The Egyptian exchange’s EGX30 index closed 5.8 per cent higher on 29 November while the EGX100 rose 5 per cent following a peaceful day of voting in which residents of Cairo and Alexandria went to the polls to elect representatives for Egypt’s Parliament.
The uplift is significant as it follows several months of poor trading. Before the elections began the EGX30 was down almost 48 per cent since the start of 2011 following huge protests beginning in January that led to the ousting of long-time President Hosni Mubarak in February.
“[Monday] was quite a significant day,” says a Cairo-based banker. “Everything went smoothly. After the violence of last week and the downgrade, many economists have been pessimistic. But things have turned around.”
On 24 November Egypt’s sovereign credit rating was downgraded from BB- to B+ by US’ based rating agency Standard & Poor’s. The agency said heightened political transition risks put the country’s rating on a negative outlook.
The markets were particularly volatile in the two weeks leading up to the first day of voting. According to a Cairo-based economist, “We had 10 consecutive poor sessions due to the Tahrir violence. Foreign and local investors were pulling their money. The media reported on it and it created a mania. It was close to post-Lehman Brother collapse standards. When the market dropped to the lowest level since the 25 January revolution, this was a 3-4 year low for Egypt.”
“We were pessimistic over the weekend. We expected big protests on Friday and the possibility that the elections would be postponed. Monday was salvation day. Polling went very smoothly. In a single day we saw the best performance of the index in the past two years.”
But some analysts have indicated that the gains from the spike in trading may not hold. “Stability is needed in the long term,” says the banker. “For investments to happen there needs to be a government that is able to take decisions and [put] stability in place.”
Meanwhile in Tahrir Square protestors continue to congregate to demonstrate against the continuing presence of the Supreme Council of the Armed Forces (SCAF) in the interim government. Protestors have referred to the appointment of Kamal El-Ganzouri as Prime Minister until the elections have been completed as proof that Mubarak’s old regime still exerts control.