Stock market ups and downs
BY AMIRA SALAH-AHMED
Cairo: After spending the opening months of 2012 as one of the best performing markets in the region, Egypt’s stock market has reversed its upward trend, affected once again by an uncertain and consistently faltering political landscape.
At the start of the year, the market seemed to be recovering from its sharp slide in the tumultuous year of 2011, as investors gained confidence that a solid transition process was in place that would lead up to an elected parliament, a new president and a fresh constitution.
Once parliament was seated in late January — even as protesters marked the anniversary of the uprising with marches and demonstrations against continued military rule — the market was buoyed by an optimistic outlook for the year ahead. The key to their confidence: transitioning swiftly to civilian rule thus leading to a stable investment environment.
On December 28, 2011, the main EGX 30 index was at 3,586 points, down from 5,628 just six months before. As the new year arrived, it steadily rose and continued to do so until March 6 when it peaked at 5,428 points.
It spent a few weeks fluctuating, until it took a sharp drop to 4,558 points on April 10, when a court disbanded the initial constituent assembly after liberals walked out in protest at the over-representation of Islamist forces in the 100-member body tasked with drafting the constitution.
A similar scenario is being replayed now to the detriment of both the transition process and, in turn, the overall economy — and of course, investor confidence.
In early May, the market faced further downward pressure as the disqualification of Salafi presidential hopeful Hazem Salah Abu Ismail spurred anger and protests, and a march to the Ministry of Defense that ended with a violent crackdown by army personnel. Droves of protesters were arrested and faced military tribunals, which led activists to call for a hunger strike on May 20.
On that day, with the first round of the presidential election just three days away, the EGX 30 recorded another sharp dip to 4,791 — not unsurprisingly since the coming election seemed more troublesome than hopeful, signaling investors’ lost faith in the political process resulting in a solid course toward transition.
As round one approached, there was some buying into the market, a trend that abruptly ended after the results were announced. Ahmed Shafik, seen as a member of the ousted regime, and Mohamed Morsi, the face of the Muslim Brotherhood’s Freedom and Justice Party, would be the top two winners.
The more “revolutionary” candidates — Abdel Moneim Abol Fotoh and Hamdeen Sabahi — were left to wonder what may have been, had they teamed up and run on one ticket.
Since May 24, the second day of round one, the benchmark index has taken a steady southward dive, and is currently playing around the 4,500 point mark. Granted, it’s still 22 percent over where it was last year.
In the meantime, the constituent assembly, though named, is still controversial, parliament is seen to be inefficient, and Egyptians are occupying that awkward space between an Islamist-dominated political sphere and a return to the old regime.
Where do investors fit in? They are waiting and seeing, as they have been since the January 25 uprising. The difference now is that a stable investment climate is a not guaranteed side-effect of a transition to civilian rule, with a nation more polarized than ever.
The importance of investors is not to be ignored, not necessarily in the stock market (which is still plagued by quick-cash strategies), but in the overall economy which continues to suffer deficient public spending and relies on private sector investments to create much-needed jobs.
Grants and loans to Egypt are in the pipeline, but have been backlogged until a more productive government is in place. Foreign investors await a regulatory framework invulnerable to sudden and arbitrary policy changes. And of course, Egyptians are anxious over the outcome of a presidential election that couldn’t be further away from their revolutionary dreams just months ago. –The Egypt Monocle