Egypt bourse to resume trading today as Gulf stocks tumble

DUBAI, Feb 28 (Bloomberg): Egypt's bourse, shut for a month because of the popular uprising that ousted President Hosni Mubarak, will resume trading tomorrow as unrest in Libya and Oman is causing stocks in the region to tumble. Dubai's benchmark DFM General Index plunged 4.5 per cent to the lowest intraday level since June 2004 at 1:19 pm in Dubai. The GCC200 Index of companies in the Persian Gulf has lost 10 per cent since Jan 27, the last day shares in Egypt traded. Global depository receipts of Orascom Construction Industries also slid. "The market should have opened much earlier," said Walaa Hazem, who helps manage $1 billion in Egyptian equities and fixed income as vice president for asset management at HC Securities & Investment in Cairo. "Locking people's money is something very bad. This will put selling pressure on the market, in addition to the regional turmoil and the economic slowdown." Unrest in the Middle East and North Africa has also spread to Bahrain, Algeria, Morocco, Jordan, Iraq and Yemen. While trading has been suspended, the heads of some companies with ties to Mubarak's regime, such as Ezz Steel, have been put under investigation on fraud charges. Finance Minister Samir Radwan said Feb 12 the popular uprising may slow economic growth this fiscal year to about 4 per cent compared with an earlier estimate of 6 per cent. Egypt's Financial Supervisory Authority, which regulates financial markets, said on Feb 19 it will limit daily share price movement to 10 per cent, lower the cash reserve requirement for brokerages to 5 per cent of their capital from 10 per cent and reduce the trading session to three hours from four. Ziad Bahaa El-Din, the agency's chairman, resigned yesterday, according to a cabinet statement. The political turmoil raised borrowing costs, with yields on treasury bills hovering around two-year highs since Mubarak's Feb 11 resignation. Egypt yesterday sold 2 billion pounds ($340 million) in 91-day bills and 3 billion pounds in 273-day notes in an auction, falling short of its 3.5 billion pound goal, according data on the ministry of finance's website. Samy Khallaf, Radwan's public debt adviser, declined to comment. "The high yields, especially on the longer-term notes, are a big concern because the government is becoming unable to cover its intended issuances," said Moustafa Assal, managing director of Cairo-based Beltone Financial's fixed income unit. "They will not come down unless there's political stability." The yield on Egypt's 5.75 per cent dollar bond due 2020 has dropped 32 basis points to 6.89 percent since reaching a high of 7.21 per cent on Jan 31, according to data. That compares to a yield of 5.16 per cent at the beginning of the year. The cost of insuring government debt against default fell 6 basis points to 366 at the close in London on Feb 25, according to CMA prices for credit-default swaps. It reached the highest since April 2009 of 442 on Jan 31. Public prosecutors have referred executives of some companies to trial on charges of corruption. Apart from Ahmed Ezz, who is chairman of the country's biggest producer of the metal, the list also includes Yasseen Mansour, chief executive officer of Palm Hills Development SAE, a Cairo-based real-estate developer. Both companies have said their operations are run independently of the chairmen. Ezz was cut to "sell" from "neutral" at investment bank EFG-Hermes Holding SAE, which also lowered Palm Hills to "neutral" from "buy." The global depository receipts of Orascom Construction Industries, Egypt's biggest publicly traded builder, dropped 1.8 per cent in London, bringing the drop since Jan 27 to 12 per cent. Orascom Telecom Holding SAE, the country's largest mobile network operator by subscribers, lost 6.1 per cent today. Some industries, such as food and telecommunications, will be in a "better position" than others when the market opens, Hazem said. "People are still going to eat and talk on the telephone," he said, singling out fixed-line operator Telecom Egypt. Commercial International Bank, National Societe Generale Bank SAE and Credit Agricole Egypt SAE "won't have good growth stories but they have strong balance sheets." EFG-Hermes dropped 3.6 per cent, bringing the decline since Jan 27 to 11 per cent. The investment bank was cut on Feb 18 to "neutral" from "overweight" at HSBC Holdings Plc.