Egypt index dips to lowest in two years

Egypt's benchmark index fell to its lowest level in nearly two years on Thursday, the second day of trade since political turmoil closed the bourse for more than seven weeks. But defensive telecoms stocks and dollar-denominated Maridive and Oil Services bucked the trend, helping to cushion the decline as investors bought stocks they believed had now become cheap, traders said.
The EGX30 index lost 3.7 percent to 4,951 points, the lowest level since April 21, 2009. Commercial International Bank, Egypt's biggest listed lender, dropped 4 percent to 31.50 Egyptian pounds, its lowest in a year. Shares in EFG-Hermes, Egypt's biggest investment bank, tumbled 10 percent to 21.41 pounds, its lowest since July 13, 2009.
Index heavyweight Orascom Telecom jumped 10 percent, its biggest single day gain since January 31, 2010. Shares in Mobinil and landline monoploy Telecom Egypt surged 10 percent. Traders said investors were optimistic that Orascom's mother company Wind Telecom would complete its merger with Vimpelcom after Vimpelcom shareholders approved the deal on March 17. Shares in Orascom Construction, Egypt's biggest listed firm, gained 3.2 percent after it announced a plan on Wednesday to buy back 750,000 shares.
Maridive, which rose 8.3 percent, is seen as one of the top picks on the index, with the bulk of its operations outside Egypt and with an oil services industry that is booming.
The EGX30 index lost 12.67 percent over the past two days after the exchange opened on Wednesday for the first time since January 27. The broad index reversed its decline and closed higher at 0.9 percent. It rebounded from lows early in the session, when a 5.5 percent decline prompted the exchange to suspend trade under circuit breaker rules.
Brokers said the decline in share prices was less than forecast. Under the rules, trading is suspended for half an hour if the broad index falls 5 percent. Other circuit breakers prevent the price of any single stock from falling more than 10 percent a day.
The acting chairman of the exchange, Mohamed Abdel Salam, urged investors to buy shares in an interview on state television. "I advised others who have liquidity that crises create billions. If you have any liquidity, hurry, choose and buy. Those who want to invest, grab your chance before the market rises. The market is very promising."
A sell-off by foreign investors could also put renewed pressure on the currency, but bankers said that because it takes two days to settle stock exchange trades, any increase in cash flows out of the country would not be felt until Monday. The Egyptian pound slid on Thursday to its lowest level since January 2005, but later regained some ground after foreign investors bought pounds to invest in the stock exchange, bankers said.