Egypt protests hit region’s markets
Egypt’s benchmark index was temporarily suspended yesterday and Dubai’s bourse slumped to a more than seven-year low following another day of tumultuous trading across regional equity markets.
Trading came to a halt on the Egyptian Stock Exchange after its broader index fell more than 5 percent amid escalating protests in the capital Cairo. The EGX 30 Index was down 4.8 percent to 3,676.73 at the 2.30pm close, the lowest level since March 2009.
The unrest also had an impact on markets in the Gulf, which have been battered in recent months by various macro-economic issues. Volumes have plummeted to multi-year lows in the UAE as risk-adverse investors shy away from equities. The Dubai Financial Market General Index fell 0.3 percent to 1,351.09, its lowest close since June 2004, whilst the Abu Dhabi Securities Exchange (ADX) fell for a seventh consecutive session to a more than two-and-a-half year low, dropping 0.43 percent to 2,439.69.
The DFM has lost more than 17 percent this calendar year amid political unrest across the region and sovereign debt problems in the US and the Eurozone.
“The turmoil in Egypt is the main cause for excessive selling across GCC markets, especially in Saudi Arabia, which was down on high volumes,” said Haissam Arabi, chief executive and fund manager at Gulfmena Investments. “It will be difficult to convince foreign investors to come back to the region. I fully understand why the Egyptian market is down almost 50 percent year-to-date because the country has experienced uprisings, turbulence and violence. However, it does not make sense that GCC markets should be suffering as much,” he said.
Arabi says it is up to local investors to bring liquidity back into the marketplace. “Now is the time for local sovereign wealth funds, pension funds and social security funds to come in and support local markets; the economic fundamentals are much better in this part of the world than they are in the United States or Europe,” he said.
Elsewhere in the region, Saudi Arabia’s Tadawul All Share Index fell 0.82 percent, Qatar’s measure rose 0.32 percent, Bahrain’s bourse closed flat, Kuwait’s gauge added 0.22 percent and Muscat’s exchange declined 0.5 percent.
“We are still in the phase where appetite for risky assets is almost non-existent,” a Dubai-based trader said on condition of anonymity. “The whole region does not look stable. There are a lot of issues everywhere and from a political perspective it is a very risky environment,” he added.
In Egypt, the plunge on the EGX100 triggered a temporary suspension in trade — a safety mechanism set up by authorities in the weeks after the uprising that toppled Hosni Mubarak. “We passed the support point, so the only thing that will stop further declines in the market is fixing the political situation in the country,” Khalid Naga, a senior broker with Mega Investments, told AP. “We have to wait and see what happens.”