Trading subsequently suspended, according to reports
By Robert Daniel, MarketWatch
TEL AVIV (MarketWatch) — Egyptian stocks tumbled nearly 10% Wednesday as the market reopened for the first time since late January.
The benchmark EGX 30 index (XX:EGX30 0.00, 0.00, 0.00%) sank nearly 10% and trading was subsequently suspended, according to media reports.
The exchange had closed Jan. 27 amid the turmoil surrounding and following the resignation of former President Hosni Mubarak. The exchange then scheduled and postponed its reopening a number of times.
A Wednesday report from Reuters had quoted the exchange chairman as saying that trading would be halted for more than half an hour if the broad EGX 100 Index fell more than 10% on Wednesday.
“We expect the Egyptian market may fall by 20% to 30% in the first few weeks of trading post-reopening, with the pace slowed by circuit-breakers,” the Cairo investment firm EFG-Hermes said in a Wednesday note.
Based on the Jan. 27 close, Egyptian stocks were trading at 10.1 times estimated earnings for 2011, the firm said. That’s a discount to the multiples of 10.7 for the Middle East and North Africa and 11.2 for the MSCI Emerging Markets Index.
A 25% drop in the market would bring down that multiple to around 7.6, “assuming earnings estimates are unchanged,” EFG Hermes said. “Given the long-term growth outlook ... the market would be attractive at these levels.”
“The market’s recovery will be slow and will depend on the pace of political developments and the extent of economic recovery,” EFG-Hermes said.
In addition, weakness in the Egyptian pound “may be an overhang, discouraging foreign portfolio investments into T-bills as well as equities for some time.”
The bourse had been facing a deadline to reopen and avoid being thrown out of the MSCI Emerging Market Index. MSCI had said it would consider removing Egypt from the index if the bourse were shut for 40 consecutive business days.
Reports say that the exchange had also set a 10% limit on individual stock moves. On the last two days of trading before the halt, the EGX 30 Index dropped 16%.
Trading started at 10:30 a.m. local time. The exchange chairman told Reuters that trading was to end at 1:30 p.m. local time, an hour earlier than normal, for a week.
On Tuesday on Wall Street, the Market Vectors Egypt Index Exchange Traded Fund (EGPT 15.73, -0.92, -5.53%) dropped 5.7%.
New bourse chairman
A Monday statement from the prime minister, Essam Sharaf, said that Mohamed Suliman Abdel Salaam had been named to supervise the stock exchange for six months. Abdel Salaam had been chairman and managing director of the exchange’s clearing, depository and registry operations.
Reports say that Khaled Serry Seyam had resigned as chairman of the bourse to protest the delayed reopening.
In that Monday statement, Sharaf had asked “people to positively contribute in the bourse upon” its reopening to help preserve “the stock exchange as one of the important economic authorities in Egypt.”
Mubarak had been in power for 30 years before the pro-democracy demonstrations sweeping the Arab world reached the country and forced him to step down.
