Tuesday, Jun 19, 2012
By Nikhil Lohade
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Egyptian stocks plunged again Tuesday, extending the previous session's hefty retreat, amid escalating concerns about a possible showdown between the Muslim Brotherhood and the country's military rulers that could further delay critical economic policy decisions.
The cost of insuring the country's debt against default also hit a fresh high since the ouster of the former regime, reflecting the increasing political risk premium placed on Egypt.
Market concerns were heightened after the Muslim Brotherhood said it would convene parliament in defiance of a court order dissolving the body, and asked Egyptians to take to the streets challenging the military's recent moves to consolidate power.
"Although the [presidential] election is out of the way, there are new imponderables which will serve to keep foreign money on the sidelines for now," said Daniel Broby, chief investment officer at asset management firm Silk Invest.
"Clearly, the military doesn't want to take a back seat; and the judiciary is unhappy with the process to date. That doesn't make for an easy ride for the new president, once he is confirmed," he added.
Egypt's benchmark EGX 30 Stock Index fell 4.2% to 4087.45 Tuesday, after sliding 3.4% in the previous session. The country's credit default swaps spread reached 665 basis points Tuesday, 14 bps wider than Monday's close, according to data provider Markit, and a new high since the revolution early last year.
While the Brotherhood has already claimed victory in Egypt's first freely contested presidential election, the official outcome is only expected later this week. The military meanwhile has sought to assure the public it will hand over power.
But from an investor perspective, the key concerns are that the recent developments will delay much-needed economic reforms and, more immediately, an agreement with the International Monetary Fund over a $3.2 billion loan--seen as vital to help shore up the country's floundering finances, analysts say.
In terms of stocks, heavyweight Orascom Construction Industries shed 3.9% to end at EGP222, while Telecom Egypt dropped 2.1% to EGP11.91.
But not all investors are seeing red. "The current sell-off is creating some exceptionally interesting opportunities, although it would be best to wait for the official [election result] announcement on Thursday," Emad Mostaque, a London-based strategist at Religare Capital Markets, said.
-By Nikhil Lohade, Dow Jones Newswires; +9714 446-1694; nikhil.lohade@dowjones.com; Twitter: @ZDJnews
Copyright (c) 2012 Dow Jones & Co.
(END) Dow Jones Newswires
19-06-12 1325GMT
