The Egyptian stock exchange, now notorious for its long closures, false reopening dates and general spontaneity has surprised investors once again. On Tuesday morning, trading was suspended for the third time since the stock exchange resumed activities a week ago. This time however the reason was very different and much more encouraging.
Egypt’s stock exchange maintains an automatic stop on trading when prices move by more that 10%. This practice has been evoked several times both before and after the revolution as a reaction to plummeting share prices. However the market has now been on a three-day rally forcing a suspension in trading for the first time today because of a 10% rise in prices on Tuesday morning.
Telecoms and banking led the market as prices corrected themselves to what Egyptian investors are considering more sensible value. It is important to note that foreign investors account for just below 50% of trades placed. Their willingness to buy into what they feel is a value market will surely be seen as a sign of encouragement for Egypt’s economy. The EGX 30 Index now lies above 5,400 and its worst performer is Ezz Steel who’s Chairman is now under fraud investigation relating to the former Mubarak government. Additionally, the Bourse Chairman recently suggested that these ‘circuit-breaker’ regulations might be relaxed, potentially paving the way for further rises.
Parallel to this, Egypt’s ever-evolving political and economic situation continues to develop. Recently, a law relaxing the regulations concerning the formation of political parties was adopted. This has received mixed reactions since it still forbids any party to base itself on religion. This has angered extremist Salafist sects and the Muslim Brotherhood who have set up the Freedom and Justice Party and declared it to have a religious ‘framework’ rather than foundation. Economists have warned that if the Brotherhood plays a big role in the next government, Egypt’s vital tourism industry could suffer. Part of the Brotherhood’s platform is the banning of alcohol and prohibiting unwedded men and women from mixing, two issues of great concern to Sharm El Sheikh tourists.
Finally, Egypt’s post-revolution economic investment partnership with Saudi Arabia continues to strengthen with a newly announced energy sharing deal. Under the jointly owned project, Egypt will send Saudi Arabia electricity during afternoon hours and Saudi Arabia will send Egypt electricity in the evenings, based one different usage pasterns in the two countries. The Egyptian government will invite tenders for the power link in April.