Stock market plummets in Egypt after protests
Stock market in Cairo falls to lowest level since 2008.
Egypt's benchmark index plummeted to its lowest level in over two years Thursday, dropping more than 10 percent as anti-government protests rattled investor confidence and left Hosni Mubarak's regime facing its most serious challenge in years.
The EGX30 index was down 10.6 percent to 5,640.38 points by 1:15 p.m., continuing its tumble after trading was briefly suspended. The market had tumbled 6.25 percent just 15 minutes into the trading session.
The day's drop built on a 6.1 percent decline on Wednesday — a plunge fueled by the massive anti-government protests that mirrored earlier demonstrations in Tunisia that led to the ouster of that country's president.
"It's clear today that the inability to control the situation in the streets yesterday is panicking investors," said Ahmed Hanafi, a broker with Guthour Trading. "The drop we saw yesterday is being repeated. At this rate, it's going to continue to fall hard."
The protests began on Tuesday, with tens of thousands of demonstrators engulfing the capital, Cairo, and other cities, and clashing with riot police in violence that left at least six people dead. The violence and protests, albeit on a smaller scale, continued Wednesday, shattering expectations that they would be summarily quashed by the powerful security forces.
"The weakness in the market is stronger after trading was suspended," said Mostafa Abdel-Aziz, a broker with Beltone Financial, a regional investment bank based in Cairo. "During the break, investors had a chance to assess the situation."
The continued fall in the index — bringing it to its lowest level since October 2008 — reflected their unease, he said, adding that some shares had dropped by as much as 25 percent. All sectors were affected.
The anger on the streets has focused on the 82-year-old Mubarak and his government, with protesters calling for his ouster and demanding action to end a litany of economic and political ills including rising food and housing prices, unemployment, a widening income distribution gap that has fueled poverty in the Arab world's most populous nation.
While Egyptian officials have boasted about healthy economic growth figures, critics have argued that the ambitious economic reforms launched in 2005 — and which led to GDP growth rates of over 7 percent just a few years ago — have done little more than make the rich even richer.
The pummeling on the stock market hits at the core of some of the Mubarak regime's main accomplishments. The president, who has ruled Egypt for nearly 30 years, has built his legacy continuing and expanding the open market policies launched by his predecessor, Anwar Sadat, in the 1970s.
State industries have largely been privatized, the Egyptian real estate sector was one of the few in the world that escaped largely unscathed from the global economic meltdown in 2008 and 2009 and the banking sector fared well given it was not victim to the subprime mortgage mess that helped precipitate the world's worst recession in over six decades.
Traders said that investors had hoped to see indications at least of an end to the unrest in the country, where roughly 40 percent live on or below the World Bank determined poverty line of under $2 per day.
But expectations that the rallies would continue Friday, the start of the weekend in much of the Arab world, have undercut that hope. Nobel peace laureate Mohamed ElBaradei is expected to take part in rallies in Cairo on Friday, according to his spokesman. His presence could, if not further galvanize the demonstrators, at least place at their forefront an internationally respected diplomat — a move that could further force the government's hand.
"There's a very big question mark about the weekend, and no one wants to hold a long position," said Abdel-Aziz, adding that the media coverage of the protests has contributed to the negative sentiment on the marketand has particularly affected foreign investors' perspective.
"It's a huge panic, and it's a huge panic for internal reasons," he said. "This is new for the market. The panics before used to be for external reasons" such as the Dubai's financial meltdown or a reaction to declines in major international stock markets.