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Egyptian stocks rose sharply yesterday on signs that the country was moving ahead with a transition to civil government after the military ousted president Mohamed Mursi, and on expectations for major financial aid from the Gulf.
Egyptian Exchange data showed foreign investors remained net sellers of stocks, and there was tremendous uncertainty over whether the country could form a coherent government capable of addressing economic problems.
But late on Monday, a decree issued by interim head of state Adli Mansour revealed plans for parliamentary elections within about six months, with a presidential vote to follow; the parliamentary polls would be held once amendments to Egypt’s suspended constitution were approved in a referendum.
And a spokesman for the Nour Party, the country’s second-biggest Islamist movement after the Muslim Brotherhood, said it would accept the choice of former finance minister Samir Radwan as interim prime minister. Political sources said Radwan had emerged as the favourite for the post.
These events suggested there was still hope for some form of political accommodation to emerge in Egypt over coming weeks.
“As steps towards forming a new government take place, it reflects positively on investors’ sentiment,” said Mohamed Radwan, director of international sales at Pharos Securities.
But he added, “Foreigners will shy away. With all the violence, it’s difficult to convince them to put money in the market.”
Cairo’s benchmark index rose 3.3%, recouping most of a 3.6% drop on Monday that was triggered by the deaths of at least 51 people in Cairo as the army opened fire.
The index is still down 3.2% year-to-date, but is close to last week’s one-month peak, which was hit in an initial burst of optimism immediately after Mursi was overthrown.
Also helping the market were expectations that wealthy donors in the Gulf would step in to prevent any financial collapse as Egypt sorted out its political situation.
After trading ended, the United Arab Emirates’ state news agency said the UAE would provide a $1bn grant to Egypt and a $2bn loan as an interest-free central bank deposit. An Egyptian source also said Saudi Arabia might lend Egypt another $2bn, which he expected to be confirmed within two days.
This aid will not in itself solve Egypt’s problems; its foreign reserves were at $14.9bn at end-June and were dropping by at least $1bn per month.
But the aid does suggest that after Mursi, Egypt has powerful diplomatic allies which see a strong political interest in keeping its economy afloat.
In the Gulf, Abu Dhabi’s heavyweight First Gulf Bank (FGB) rose 3.4% to an all-time high, helping lift the emirate’s bourse to a multi-year peak as investors bet on strong second-quarter earnings.
Analysts polled by Reuters forecast the bank would in coming days post 6.7% average growth in second-quarter profit.
FGB, with the highest loan growth among UAE banks, is among the top picks for investors, said Ali Adou, portfolio manager at The National Investor. Also, the lender is expected to be included in index compiler MSCI’s emerging markets index, after MSCI decided in June to upgrade the country.
“You’ll see the partial impact of the upgrade this year and the rest going forward - but the momentum will build up,” Adou said.
Abu Dhabi’s benchmark climbed 1.0% to its highest close since October 2008.
Dubai’s index ticked up 0.1% to its highest close since June 20. Trading volume was at its highest in two weeks, though still moderate because of summer holidays.
Investors are awaiting cues from second-quarter earnings to justify Dubai’s 44.4% year-to-date index rise. UAE companies will start announcing quarterly results later this month.
Saudi Arabia’s measure climbed 0.2% but stayed below Sunday’s 15-month high. Petrochemical shares led gains; Saudi Basic Industries Corp (Sabic) climbed 0.5% after announcing 6bn riyals ($1.6bn) or 2 riyals per share in first-half dividends.
In Qatar, Ooredoo, the telecommunications operator formerly known as Qatar Telecom, rose 1.6%, the main gainer on the bourse. Four analysts forecast the firm would post 31.9% average quarterly earnings growth.
Doha’s benchmark advanced 0.3%, up 11.4% in 2013.
Elsewhere, in Kuwait, the index retreated 0.1% to 7,925 points, the index in Oman gained 0.4% to 6,487 points, while the Bahrain index slipped 0.1% to 1,190 points.