Egypt Stocks Decline Most Since 2016 After Protests

(Bloomberg) -- Egyptian stocks tumbled after anti-government protests threatened to tarnish the nation’s hard-won image as an emerging-market safe haven.

The EGX30 retreated 5.3%, the most for any single day since 2016, as every member declined, while the wider EGX100 index lost 5.7%, its biggest drop since 2012. Though the weekend demonstrations against President Abdel-Fattah El-Sisi’s government weren’t large, they occurred in cities and towns across the country, and evoked memories of the years of instability following the 2011 uprising that ousted Hosni Mubarak.

The “protest risk is not trivial,” Hasnain Malik, Dubai-based global head of equity research at Tellimer Markets Inc., said in a note. It’s especially precarious given the “significant foreign capital parked in local-currency bonds, an exchange-rate that’s no longer cheap on a real effective exchange-rate basis and the near-universally positive view of foreign investors on Egypt equities,” he said.

Egypt’s economy is growing at the fastest pace in the Middle East, yet living standards have worsened. Most Egyptians have been hit hard by a devaluation that saw the pound lose more than half its value and subsidy cuts that sent prices soaring, adding to El-Sisi’s challenge of containing social unrest.

But those measures helped make the nation a darling for investors in developing economies, with carry traders benefiting from some of the highest average yields in the world and a currency whose gains this year have been surpassed only by Ukraine’s hryvnia.

The market turmoil comes four days before that central bank is scheduled to decide on monetary policy. Economists predict a 150 basis-point cut to the deposit rate, according to forecasts compiled by Bloomberg before the protests erupted.

MIDDLE EASTERN MARKETS:

• The Egyptian bourse suspended trading for about 30 minutes at 12:42 p.m. in Cairo to help cool the sell-off after the EGX100 gauge sank 5%
• Among the largest caps, Commercial International Bank and Egypt Kuwait Holding retreat 3.4% and 7.1%, respectively
  • Juhayna Food Industries loses the most among index members, down 9.7%
• Kuwait’s Premier Market index rises 2.9%, the most in the region with KFH and AUB up 5.7% and 4.6%
  • The market got a boost from a periodical index update by FTSE Russell, which considered the closing prices of Thursday to implement quarterly changes to some of its benchmarks and leading to an increase in passive inflows. The review is expected to draw about $14 million in flows by foreigners to Kuwait, according to estimates by EFG-Hermes Holding
• Saudi Arabia’s Tadawul All Share Index adds 0.3%, extending gain of 1.2% last week
  • Saudi Aramco reiterated its commitment to bringing production back to its full capacity by the end of the month. Brent crude rose 6.7% last week, the largest weekly gain since January
  • MORE: Aramco Said to Add Barclays, BNP, Deutsche, UBS as Bookrunners
• In the United Arab Emirates, the gauge in Dubai falls 0.1% while Abu Dhabi’s ends little changed
• Israel’s TA-35 retreats 0.7%
  • Partner Communications falls as much as 4.8% after a report by local newspaper Calcalist that shareholder Haim Saban plans to hand his 30.4% stake in the company back to Hong Kong-based Hutchison

To contact the reporters on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net;Farah Elbahrawy in Dubai at felbahrawy@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Justin Carrigan

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