egyptian financial market."

Al-Mamlouk said even though the exchange plummeted last Monday, the decrease was less than expected. He also noted the active trading in the telecommunications sector which allowed the index to recover.

"The state of calm influenced trading throughout the rest of the week," al-Mamlouk said. "Purchases by Arab investors soared to their highest levels in six months. There was also increased activity among individual investors and Arab investment funds.

"On Wednesday alone, capital markets gained 6.4 billion pounds [$1 million]," he said.

"This week's trading is worthy of interest because it bucked a lot of expectations since the financial market separated itself from the tense atmosphere throughout the country," said Mohammed al-Mohammed, the public relations director for Giza Financial Trading.

Asked about future projections, al-Mohammed said he expects the stock exchange to rise, but also predicted some fluctuations.

"It is obvious that Arab investors view concepts such as stability through a political lens," al-Mohammed said. "They think that security tensions on the ground do not have a long-term impact. This is especially true now that things have become clearer on the political arena through the cabinet, the Shura Council, the People's Assembly and the next president, as a date was set for presidential candidates to register."

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    طالب ابراهيم

    2012-2-15

    O people of Egypt, we supported you with our heart and soul till you overthrew you system. But frankly speaking, you became “spoiled”. The whole world knows you are heroes, champions and no one can beat you. It’s enough, everyone please stop! Don’t cross the limits, seek your interests, let the authorities manage the country and be patient a bit until things settle down and then you can judge them. May God be with you. I hope for our brothers, the Egyptians not to be driven back by silliness and nonsense collective and extensive disobedience. If the country remains unsafe, this will allow the smuggling of drugs, theft of oil and the increase in crime. Egyptian brothers think reasonably and see the reality. You did not settle for the departure of Mubarak and until now there are protests every Friday and there is chaos in your matches. There is no power but from God.