Egypt's stock market dives in the continued aftermath of Russian plane crash

Sunday 08-11-2015 05:52 PM
Egypt's stock market dives in the continued aftermath of Russian plane crash

A man rests at his desk at the Egyptian stock market in Cairo, November 25, 2012. Egyptian share prices plunge, with the benchmark index losing nearly 10 percent in the first trading session since President Mohamed Mursi ignited a political crisis by expanding his powers. REUTERS/Asmaa Waguih


By Abd Elkader Ramadan  

CAIRO, Nov. 8 (Aswat Masriya) - The Egyptian stock market's benchmark index EGX 30 retreated by 2.58 percent Sunday, the week's opening session, reeling in the aftermath of the Russian plane crash.

The medium and small enterprises index EGX 70 and the broader EGX 100 also both dipped by 3.43 and 2.67, respectively.  

Muhammad Elnagar, the head of research and investment at El Marwa Brokerage believes there are two main reasons behind the dive: the ramifications of the Russian plane crash in the Sinai desert on October 31 and the saving certificates issued by two state banks with high saving schemes, worth 12.5 percent.

The latter cause, Elnagar said, is an indicator of a possible increase in the interest rate.

A return of 12.5 percent is between 2.5 and 3 percent higher than any other available return on a saving scheme in Egyptian banking. 

Elnagar believes the higher interest rates reduce liquidity in the stock market, especially for Egyptian investors who have sustained "great losses" since the start of the year.

The higher interest rate can be a "guaranteed" compensation for these losses, he said. 

Meanwhile, news from Egypt has been making global headlines for the past week because of the crashed Russian civilian flight which disappeared from the radar 23 minutes into a trip from Egypt to St. Petersburg killing all 224 on board.

Although Egypt is leading an investigation committee to identify the cause of the crash, major world powers, the U.S. and the UK have both officially entertained the possibility that the crash was caused by a bomb. 

The American and British statements have sent ripples across the world, and Egyptian airport security has since been under heavy scrutiny. 

On Friday, Russia suspended flights to Egypt, a decision that came on the heels of a British decision to halt flights to the resort city of Sharm el-Sheikh. 

Coming a little over a month after Egypt "mistakenly" killed eight Mexican tourists and four Egyptians in al-Wahat area in the western desert, the Russian plane crash has sparked fears in Egypt on the potential damage it will mean for tourism. 

The Egyptian state has been trying to revive the beleaguered sector, a main source of hard currency, since a popular uprising in 2011 triggered years of political turmoil, taking a heavy toll on tourism.

Egypt has had to postpone a three-year $22 million per year international campaign to promote Egypt as a leading tourist destination because of the Russian plane crash.

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