Egyptian Exchange again delays reopening

The Egyptian Exchange (EGX – www.egyptse.com) has again postponed its reopening and says it will only open when the strike-hit banking system gets back to normal. Dates mentioned now include Sunday (20 Feb) or Tuesday next week. The bourse closed on 27 Jan after a 16% fall in its EGX30 Index, including a dramatic 11% fall on the last day.

The exchange will wait 2 days after the banks open, according to media reports. The banks will not open until after the weekly Friday Muslim prayer day.

EGX Chairman Khaled Seyam told Bloomberg today (16 Feb): “Our market is directly tied to the banks because they are our custodians… We need to make sure they are back to normal operations because we cannot afford to start and stop again.”

The exchange has also outlined steps to limit potential losses from investors who are may be rushing to get funds out. These could include rules to halt trading for 30 minutes of the EGX 100 Index (which closed at an eight-month low of 884.79 on 27 Jan) rises or falls more than 5%. The exchange will shut for the day if the EGX 100 moves more than 10% percent, he said.

Bloomberg also reports that representatives of private investors were meeting exchange officials and some had asked for suspension of trading of 13 companies associated with the regime of former President Hosni Mubarak. These include Ezz Steel, Egypt’s biggest producer of the metal, Ezz Aldekhela Steel Co. and Ezz Ceramics & Porcelain Tiles Co., affiliated with Ahmed Ezz, a member of Mubarak’s former ruling party whom the public prosecutor is investigating for corruption. Some investors called for more regulation to prevent insider trading and improve disclosure and for new management at the Egyptian Financial Services Authority which regulates the securities market.

Shares in the Market Vectors ETF have climbed 12% since 27 Jan, but dipped 0.7% on 16 Feb, although the fund closed to new money after investors sought to pour in funds on 28 Jan. Global depositary receipts (GDRs) of Orascom Construction Industries (Egypt’s biggest publicly traded builder) and Commercial International Bank Egypt SAE (the biggest publicly traded bank), both slid more than 4% on trade today on the London Stock Exchange.

Egypt is also seeking to issue EGP 4.5 bn ($765 mn) in 91- and 273-day T-bills as scheduled on 20 Feb, while EGP 5.5 bn ($935 mn) Egyptian pounds in 182- and 364-day bills has been postponed from 17 to 21 Feb. No foreigners tendered for a record EGP 15 bn issue of T-bills on 7 Feb, but local banks oversubscribed 1.35 times.

Selling pressure seems to have built up with the market closure. Associated Press quotes Wael Ziada, head of Egypt research at the Cairo-based investment bank EFG-Hermes: “The market is going to decline. There is no doubt that there is some pressure, and it’s been building up ever since the market has been closed.”

Tens of thousands of Egyptians are on strike over very low salaries, and poverty. World food prices are at record highs. The cost of protests and slowdowns in the economy is huge, including major disruption to tourism. However most large businesses said operations were almost back to normal from 7 Feb.

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