Egyptian stock market plunges amid heavy selling

Tuesday 10-11-2015 03:06 PM
Egyptian stock market plunges amid heavy selling

A trader watches his monitor at the Egyptian stock exchange in Cairo April 1, 2014. REUTERS/Mohamed Abd El Ghany


CAIRO, Nov. 10 (Aswat Masriya) - The Egyptian stock market dived on Tuesday for the third day in a row with the benchmark index EGX 30 dropping by 4.4 percent.

EGX 30 experienced a steep drop within the first 30 minutes of trading, amid heavy selling by foreign traders and Egyptian financial institutions.

The middle and small enterprises index EGX 70 and the broader EGX 100 both dipped as well by 3.84 and 3.4 percent, respectively.

The Egyptian stock exchange administration has had to suspend trading on more than two dozen stocks for half an hour each for exceeding the 5 percent drop allowed in a single trading session.

The suspended stocks include blue chip stocks like Emaar Misr and several stocks from the tourism sector including the Egyptian Resorts Company and Sharm Dreams Company for Tourism Investment.

Over the course of the two previous stock market sessions held this week, EGX 30 fell by more than 5 percent, as Egypt continues to grapple with the ramifications of the Russian plane that crashed in the Sinai desert on October 31.

Some of the hardest hit stocks in trading on Monday were from the tourism and resorts sector, with fears abounding on how the plane crash might impact the Egyptian tourism industry.  

The effect of the Russian plane crash on the stock market was immediately felt in the week following the catastrophe.

The benchmark had inched upwards 1.7 percent last week. But international developments such as decisions restricting flights to Egypt, and the U.S. and UK officially entertaining the possibility that the crash was caused by a bomb have placed Egyptian airports under heavy scrutiny.

Muhammad Elnagar, the head of research and investment at El Marwa Brokerage previously cited the saving certificates recently issued by two state banks with high saving schemes, worth 12.5 percent, as another reason for the market dip.

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 told Aswat Masriya he 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.

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