Market Report: Egypt stocks plunge 4 per cent on Cairo violence

Exchange sees a second, bigger hit with virtually all stocks taking a pounding as street battles rage on and the economic picture turns yet bleaker

Egyptian stocks deepened their decline on Monday as deadly battles in the capital spun on for a third day, casting new doubts on the country's political and economic stability less than a week before parliamentary elections.
The EGX30 tumbled 4.04 per cent to close Monday at 3,860 points, its lowest level since March 2009. The benchmark index has tumbled 46 per cent since the start of the year.
The losses surpassed the previous day's 2.4 per cent drop, prompted by the outbreak of fatal clashes between protesters and security forces in Cairo on Satursday that have left at least 24 dead.
"The market is not following any sort of rules now -- the drop is driven by the sheer force of the instability that is sweeping Egypt," says Mostafa Badra, a capital markets expert.
Stocks lost around LE10 billion of their market value on Monday, adding to the previous day's LE7 billion losses, according to Badra.
"Even Orascom Construction Industries (OCI), have plunged today despite announcing impressive results," he said, pointing to the performance of Egypt's largest-listed firm which saw its shares frozen for much of the session.
Earlier on Monday, Egypt's OCI reported a 24 per cent rise in profits for the third quarter of 2011, helped by expansion in its construction and fertiliser units.
But such results -- which exceeded experts' estimations -- couldn't save OCI's once valuable stock from shedding a further 2.2 per cent.
Virtually all shares on the exchange followed suit; from the 179 listed, 171 lost value and just 3 made tiny gains -- an across-the-board battering reflected in the broader EGX70 index, which plunged 5.2 per cent.
Low-cap stocks took the biggest hit, but heavyweights like property developers SODIC (down 7.2 per cent) and Orascom Telecom (down 3.9 per cent) also saw serious losses.
Foreign investors continued their exodus from the market, net-selling a total of LE31.1 million in stock to Egyptian and resurgent Arab investors. Total turnover was LE262.9 million, as investors moved to off-load stocks.
As on Sunday, some analysts expressed mild surprise that shares hadn't fallen further and cited the 3,800 point-mark as a vital resistance point.
Badra said it would be wise for investors to hold their positions and count on a likely rebound.
"Trading prices are currently at very low levels and are bound to increase again," he explained but added that the clashes had created intense uncertainty among traders and investors.
"We don't know what caused all this and we don't know how the situation will be resolved," Badra added.
Other economic news was grim, with the Egyptian pound flirting near the LE6 to the U.S. dollar mark, reaching levels largely unseen since the height of the 25 January uprising that ousted former President Hosni Mubarak.
Also, Egypt's five-year credit default swaps, the cost of insuring the country's debt, stood at 525 basis points compared to 466 basis points on 18 November, according to data from financial information provider Markit.
The IMF is projecting Egypt's economic growth to come in at an anemic 1.2 percent this year compared to about 5 percent in 2010.
With key revenue sources hammered the interim government has had to rely on foreign aid, as well as selling treasury bills and bonds to raise money.
But yields on two billion, 266-day, treasury bills auctioned on Sunday surged to 14.7 per cent — significantly higher than the 1.5 per cent interest rate the IMF had requested on a roughly $3 billion loan it offered the government over the summer.
Egyptian officials turned down that offer, but are now re-evaluating it given the climbing yields they are forced to pay to attract interest in their securities.