Archive for the 'Egypt' Category
September 30th, 2011 by Tom Minney
Ethiopia has raised Birr 7 billion ($408 million) of debt to finance the $4.8 bn Grand Ethiopian Renaissance Dam on the Blue Nile River and plans to issue more bonds. Communications Minister Bereket Simon said the country is not raising funds from foreigners in a bid to demonstrate its economic resurgence, according to an interview on Bloomberg yesterday (29 Sept).
The 5,250-megawatt dam, also called the “Millennium Dam”, is scheduled for completion in 2017 with the first 700 MW to be generated in 2015. It is on the Blue Nile, the main tributary of the Nile River, about 30 kilometres from the border with Sudan. According to the report, the dam wall is to be 145 meters high and 1.8 kilometres long and the lake will be 1,680 square kilometres (Lake Tana is 3,000-3,500 square kilometres according to Wikipedia), reportedly mostly uninhabited forest in the western Benishangul-Gumuz region.
Prime Minister Meles Zenawi launched the project and construction in April. Ethiopia is busy with many giant hydropower, wind and other generation projects to use its potential to generate 45,000 MW of hydropower, 10,000 MW of wind and at least 1,000 MW from geothermal sources. It is becoming a regional electricity exporter to counteract shortages in the nine East African Power Pool (www.eappool.org) countries, including Kenya, Djibouti, Sudan and Uganda, which are to be connected by a regional grid by 2016. The country started exports to Djibouti in May, a transmission line to Sudan may be completed by January and a feasibility study for a link to Kenya has been finished. Ethiopia is seeking to diversify the fast-growing economy, which used to rely on commodities such as coffee for most of its foreign currency.
Bloomberg quotes Bereket: “Building a dam on the Nile has been the dream of every Ethiopian. For millennia, we have been looking at the Nile as if it has been a curse that took our fertile soil and benefited others while Ethiopia was impoverished.” Bereket is heading a “public mobilization council” to raise funds for the project.
Egypt depends on the flow of the Nile for all of its water. Previous President Hosni Mubarak opposed infrastructure projects by upstream nations, citing old treaties established by the British which favoured Egypt. However, Ethiopia announced the dam soon after Mubarak was deposed in February and the new government has reportedly sought details of the technical and environmental studies on the effect of the dam on Egypt’s Nile water flow. Bereket told Bloomberg that Egyptian and Ethiopian officials have met twice and relations are improving.
Zemedeneh Negatu, managing partner for Ernst & Young LLP in Ethiopia, told Bloomberg: “The financial capacity to build the dam I don’t think should be in doubt at all. Over the next six years, Ethiopia can collect from taxes somewhere between Birr 450 and 500 billion.” He said the dam is “very critical” for Ethiopia to achieve its industrialization goals and for neighbouring states.
Donations of a month’s salary by civil servants have been converted into bonds to help boost the nation’s savings rate, currently 5.5% of gross domestic product, Bereket said. The opposition have criticized funding pressure on civil servants.
Public funding is unlikely to be maintained as it would be “too taxing,” so private companies have been encouraged to buy the debt, which offers a coupon of 5%. There are also plans for bonds to be offered to the Ethiopian diaspora with returns above the London Interbank Offered Rate, while sales to farmers are planned “early next year,” he said. A “significant” portion of funding will also come from the government’s development budget, Bereket said. A National Bank of Ethiopia directive was issued in April compelling banks to buy government bonds equivalent to 27% of their loans each month may raise Birr 11 bn for development programs in its first year, according to Access Capital (www.accesscapitalsc.com), the Addis Ababa-based research group. That amount is likely to increase in subsequent years, it said in an April research note.
The Ethiopian Government plans to borrow Birr 398.4 bn by mid- 2015 to invest in industry and infrastructure. The World Bank said in June this may lead to the economy over-heating and debt problems, the. Annual inflation in Ethiopia was 40.6% in August, partly because the central bank boosted money supply.
September 27th, 2011 by Tom Minney
Mark Voss of fund manager Silk Invest (www.silkinvest.com) foresees a turning point for the Egyptian market in a recent note. He also notes growth in Tunisia, with companies back to pre-revolution levels, tourism boom in Morocco, giant growth in Ghana and telecom payments innovation in Kenya.
He says the company clearly sees value in the market, but the evolving politics has cast a cloud on investor sentimenty. “We believe this is now lifting as the country’s election commission chief announced a roadmap for parliamentary elections – and a crucial step in transitioning to civilian rule, from 21 November to 4 March 2012. This should also pave the way forward for the Presidential elections by early next year. Going forward, we suspect that this may mark a turning point in the market’s fortunes.” He adds that there is no shortage of lenders to help the country get back on its feet. He adds that core inflation was 6.9% in August from 8.7% in July and Suez Canal revenues climbed 8.5% year-on-year in August.
Also on the post-revolutionary theme, he looks at Tunisia and said it “continued its upward trend with many companies now back at their pre-Jasmine revolution price levels”. Tourism in Morocco was surging and by end of July was up nearly 10% year on year.
For the rest of Africa he pointed out that the IMF forecasts 13% GDP growth for Ghana this year and noted the Chinese gave a US$3 billion loan for further infrastructure developments. In Kenya: “interest rates were notched slightly up to help control inflation and reduce local currency volatility. Following an unexpected increase in harvested maize, food inflation in the country is expected to decline”. Telecoms innovation continues full speed in Kenya, as Airtel Kenya unveiled an online payment system enabling mobile subscribers to use handsets to make purchases online, while Safaricom and I&M Bank launched a service that allows M-pesa customers to transfer money from their accounts to a pre-paid visa card – which can be used globally.
August 25th, 2011 by Tom Minney
Tiny, small and medium businesses in Egypt and Tunisia, later Algeria and Morocco, are set to benefit from a new €30 million ($43.2 mn) SANAD Fund for MSME (www.sanad.lu). This was set up in August 2011 by German development bank KfW Entwicklungsbank with funding from the German Ministry for Economic Cooperation and Development and the European Commission and will offer debt and equity financing to partner institutions in the Middle East and North Africa (MENA) region that serve micro, small and medium enterprises (MSMEs). Other target countries include Middle Eastern countries such as Lebanon and Jordan.
The fund is expected to attract further investments from public and private bodies. The partners who will help invest the money will be banks, microfinance institutions, financial service providers, leasing and factoring companies, guarantee funds or venture capital funds. The fund will also offer them technical help to build their skills and reach.
Development finance alternative asset manager Finance in Motion GmbH (www.finance-in-motion.com) and Oppenheim Asset Management Services S.à r.l. (www.oppenheim.lu) will manage the new fund which will be structured as a Luxembourg-based Specialized Investment Fund, SICAV-SIF, involving different share classes.
By facilitating access to finance in the region, SANAD – literally “support” in Arabic – aims to strengthen the MSME sector and local financial markets in the MENA region in line with the principles of responsible finance.
June 20th, 2011 by Tom Minney
Egypt is chasing its short-term domestic market to fund ballooning Government deficits, but seems to be preparing for a new Eurobond issue to replace $1 bn in 8.75% Eurobonds maturing in July, according to Bloomberg.
A week ago, Bloomberg reported that US President Barack Obama’s May guarantee on $1 billion of Egyptian debt could cut the country’s borrowing costs, helping the transition to democracy. Bloomberg surveyed 5 fund managers and says the median estimate is that the guarantee could cut yields on the five-year debt by 200 basis points (2 percentage points) or the equivalent of $100 mn.
Yield watchers follow the 10-year Eurobond, issued at 5.75% in April 2010 and listed on the Bourse de Luxembourg. The 2020 bond price climbed at the start of June after the Government unveiled a new capital gains tax and higher corporate tax, although the news hit share prices and its yield fell 15 basis points (0.15 percentage point) to 5.66% on 2 June, the lowest since 14 January. It had peaked at 7.07% on 31 January.
The IMF has also announced a $3 bn loan and other reported backing includes a plan for a $2.2 bn World Bank loan and $4 billion in economic and budgetary aid from Saudi Arabia.
Sergey Dergachev, who helps manage the equivalent of $8.5 bn in emerging-market debt at Union Investment Privatfonds in Frankfurt told Bloomberg: “The U.S. guarantee helps to get more interest from investors and calm investors’ nerves a little bit. But underlying credit risks for Egypt are nevertheless very high.”
Bloomberg reports that Egypt is rated Ba3 by Moody’s, 3 levels below investment grade after its second downgrade this year in March. A statement on 24 May says: “Egypt suffers from deep-seated political, socio-economic challenges. These include chronic high rate of unemployment, elevated inflation and widespread poverty.” Unemployment rose to 11.9% in the first quarter this year, from 8.9% the previous quarter. Food prices have risen about 20% this year, according to the Government’s statistics agency. Standard & Poor’s rates Egypt BB.
According to a recent report on Bloomberg, the T-Bill auction on 19 June the Ministry of Finance fell 11% short of raising the EGP 6.5 billion ($1.1 bn) targeted at an auction of treasury bills. It sold EGP 3bn in 3-month bills, the highest since 13 February, and EGP 2.8 bn from 9-month bills, less than the EGP3.5 bn target. Bloomberg reports the average yield on the three-month securities jumped 16 basis points, the most since an auction on 20 April to 11.761%. The yield on nine-month bills gained 4 basis points to 12.944%.
June 20th, 2011 by Tom Minney
Leading African and Middle Eastern private equity investor Citadel Capital (www.citadelcapital.com) said yesterday (19 June) that Egypt’s public prosecutor has lifted a travel ban imposed in April on its chairman Ahmed Heikal, according to a report on Reuters.
The company announced on 16 June that Citadel Capital Partners Ltd. (CCP), the vehicle through which members of the Executive Committee hold their equity in Citadel Capital, sold approximately 13.4 million shares in Citadel Capital with a total amount of approximately EGP 74 mn (US$12.4 mn) last week and lent the money to Citadel “to strengthen the firm’s cash position”.
According to the Reuters report, the Government had ordered Heikal not to travel while investigators probed corruption allegations against several business leaders and government officials linked to former President Hosni Mubarak. Heikal and former prime minister Atef Obeid were accused of links to profiteering and embezzling public money. Reuters reports that Citadel shares fell 10% after the ban on 14 April and have lost a third of their value since the start of the year. Citadel is listed on the Egyptian Exchange (CCAP.CA).
According to the report, Citadel said: “The public prosecutor has agreed today to remove the name of Ahmed Heikal, the company’s chairman, from the list of people banned from travelling.”
Reuters also says that Dubai-based Abraaj Capital (www.abraaj.com) has talked with Citadel about possibly buying a stake. FT Tilt also has an interesting story on the deal, discussing whether Abraaj is seizing an opportune moment and noting that Citadel shares climbed sharply in trading on 19 June.
CCP owns approximately 33% of Citadel Capital SAE shares as of 16 June 2011 and the company statement does not say who bought the shares. CCP has lent the funds to Citadel Capital “until regulatory approvals are obtained for the planned capital increase”.
According to the company, Citadel Capital has $8.7 bn in investments under its control. It “focuses on building regional platforms in select industries through acquisitions, turnarounds, and greenfields executed via Opportunity-Specific Funds. The firm’s 19 OSFs now control Platform Companies with investments worth more than $8.7 bn in 14 countries spanning 15 industries, including mining, cement, transportation, food and energy.
“Since 2004, Citadel Capital has generated more than $2.5 bn in cash returns to its co-investors and shareholders (on investments of $650 mn), more than any other private equity firm in the region. Citadel Capital is the largest private equity firm in Africa by PE assets under management (2006-2011, as ranked by Private Equity International).”
June 14th, 2011 by Tom Minney
The Egyptian Exchange (www.egyptse.com) is to introduce new products and trading innovations, including remote orders placed abroad, exchange-traded funds (ETFs), intraday trades and short selling. Mohamed Abdel Salam, chairman of the Exchange, told Reuters that transparency was up and political uncertainty was down in Egypt since the political uprising that overthrew former president Hosni Mubarak and this is bringing more investor confidence.
The trading changes had been delayed as the political mandate of the old government decreased. Some innovations could be introduced in July and talks on remote orders are to resume with the London Stock Exchange (www.londonstockexchange.com) on 20 June.
Mohamed Abdel Salam told Reuters in an interview on 13 June: “There are indicators that show the market is improving because of the revolution. First, it reduced political risk. In the past, things were vague. If the president were to die, would his son take over, or would the army? Many people have started trusting us now, and we are also trying to reduce transaction costs on foreign investors … so I think we will now introduce short-selling and intraday trade in the first days of July.”
He said that companies had been on time in publishing quarterly results, indicating the effects of the revolution on their earnings, and this improved the country’s credibility. In addition, since the changes institutional investors had become more prominent: “The market is becoming more stable, because institutional investors have begun to outnumber individual investors, who used to cause sharp market moves by their emotional trading.” Egypt is one of the African exchanges with very many active local individual shareholders.
He said the aim of the changes is to bring new energy into the exchange: “Egypt’s market is in need of new blood to be pumped in; it needs new products … It is unarguable that this is a main way to increase liquidity and volume.” Previously there had been moves to introduce short selling in 2008 but this had not been introduced in 2010 as scheduled.
Remote orders with FIX
The Egyptian Exchange aims to allow investors to place orders from abroad although trading would still have to be executed through a local broker. Investors could use the Financial Information eXchange (FIX) protocol (www.fixprotocol.org) to place orders and secure the details until the transaction was completed by the broker. The first link was due to be introduced via London in mid-2010, reports the agency, followed by links to centres in the Gulf. The Chairman said the delays had been caused by technical problems at the LSE and talks would resume this week on 20 June.
Another plan is for dual-listings with exchanges such as Qatar, Dubai, Abu Dhabi and Kuwait. Abdel Salam said: “There are Gulf companies that expressed a desire to enrol in the Egyptian stock exchange but I cannot disclose names now.” Several exchanges have been vying to form the centre of Arab trading.
Commodity trading in gold could be established through a fund and talks are on with Egypt’s Chamber of Metallurgical Industries. The Chairman said: “We want to introduce a new way to trade gold called ETC, standing for Exchange Traded Commodities; this should facilitate trading of raw gold, and Egypt is a strategic gold producer, so we should make use of it.”
The Egyptian Exchange was closed from 27 January to 23 March after the popular uprising and it faced turbulence and pent-up demand when it did open. The benchmark EGX 30 Index closed on 13 June at 5,550.22, down 17.5% since the revolution although the trend has been positive since a low of 4,850.41 on 8 May.
March 23rd, 2011 by Tom Minney
The Egyptian Exchange (www.egyptse.com) opened today at 10:30am after nearly two months, and was immediately swamped with a flood of selling, which saw the index plunge nearly 10% and trading halted a few minutes after the exchange opened. The EGX 30 Benchmark opened the day at 5,646.50 but selling pressure that had built up before trading opened saw the index start to plummet down and buyers stayed well clear. Trading was halted for 30 minutes with the index at 5,085.63, according to the EGX website.
When the exchange reopened, the mood was a little better and the index slowly edged up to 5,155.33 over the next 50 minutes before drifting through to close at 5,142.71 after a further 2 hours, down 8.9% on the day.
Foreigners and then Gulf Cooperation Council members reportedly led the sell-off.
The exchange regulator had introduced new rules to halt trading if the exchange or any shares are too volatile. According to the rules, trading was halted for half an hour after a 5% change in value in the EGX100 index and as long as the EGX Chairman decrees if it falls by 10%. Similarly if a share price moves by 10% the price will be fixed until the end of the trading session and Associated Press reports that this happened to telco Mobinil, Orascom Construction, and EFG-Hermes investment bank, while around 30% of the trading was in Orascom Telecom which rallied a bit during the day but closed the session down 2.7%.
The bourse, which combines the former Cairo and Alexandria exchanges, had closed its doors on 27 January after falling 16% in a week during of political unrest which unseated former President Hosni Mubarak on 11 February. The reopening was delayed repeatedly because of strikes which kept clearing and settlement banks from reopening. Officials also wanted to prevent economic disruption. However, today is reportedly 2 days before a deadline which could have seen the EGX removed from the MSCI Emerging Markets Index, according to an Associated Press report. Other reports today state that the trading halts could still lead to discussions about downgrading the Egyptian market to the MSCI Frontier Markets index.
Some 46 companies were suspended from trading, after acting EGX Chairman Mohammed Abdel-Salam said they had not given full requested financial disclosure or had sent incomplete information about the shareholdings of targeted individuals. This is linked to ongoing investigations into share holdings and dealings of the Mubarak regime and associated businesspeople.
Egypt has also seen pressure on the Egyptian pound currency, trading at LE5.955=$1 by Wednesday evening. The country had seen its sovereign rating downgraded and the Government had reduced growth forecasts to 4% from 6% although some thought growth could be considerably less.
Selling pressure on the stock market is set to continue, but there are still many long-term bulls who believe that democracy and better governance could be good for the economy and are likely to start snapping up bargains when share prices fall a little further.
ETF allows creation orders
New York-based asset manager Van Eck Global announced today that it is again accepting creation orders for Market Vectors Egypt Index ETF (www.vaneck.com/funds/EGPT.aspx). These were suspended on 31 January after a strong inflow into the fund from investors who felt then that political change could be good in the long-term, although it still allowed investors to redeem units. The asset manager warned: “Market Vectors Egypt Index ETF will begin accepting new creation orders in accordance with the policies and procedures detailed in the Fund’s prospectus and Statement of Additional Information that include the right to suspend creation orders again if necessary. In an effort to facilitate an orderly resumption of trading, the Egyptian Exchange will follow procedures and measures, including circuit breakers on individual stock price changes, which may limit the Fund’s ability to track the Market Vectors Egypt Index.” Reuters reported that the ETF was down 7.5% today, bringing its total loss since 26 Jan to 18%.
March 14th, 2011 by Tom Minney
LIVE FROM SECURITIES AFRICA CONFERENCE (BNY Mellon, London)
African exchanges could grow dramatically in both market capitalization and turnover, following the explosive trends already charted by the Indian and Chinese markets. This was the view of Sunil Benimadhu, President of the African Stock Exchanges Association (ASEA – www.africansea.org), speaking at an African investment conference organized by stockbroker Securities Africa (www.securitiesafrica.com) in London today (14 March).
According to his projections, by 2020 leading African exchanges including Nigeria, Egypt, Kenya, Botswana and Mauritius could see giant growth. He says that based on an assumption of economic growth (GDP) of 5% a year and if African markets continue to follow trends seen elsewhere in terms of their share their economies (GDP) then both turnover (the value of shares traded) and market capitalization (the value of the shares listed on the exchange for trading) could increase many times during the coming decade. Already in the last 10 years Kenya has seen its market capitalization grow 12x, while the market capitalization of the Mauritian market has risen from 30% to 80% of GDP even as the economy has also grown by 5% a year. This has also been seen in other markets, for instance in China where turnover has risen 5x to $2.7 trillion and India where turnover is up from $148 bn to $1.6 trn. African markets could achieve similar growth in the coming years.
Sunil dubs his continent “the final growth frontier of the world” and says it is attracting a lot of interest, despite a slowdown this year due to political upheaval in Tunisia, Egypt and Cote d’Ivoire. As global economic power shifts to China and India, demand for commodities will continue to soar in order to support their growth, and this will continue to boost African economies. In addition, many countries have successfully introduced structural adjustment programmes. There has been huge growth in many African countries and a new and numerous middle class is emerging, likely to push consumption at 10% a year for coming years.
Investors deterred by “anaemic” growth in developed markets are turning to Africa. Despite the prospects, African markets are currently trading at less than 11x trailing Price-Earnings ratio (a measure of valuing a share price compared to last year’s net profits), compared to a trailing PE ratio of 16x in developed markets. This is despite developed markets only growing by 0%-0.5% a year, compared with African growth forecast at least at 5% in most major markets, and more in many countries. Despite delivering double-digit returns and providing some of the world’s top performing markets, even after factoring in risk perceptions “African markets are much cheaper”, says Sunil.
Challenges for macro-economic policy-makers include more improvements in the business climate including further opening of markets, inclusive growth that spreads the benefits to a middle class who will in turn spur consumption and bring large numbers of the population into the forefront of the growth story. He also said the continent needs good, democratic governance, as indicated in North African countries which had been deemed to be success stories until governance problems came to the fore. There also needs to be substantial investment in infrastructure, including roads, railways and airports to link African markets. However, Afridan capital markets could supply the investment funds for this, provided policy-makers understand and actively support the development of security exchanges.
Exchanges also have to play their part. He says they should focus on “the 4Ps: products, players, participants and partnerships”. The markets need new products, they need new players including dramatic increases in the proportion of the local population who trade on capital markets and activity levels by international investors. Top companies – for instance oil companies in Nigeria – may not even be listed and there is plenty of potential to put leading companies onto the radar screen of the international investors. African stock exchanges also need to seek new partnerships with each other. Links between markets in East and Southern Africa are advancing.
How the African Stock Exchanges Association (ASEA) aims to shape the future of African capital markets:
1. Emerge as the organization of reference and choice for investors to obtain first-hand information on African stock markets, increase the visibility of the African markets
2. Revamp the website to give up-to-date information to investors who want to understand the performance of African markets and to become a major source of real-time information, including the changes exchanges are going through.
3. ASEA will work a major index provider to come up with an investigate African index that will be jointly owned and should serve 2 key functions: as a benchmark for investors and to be used as reference for the creation of an African Exchange-Traded Fund. It will track ASEA’s 22 member exchanges, although have not yet decided the weighting of the JSE.
4. ASEA should become mouthpiece of African exchanges with African governments and regional organizations as well as the African Union, the African Development Bank and the World Bank.
March 7th, 2011 by Tom Minney
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.”
March 1st, 2011 by Tom Minney
Investor confidence in Egypt is likely to be further undermined after Egyptian officials again delayed the reopening of the Egyptian Exchange (EGX – www.egyptse.com) from today (1 March). It was announced late on Monday that trading would not start today at 10:30am but would again be put off until Sunday, 6 March. There have been repeated delays to the reopening.
The exchange is expected to face strong selling pressure when the shortened trading session begins and this could trigger new measures to stop volatility and cause the bourse to halt trading very quickly after it does open. According to reports, trading on stocks will be carried on within a pre-set price range and will be halted for half an hour in there is a 5% change in value, while if a share price moves by 10% the price will be fixed until the end of the trading session. If the EGX 100 index moves by 5% trading will halt for half an hour, if it changes by 10% trading will halt for as long as decreed by the EGX Chairman.
State-run Middle East News Agency (MENA) carried a statement by exchange officials that the market would reopen on 6 March to “allow investors to profit from the government’s support to guarantee stability in the bourse.” Officials have refused some demonstrators’ demands last Sunday to cancel trades made during the 2 days before the EGX closed on 27 January, when share prices plummeted.
Investigations are continuing into business leaders close to former President Hosni Mubarak who were prominent in leading listed companies and also who owned many shares and may be trying to rearrange their finances.
Karim Helal, Managing Director of brokerage CI Capital was quoted by Associated Press saying the delays harm sentiment: “No doubt, it is certainly eroding investor confidence, and we’re losing credibility by the day in international markets. If the decision is to allow the market to absorb losses, it won’t make a difference. It will just make it worse.”
There have been sharp falls in other stock markets across the Middle East and North Africa, as pro-democracy demonstrations have been increasingly widespread and persistent. Escalating violence in Libya is pushing up oil prices, while fears there could be pressure in Saudi Arabia have also added to worries about global oil prices and the economic recovery, damaging sentiment on exchanges worldwide.