x Abu Dhabi, UAESaturday 22 July 2017

Egypt takes a breather on Mubarak concerns

What's down Many prognosticators picked Egypt to have a breakout year. So why has its benchmark index declined more than any other in the region so far this month?

Many prognosticators picked Egypt to have a breakout year. So why has its benchmark index declined more than any other in the region so far this month? It turns out that institutional and foreign investors remain bullish on the country, but retail investors are selling over concerns about the health of Hosni Mubarak, the Egyptian president, and disappointing news from the country's fixed-line telecommunications monopoly.

The EGX 30 Index is down 3.1 per cent this month, despite positive gains yesterday. "The market in Egypt is usually driven by the retail market and this has been true, particularly over the past few trading days," said Angus Blair, the head of investment banking at Beltone Financial Bank in Cairo. Most of the selling was related to fears about the health of Mr Mubarak, who is recovering from gall bladder surgery, and disappointing earnings from Telecom Egypt, which said on Monday it was proposing a reduced dividend and delaying the launch of an undersea cable until the second quarter.

The north cable, which is to run from Egypt's Mediterranean coast to Marseille in France, was due to be completed by the end of last year. Tarek Tantawy, the chief executive of Telecom Egypt, also said the company expected little growth in its fixed-line unit. "I do not see the customer base going back to 11 million in 2009 - I expect some additions because of new households but nowhere near the 1.5 million or 2 million [lost in 2009]," Mr Tantawy told Reuters.

Despite the recent stumble in share prices, analysts from Bank of America recently wrote the bank remained bullish for the long term on Egypt. They noted the country "stands tall to the GCC", thanks to its "under-penetrated domestic market, small systemic risks and strong banking sector". Mr Blair echoed that view. He said he expected foreign direct investment to reach as much as US$10 billion, the highest in Africa this year, and noted that the loan-to-deposit ratio for Egyptian banks was about 53 per cent. Most UAE banks are at twice that level.

"After a strong run, the Egyptian market needed to take a pause, so a correction was actually quite welcome," Mr Blair said. @Email:breagan@thenational.ae halsayegh@thenational.ae