DUBAI: Egypt’s stock market fell sharply yesterday as security forces in Cairo moved to disperse demonstrators supporting deposed President Mohammed Mursi, sparking violent clashes across the north African country which have killed at least 29 people.
The Egyptian index sank 1.7 percent to close at 5,549 points, very near the day’s low of 5,546.
It was the steepest daily drop since early July but, despite the violence, yesterday’s fall was smaller than drops of 3 percent or more recorded in response to other bouts of political instability since last year.
Many investors hope a crackdown on the Muslim Brotherhood will help the army-backed government assert its control and begin to rebuild the economy, and are willing to tolerate a high level of violence in the meantime.
Because of these hopes, the index is still up more than 20 percent from its June low. It has major technical support around 5,450 points, where it peaked in May and July.
Mohabeldeen Agena, a senior analyst at Cairo’s Beltone Financial, said underlying buying support for the market remained strong and described Wednesday’s drop as mostly the result of profit-taking.
“I think that any minor dive close to 5,400 is a strong buy opportunity,” he said. “We’re heading toward 6,000 before the end of this quarter.”
Foreign investors and Arab investors were net buyers of stocks yesterday, while Egyptians were net sellers, exchange data showed.
But the latest violence may make it even harder to launch political negotiations, involving a wide range of groups including Mursi’s Muslim Brotherhood, that are needed to hold an inclusive parliamentary election before a return to civilian rule.
Without inclusive elections many investors, particularly foreigners, will hesitate to put large amounts of money into the stock market.
In a report earlier this week Raza Agha, chief economist for the Middle East at VTB Capital in London, said he was staying underweight on Egyptian assets because the economy would remain weak for some time and it was difficult to see a way out of the political morass.
“A sustainable/acceptable (to both sides) middle ground between all this is unclear,” he said.
Most Gulf markets moved narrowly; technical outlooks remain bullish but there has been almost no concrete news this week to trigger fresh buying.
Qatar outperformed, gaining 0.9 percent to breach 10,000 points for the first time since September 2008 on the back of strong earnings announced in the last several weeks.
The Qatar Exchange said first-half earnings at 41 listed companies, excluding Vodafone Qatar which has a different financial year, had risen 13.6 percent from a year ago.
The Qatar index is technically long-term bullish after its clean break last month above the January 2011 peak of 9,290 points, which coincided with the 61.8 percent retracement of the drop from June 2008. There is now no major technical barrier before the June 2008 peak of 12,637 points.
Bahrain slipped 0.1 percent as buyers stayed away due to major anti-government protests planned for later on Wednesday by pro-democracy activists inspired by events in Egypt.
The Bahraini government vowed to “forcefully confront” demonstrators and prosecute those responsible for “incitement”, perhaps with newly toughened anti-terrorism laws.
Reuters
