Cairo bourse opens after 7 weeks

The Cairo stock exchange clawed back some of its early losses but still closed sharply lower on Wednesday, the first day of trading in seven weeks that laid bare economic jitters as Egypt moves towards elections following a popular revolution.

The main EGX-30 index shed an initial 9.93 per cent to 5,085.63 within little more than one minute of reopening, prompting officials to suspend trading for half an hour in line with emergency regulations.

It rebounded slightly to close down 8.92 per cent at 5,142.71.

The index had been widely expected to fall, with investors concerned by economic turmoil and labour unrest wrought by the uprising that forced president Hosni Mubarak to resign on February 11 after 30 years in power.

On January 27, the bourse fell 10 per cent after 70 billion Egyptian pounds ($11.9 billion) was wiped off shares in 48 hours.

If the reopening had been delayed further, Egyptian companies would have been excluded from the Morgan Stanley Capital International Index, forcing foreign investors to sell their stakes at the earliest possibility.

Egyptian transition authorities tried to encourage investors not to sell.

"Keep your nerve. Don't sell en masse. All indicators say that the economy will recover quickly," Finance Minister Samir Radwan told state television minutes before trading began.

He had recently acknowledged that authorities were reluctant to open the bourse earlier, because the country's affairs "had not improved as much as we had imagined, although things are improving every day."

"It's in your interest not to sell. Be patient. God looks after those who are patient," said the market's interim chairman, Mohammed Abdel Salam.

Economic confidence in Egypt has also been hit by sweeping corruption investigations. On Tuesday, ex-finance minister Yussef Boutros Ghali was the latest to be referred to a criminal court to face charges.

The reopening comes just four days after Egyptians voted overwhelmingly in favour of constitutional amendments, paving the way for parliamentary and presidential elections within six months.

Investment bank Hermes predicted the bourse could fall 20-30 per cent in the first few weeks of trading and would recover slowly, depending "on the pace of political developments and the extent of economic recovery."

"We do not expect the Egyptian market to perform as poorly as Pakistan did in late 2008, when the Karachi Stock Exchange reopened after a de facto closure of nearly 60 days, only to fall more than 40 per cent," it said.

"Nor do we expect the strong rebound seen in Pakistan to be repeated in Egypt -- there will still be an FX overhang, in our view, and the global liquidity environment is becoming gradually less favourable."

A resumption of trading was postponed five times since closing two days into the 18-day uprising that forced Mubarak out of office.

In efforts to stabilise the index, authorities have announced that for the first week the market will only function three hours a day, instead of four.

State news agency Mena had reported that trading would be suspended until further notice if the index fell 10 per cent.

Market chairman Khaled Siam resigned on Monday, and Prime Minister Essam Sharaf decreed that Abdel Salam would take over for six months.

Government bourse adviser Hani Sarie-Eldin said on the cabinet's Facebook page that government organisations will work to boost the market by buying shares using surplus from budgets.

Follow Emirates 24|7 on Google News.