The Egyptian stock exchange has reopened for business on Wednesday morning but not without a hiccup or two.
Seconds after trading commenced the circuit breakers kicked in and the exchange was forced to suspend business.
Several stocks including Telecom Egypt, Commercial International and Orascom Construction fell by more than 10 per cent, prompting the exchange to halt trading for 30 minutes.
RTRS-EGYPT BOURSE SUSPENDS TRADE AFTER BROAD INDEX <.EGX100> FALLS 5 PCT
RTRS-EGYPT BOURSE SUSPENDS TRADE IN SEVERAL MAJOR STOCKS AFTER REOPENING
Everything is back up and running now and the EGX 100 looks to have stabilised around 822 — that’s a fall of 7 per cent. But trading is volatile.
Still, a 7 per cent fall is not too bad. Citigroup was braced for something worse.
The fact that the Egyptian market is likely to be under pressure on opening is evidenced by the decline in value of the Egyptian stocks that trade outside Egypt: since the market has been shut the four main GDRs/ADRs are down a further 10-20% since late January, and in some cases down by 40% year to date. In fact we suspect that the performance of some GDRs, and especially the US-listed Egypt ETF, understates the downward pressure that these stocks may come under when they begin to trade again locally.
The decision to reopen the exchange is a brave one by Egypt’s new leaders. Retail investors own around 60 per cent of the equity market and many of them have already suffered heavy losses. A public outcry remains a possibility as FT Alphaville’s Tracy Alloway discovered on her recent trip to Egypt.
That said, the authorities were in a difficult position. If the market hadn’t reopened this week then Egypt would have most likely have been removed from the MSCI indices, something that would have triggered further selling when it did reopen.
And at least there is one stock in positive territory.
From Reuters:
Shares in Egypt’s Sinai Cement <SCEM.CA> soared as much as 8 percent, the only firm to gain in the reopening of the stock exchange on Wednesday, after weeks of closure due to the political turmoil. CI Capital said earlier on Wednesday Sinai Cement offered “unquestionably” the highest dividend yield in its coverage universe, if not in the whole market, and recommended investors to buy the stock.
Related link:
Egypt’s MSCI countdown – FT Alphaville
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