Egyptian shares have fallen by more than 40 per cent since the start of the year, unsettled by the repercussions of the uprising that eventually ousted Hosni Mubarak from the presidency in February.
While stocks on the exchange are now the cheapest in the region, Credit Suisse has advised against a rushto Egyptian equities.
Shares on the Egyptian Exchange are trading at 5.7 times earnings, but that performance is at risk from political uncertainty, said Ahmed Badr, an analyst at the Swiss investment bank, in a note to clients. Although Egypt's supreme military council approved amendments to the election law last week and set the start of voting for November 28, friction between political parties and the military council could prolong the country's period of interim governance, spur more unrest and slow economic recovery, Mr Badr said.
An unstable regulatory environment as a result of ongoing legal disputes between the state and private investors has contributed to private investment falling 34.8 per cent in the third quarter from the same period last year. The trend is forecast to continue for several quarters, Mr Badr said.
Because of an increased outflow of capital, foreign direct investment turned negative in the third quarter versus a US$1.7 billion net inflow in the same period last year.
Tourism revenue, the cornerstone of Egypt's economy, declined 45 per cent in the third quarter compared with this year's second quarter. That decline is likely to hurt GDP growth and the country's current-account deficit.
Egypt's currency depreciation could put further pressure on central bank reserves, which have shrunk by about $12bn since January, Mr Badr said.
The unemployment rate after the revolution shot up to 11.8 per cent in the second quarter, from 8.9 per cent in the fourth quarter of last year. A decline in public and private investment as well as falling foreign direct investment are expected to keep unemployment high in the medium term, Mr Badr said.