Egyptian Stock Exchange suffers 'severe losses' following Mubarak sons’ arrest

The Egyptian Stock Exchange (EGX) yesterday incurred “severe losses” amid a lack of liquidity, just a few weeks before the Egyptian government began to implement its plan to offer shares of government companies on the capital market, state-owned Ahram Online has reported.

The stock exchange developments were reported to have had a “negative psychological impact” on stock market’s traders.

At 11:30 (Greenwich time) yesterday, Egypt’s benchmark index (EGX 30) fell by 3.2 per cent, reaching 14,816 points marking the lowest level since last February. On the other hand, the EGX70 index also fell by 1.23 per cent, standing at 733.61 points, according to Al-Ahram.

“The sharp drop in Egypt’s stock exchange is due to what is happening in emerging markets and the exit of foreigners from them”, the head of research at the Cairo-based investment bank Pharos Holding, Radwa Suweifi, told Reuters.

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She added that the “news of the confiscation of funds and business enterprises from the Muslim Brotherhood and then the arrest of Alaa and Gamal Mubarak, in addition to the value of the US dollar and the Egyptian pound, have negatively affected the psyche of the stock market’s traders.”

Last week, Egypt confiscated the assets and properties of some Muslim Brotherhood leaders. The Islamic group was declared a “terror group” by the Egyptian government following the 2013 military coup which toppled the country’s first freely elected president Mohamed Morsi.

On Saturday, Cairo’s criminal court ordered the arrest of ousted President Hosni Mubarak’s two sons, Alaa and Gamal, in addition to other seven businessmen, over charges of “being involved in stock market manipulation.”

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After the arrest, the market capitalisation lost about 22 billion Egyptian pounds from of its value on Sunday, registering EGP 825.08 billion down from EGP 849.64 billion on Thursday, according to Al-Ahram.

“Today’s session is the worst in market losses since the Egyptian pound’s floatation in November 2016,” Suweifi added.

Stocks of Citadel Holding, Talaat Mostafa, Global Telecom, Palm Hills, and EFG Hermes local companies fell by about 8 per cent, while the stock of the financial services Pioneers Holding fell by around 7 per cent.

“There is panic in the market amid tight liquidity,” Ibrahim Al-Nemer, senior consultant at the Cairo-based Naeem Securities Brokerage, said, adding that “any attempts to rise without sufficient liquidity will be doomed to failure.”

What’s happening in the market is not promising for next month’s expected offerings

Al-Nemer stressed.

Egypt’s finance minister, Mohamed Mait, recently announced that the government was seeking to start a programme of offerings in October to raise some 25 billion Egyptian pounds from the sale of shares in four or five public companies on the stock exchange.

The government’s program aims at selling shares of dozens of its own companies in the oil, services, chemicals, shipping, marine services and real estate sectors to support the state’s public finances.

“Is there any sufficient liquidity in the market to accommodate the expected offerings, whether governmental or private?.” Suweifi noted, warning: “We may see postponements of some of the offerings until the liquidity and psychological state of clients improve.”