Egyptian Exchange again fails to reopen, bonds and GDR prices fall

The Egyptian Exchange (www.egyptse.com) has failed to meet another self-imposed deadline to reopen yesterday (6 March), and investors are increasingly unhappy. In a statement on 3 March the stock exchange said the delay was linked to the resignation of Prime Minister Ahmed Shafik. Costs of debt are soaring and prices for a foreign-listed exchange-traded fund (ETF) and global depository receipts (GDRs) are falling.
In the statement, the bourse says: “Resuming of trading will be decided following the discussions with Egypt’s new Prime Minister.” New regulations by the Egyptian Financial Supervisory Authority to govern trading, aimed to halt trading if there is too much volatility, are published on the EGX website. There are also requirements of disclosure of who owns the shares and many pages of blocks on share trading by named individuals.
According to interviews by Bloomberg news the EGX market could fall by up to 10% when it does reopen.
The Ministry of Finance sold LE 3 billion ($509 million) of bonds on 6 March, LE 1.5 bn less than planned, as yields on 266-day notes climbed 31 basis points from the last auction to 12.47%, reports Bloomberg.
The Market Vectors Egypt Index ETF, traded in the US, firstrose19% between 27 January and 14 February, 3 days after former President Hosni Mubarak resigned, and then fell 9%, including 6.2% in 2 weeks while the MSCI Emerging Markets Index rose 1.5%. Last week, Commercial International Bank Egypt GDRs, traded in London, sank 15% to the lowest level since July and GDRs in Orascom Telecom Holding first climbed12% but since sunk to 5.2% below their level on 27 January when the EGX shut down during political unrest.
Barclays Capital said in a report on 18 January that foreign investors hold about $13 bn in Egyptian shares and account for almost 25% of trading.
Jeff Chowdhry, the London-based head of emerging-market equities at F&C, which oversees about $163 billion worldwide, is reported on Bloomberg as saying that Egypt risks becoming “a pariah of an investment destination. If they value foreign investment in their stock market, they should get that market open immediately and take off any restrictions in terms of having too cumbersome administrative requirements.”
Slim Feriani, London-based CEO of Advance Emerging Capital Ltd, which manages $750 mn in frontier and developing nation stocks warns the EGX30 may drop another 10% when it eventually reopens after falling 16% in the week before it closed.
Bloomberg also quotes Frank Nielsen, MSCI executive director for equity and applied research, saying on 1 March that MSCI Inc. may begin investor talks on whether to remove Egypt from the MSCI Emerging Markets Index if the market is closed for 40 days or more. Argentina was dropped from the index in 2009 and reclassified as a frontier market.
Prime Minister-designate Essam Sharaf may announce his new cabinet by the end of the week. Finance Minister Samir Radwan said economic growth will slow to about 4% in the fiscal year to end June, down from an earlier 6% forecast.
Bloomberg cites Fadi Al Said, a Dubai-based senior investment manager at ING Investment Management which oversees about $ 518 billion worldwide: “I’m really disappointed on the way it’s been handled. I hope that the market will open up soon and let’s get over with this cleanout, because this will create massive opportunities.”

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