Trading halted on Egyptian exchange over crisis

CAIRO — Trading was halted on the Egyptian stock exchange after its broader index plunged over 5 percent on Tuesday as escalating protests and deadly violence in the capital thrust the nation into its worst political crisis since the ouster of former President Hosni Mubarak.

The move by the Egyptian Exchange came after the plunge on the EGX100 triggered a temporary suspension in trade — a safety mechanism set up by market authorities in the weeks after the uprising that pushed Mubarak from power in mid-February.

The measures were intended to guard against what many, at the time, feared would be the market’s collapse after its reopening more than two-months following the start of the Jan. 25 uprising.

The slide Tuesday was the market’s third consecutive day of declines and reflected the uncertainty about the country’s political future as thousands gathered in central Cairo protesting against the country’s military rulers. The uncertainty has weighed heavily on Egypt’s already stumbling economy, with the country’s five-year credit default swaps — the cost of insuring Egypt’s sovereign debt against default — climbing 25 basis points since Monday to 563 basis points, according to data service provider Markit.

The benchmark EGX30 index was down almost 4.5 percent by the time trading was halted at 1:05 p.m. local time. The exchange said trading was to resume at 1:54 p.m. — a delay longer than the 30-minutes called for under market guidelines. Traders had said put the support point for the benchmark index at 3,800 points, but the market blew past that level with little difficulty early in the day, building on Monday’s 4 percent slide and dragging its year-to-date decline down to over 47 percent.

“We passed the support point, so the only thing that will stop further declines in the market is fixing the political situation in the country,” said Khaled Naga, a senior broker with Mega Investments. “We have to wait and see what happens.”

With the first parliamentary elections since Mubarak’s ouster slated for Nov. 28, the fourth day of clashes between demonstrators and security forces spotlighted the challenges the country faces as it tries to move toward a democratic system.

While far from presenting a united front, the activists massed in Cairo’s Tahrir Square — the epicenter of the uprising that toppled Mubarak — are demanding that the military rulers either immediately hand over power to a civilian administration or set a fixed date for a transition to civilian rule.

The days of unrest have proven deadly, with at least 29 killed across the country, most of them in Cairo. The violence and continuing demonstrations prompted the civilian Cabinet to offer its resignation late Monday. But the move failed to appease the activists who see the civilian government as little more than subservient to the military rulers.

Firmly entrenched in Tahrir Square, the activists issued a call for a million-man rally on Tuesday — a move that had thousands streaming into downtown Cairo and raising the scepter of further clashes and violence even as officials called for restraint from all sides.

But the promise of continued trouble only builds on already growing political uncertainty that has battered the country’s economy.

Naga said the stock market has lost about 180 billion pounds ($30.25 billion) since the start of the year — with most of that linked to the unrest in the country versus the overall global financial concerns linked to the Euro-zone debt crisis and broader fears of recession.

“Yesterday, the losses were about seven billion (pounds) and today, I’m expecting the same if not more,” he said.

The losses marked the 10th consecutive trading session in which the market — one of the worst performing emerging market indices in the world — suffered a slide as a result of Egypt’s tenuous political situation.

Rami Sidani, the Dubai-based head of Middle East and North Africa investments for British asset management firm Schroders, said there is a “very negative sentiment” over Egyptian stocks at the moment. The uncertainties surrounding the country’s political future have triggered a panicked sell-off on the Egyptian exchange, he said.

“There is no discrimination between one company or another,” said Sidani. “Investors are just selling across the board without taking into consideration the value of the underlying assets.”

The declines came as several markets elsewhere in the region extended slumps of their own following Monday’s rout on Wall Street.

The Dubai Financial Market dropped 0.3 percent to close at 1,351 points Tuesday, its lowest level in more than seven years. Saudi Arabia’s main index was trading down 0.4 percent at 6,131 points by mid-afternoon.