Egyptian stock market set to fall 10% as it reopens
Posted on 28 February 2011 with no comments from readers
The Cairo bourse is scheduled to open for trading this week for the first time since the revolution that swept Mubarak from power, and is very likely to test the maximum 10 per cent downward movement level within trading hours shortened from four to three. The real question will be how many days this continues before the stock market stabilizes.
Clearly the market will have lost valuation as it was suspended very early in the crisis. Egyptian cities have been struggling to get back to business as usual. But the chairmen of key companies like Ezz Steel and Palm Hills have been charged with corruption due to links with the former regime, and nobody really has a clue whether the military will manage to organize a peaceful transition to a functioning democracy within six months.
High oil price
Meanwhile, high oil prices are yet another burden on the Egyptian economy, with the important tourism industry at a virtual standstill. Hopes of five per cent GDP growth this year are history.
Egypt was also something of a magnet for regional foreign direct investment over the past few years. One of the many ironies of revolution is that is often occurs when economies have been exhibiting higher than average rates of growth, and fortunately the Egyptian state is far from bankrupt.
FDI is not likely to recover until investors are sure of the new regime and that may take years, assuming that a peaceful transition can be managed. Arab League boss Amr Moussa, pictured above, has said he will stand for the presidency, if or when elections are held, and would be popular with investors as a moderate, safe pair of hands.
Foreign support
Egypt also has many friends among the Western and Arab counties who have no desire to see the largest Arab state fall into chaos, and are keen to rectify their errors in supporting President Mubarak in the past. This sort of outside help would be welcome.
The hot summer weather cannot come soon enough this year in the Middle East to cool things down. However, the situation remains highly uncertain and the rapid spreading of unrest to many countries does not bode well for an easy immediate future, or lower oil prices.
