Investors are
bracing for a big sell-off when Egypt’s stock exchange opens on Tuesday
after a month-long shutdown caused by the mass uprising that toppled
the country’s president. But the reopening could be cut short if share
prices do plunge as this will trigger a trading suspension. “It could
be the shortest session on record tomorrow,” said an analyst based
outside the country.
The bourse, which
will open at 10:30 a.m. (0830 GMT) on Tuesday, will suspend trade for a
half hour if the benchmark index declines by 3 percent and for the
remainder of the session if it falls by 6 percent.
It will also
suspend trade for a half hour if the broader 100-share index declines
by 5 percent and the whole session if it falls by 10 percent.
The government has
postponed the exchange’s reopening several times in the last few weeks
because of continuing unrest. The protests and a series of subsequent
worker stoppages have left much of the economy in shambles, scaring
away tourists and investors and putting pressure on the country’s
currency. “The market hasn’t priced in a month of Egypt news, and there
is greater risk-aversion regionally and globally than there was a month
ago,” said Simon Kitchen, Egypt strategist for Cairo-based investment
bank EFG-Hermes.
The benchmark index
tumbled on the two days the market was opened after the protests
erupted in late January, losing 6.1 percent on January 26 and another
10.5 percent on January 27, and analysts said they expect even more
declines.
Akram Annous, MENA
strategist at Al Mal Capital, said negative sentiment might be nearing
a peak, but few investors would be stepping in to take risks. “Unrest
is festering in the region and since Egypt’s revolution, there has been
Libya, Bahrain and now Oman, while the spectre of Saudi is causing
anxiety for everybody,” he said.
Analysts are also
concerned about the performance of several of the exchange’s most
prominent companies after their top executives were indicted on
corruption charges, and they fear other companies might be affected as
prosecutors pursue businessmen who were close to the former government.
Still, some analysts say there could be buying opportunities. “We see
the Egyptian economy shrinking by 2.5 percent in 2011. Taking that into
account, the earnings impact is going to be 10-15 percent,” said Daniel
Broby, chief investment officer at London-based asset manager, Silk
Invest.
“The stock market
has fallen more than that already and on that basis, it’s looking cheap
prior to the unrest period.” Kitchen said the preferred companies were
those with strong exposure outside Egypt.
There was also a
preference for two companies, Sidi Kerir Petrochemicals and AMOC, that
are government-controlled, to have high dividend yields and have a
relatively small work force, he said.
