CAIRO, (AP) – Egypt’s benchmark stock index tumbled more than 5 percent early Wednesday, with local investors fleeing the market a day after massive protests engulfed the capital and other Egyptian cities in what became one of the most serious challenges to the government in years.
The drop offered a front-row perspective into potential challenges confronting Egypt and its efforts to appease investor concerns in the wake of the unrest in Tunisia earlier this month that led to the ouster of that nation’s longtime president.
The Egyptian Exchange’s benchmark EGX30 index was down almost 5.3 percent to 6,367.27 points by about 1:30 p.m. local time. The drop was the sharpest since May, when the index fell slightly over 6 percent, according to traders. The session was the first chance investors had to react to the protests on Tuesday, a national holiday honoring the police force.
“The market opened in a panic,” said Ahmed Hanafi, a broker with Guthour Trading. “It’s been a while since we’ve seen these numbers. The reaction on the market has been very negative to the protests.”
The declines hammered all sectors, with the exchange’s Web site showing only five companies posting gains in light trading. Meanwhile, the share prices of another 174 companies fell, led by El Shams Housing and Development and chemical manufacturer Kafr El-Zayat Pesticides, which saw their stock shed 12.31 percent and 11.94 percent, respectively, according to Zawya, a regional business information service.
Shares of the Egyptian Financial and Industrial Company were down 10 percent, to 16.17 pounds while Faisal Islamic Bank of Egypt was down 8.53 percent to 20.27 percent.
The drop came a day after tens of thousands of Egyptians took to the streets, clashing with riot police in a protest modeled after the uprising in Tunisia that toppled that North African nation’s longtime president. The violence in Egypt claimed four lives — two protesters and a policeman died Tuesday while a third protester died Wednesday of injuries sustained the previous day. Another 250 people injured.
The demonstrations were the most serious challenge the government of President Hosni Mubarak has faced in years, and were fueled by growing dissatisfaction in the Arab world’s most populous nation with what critics note is a growing disparity in income distribution, poor or inadequate social services and rampant corruption.
The 82-year-old Mubarak, who has ruled Egypt for roughly 30 years, has built his legacy on the country’s political stability and role as a close U.S. ally. But many Egyptians complain that the ambitious economic reforms that have led to economic growth rates of over 7 percent in recent years have failed to trickle down to the masses and that the government has done little to address crippling poverty in the country.
Egyptian officials have predicted that the economy will grow by about 6 percent in the fiscal year ending in June, continuing a rebound in the post-global financial meltdown period. Mubarak’s government has pointed to these figures as evidence of the country’s appeal to investors and its continuing success in improving the overall standard of living in the country through enterprise development and job creation.
But Egyptians, weary of seeing their pay increases eclipsed by almost immediate hikes in food and commodity costs, argue that there has been little trickle down effect from the reforms launched in 2005 and largely guided by Mubarak’s younger son, Gamal, who is seen as a likely successor to his father. Roughly 40 percent of the country’s 80 million people live on or below the World Bank delineated poverty marker of $2 per day.
With presidential elections months away, Mubarak, who has yet to say whether he will run for a sixth term, has stressed recently that his administration was focusing its sights on improving the economic situation for the country’s neediest citizens.
Officials, however, have grown concerned that Tunisia uprising would have a ripple effect in the region, panicking investors who would see parallels with Egypt — another Arab country ruled for decades by the same man where freedoms have been trumped by a desire from the regime to stay in power. Egypt’s industry and commerce minister, Rachid Mohammed Rachid, who also currently oversees the investment ministry portfolio, said Sunday that the situation in Egypt is different than in Tunisia. But he conceded that concerns about Tunisia could affect investor interest in his nation.
The drop in the market Tuesday, however, offered indications that foreign investors were yet to be frightened off.
Hanafi, the broker, said most of the selling was on the part of Egyptians while foreign investors were seen bargain hunting.