CAIRO: Egyptian stocks posted their biggest drop in seven months and the pound dipped to its weakest against the dollar in almost six years on Monday as investors grew concerned that political turmoil in Tunisia could spread to Egypt. Traders had been awaiting the reaction of foreign investors to events in Tunisia when European markets opened on Monday. Egypt's weekend is Friday and Saturday and its currency market and stock exchange had been relatively subdued on Sunday. An Egyptian man set himself alight near parliament on Monday morning in an apparent protest against poor living standards, a witness and officials said, echoing a self-immolation that spurred the wave of demonstrations in Tunisia. "It's Tunisia, and then the man setting himself on fire in Cairo this morning," said a trader at a bank in the capital city. "There's some hot money flying out of the market, mainly foreigners selling." Activists throughout the Arab world say they have been inspired by the example of events in Tunisia, which marked the first time in generations that an Arab leader was toppled by public protests. Egypt's government is adamant there will be no large-scale unrest on its watch. But the cost of insuring Egyptian sovereign debt against default rose sharply, with five-year credit default swaps rising 40 basis points to 320 basis points, an 18 month high, according to Markit. The pound traded as low as 5.8263 to the dollar on Monday, its lowest since early February 2005 and down from around 5.7980 on Sunday. The benchmark EGX30 share index dipped 2.2 percent, its biggest decline since June 22, 2010, with index heavyweights Commercial International Bank and Citadel Capital falling 2.7 and 3.3 percent respectively. The index reached an eight-month high early this month but has steadily weakened since then. "There's a bit of a strong market correction, with a catalyst being the contagion factor from Tunisia, especially after the man went to parliament and tried to burn himself," said Mohamed Seddiek, senior research manager at Prime Securities. Saddiek said Egyptian equities were still trading at 11 times estimated 2011 earnings, which seemed quite expensive. An Egyptian Facebook group has called for street protests on Jan. 25, calling it a "Day of Revolution against torture, poverty, corruption and unemployment." "This might be a good buying opportunity," said Seddiek. "People might be angry but ... I believe government reforms, and the gradual removal of subsidies, will continue on track."
