|22 September, 2019

Egypt trading suspended as shares plunge after protests

Trading on Egypt's stock exchange was suspended on Sunday after the EGX 100 dropped by 5%

Traders work at the Egyptian stock exchange in Cairo, November 19, 2014.

Traders work at the Egyptian stock exchange in Cairo, November 19, 2014.

REUTERS/Mohamed Abd El Ghany

CAIRO- Trading on Egypt's stock exchange was suspended on Sunday after the EGX 100 dropped by 5%, a fall that analysts linked to protests which broke out in Cairo and other cities over the weekend.

It was the first suspension for such a sharp move in prices since 2016, when Egypt embarked on a three-year economic reform programme backed by the International Monetary Fund, devaluing its currency and undertaking austerity measures.

"It is definitely due to the small escalation over the weekend, which is making investors cautious," said Ashraf Akhnoukh, director at Arqaam Capital in Cairo.

He said sellers were mostly locals and Arab investors.

When share trading was suspended shortly after 1030 GMT, Orascom Investment OIH.CA had fallen by 9.89%, Ezz Steel sank by 9.91% and Pioneers had dropped 9.65%.

Orascom Construction fell by 8.04% and Palm Hills lost 9.63%.

Before the latest sell-off, Egyptian stocks had rallied this year on the back of economic growth and a recent interest rate cut. The benchmark index .EGX30 is up 8% so far this year.

Yields on Egyptian treasury bills also slumped at an auction on Sunday, with the average yield on 91-day bills declining to 15.627% from 16.221% a week earlier, and on 266-day bills to 15.052% from 16.484% two weeks earlier.

Yields have fallen since the central bank cut overnight interest rates by 150 basis points on Aug. 22. 

On Friday, hundreds of people demonstrated in central Cairo and several other Egyptian cities against President Abdel Fattah al-Sisi, responding to an online call for protests against government corruption, witnesses said. 

Small protests also took place in the city of Suez late on Saturday. On Sunday Al Arbaeen square, where riot police had fired tear gas at protesters, was closed to traffic, witnesses said.

Egypt's economic reform programme has won praise from economists and helped reduce the current account and budget deficits. In 2016 the stock exchange was suspended for a 5% rise as investor confidence returned at the start of the reform programme.

But austerity measures including the introduction of a value-added tax and higher energy prices have increased pressure on Egyptians, many of whom live in poverty.

Political protests have become rare due to a broad crackdown on dissent under Sisi, whose popularity has been dented by the austerity measures.

Sisi's supporters say the crackdown was needed to stabilise Egypt after the 2011 uprising that toppled former President Hosni Mubarak.

Analysts said that although inflation has fallen recently, weak market sentiment may have contributed to Sunday's sudden drop in share prices.

"People are a bit unsure whether this is something small and will pass or will snowball. I don't think anything will happen. But (it) will change sentiment for sure," said an Egypt-based banker, who declined to be named because they were not authorised to speak to the media.

(Reporting by Ehab Farouk, Nadine Awadalla, Saeed Azhar, Hadeel Al Sayegh and Patrick Werr Writing by Lena Masri and Aidan Lewis Editing Raissa Kasolowsky, Dale Hudson and James Drummond) ((Lena.Masri@thomsonreuters.com; +447736465101;))

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