The weekend stream of violence between Israelis and Palestinians drove the Cairo stock exchange three percent lower on Sunday, June 3. The Hermes Financial Index closed at 6,342.76 points—194.64 points lower—whereas the broader CIBC index lost 0.5 points, closing at 69.15.
Most share prices fell despite it being the first day that Egypt was effectively included in the Morgan Stanley Capital International (MSCI) benchmark of Emerging Markets Free (EMF) index, expected to dramatically increase foreign investment in the market.
Analysts attribute the bourse’s weakness to the escalating violence in region. On Friday, a suicide bombing outside a Tel Aviv nightclub killed 20 people, and wounded more than 130, raising international concerns about the region’s rising conflict.
Egypt's foreign exchange problem is also adding to the general pessimism in the market, as the supply of U.S. dollars remains scarce in banks, and black market exchange rates have risen since the official exchange rate change made on Monday, reported Reuters news agency. According to market sources, dollars have been exchanged in the black market at a rate of 4.06-4.10 pounds, whereas in the offshore market the pound has been trading at 3.95 to 4.00 pounds to the dollar, and has been stable for at least the last month.
Egypt’s Central Bank slightly devalued the central exchange rate last Monday from 3.85 to 3.86 pounds per dollar. The "managed peg" exchange rate system allows banks and bureaux to trade within a band of one percent to either side of the central rate.
Orascom Telecom (OT) lost 4.25 percent in Sunday’s trading, closing at 29.00 points, whereas Egyptian Company for Mobile Services (MobiNil) closed at 64.51 points, down 3.6 percent from Thursday's close. Commercial International Bank (CIB) was last traded at 33.85 pounds, also down 2.3 percent from Thursday's close. —(MENA Report)
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