Markets appear bullish on El Sisi

In 2014, the Egyptian bourse underlined the link between politics and economics

Egypt’s stock exchange outdid every other index in the Middle East and was the fourth-best performer in the world. Mohamed Abd El Ghany / Reuters
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Life in Egypt since the 2011 revolution has been difficult. Political turmoil, regular protests, lack of security and stability and deep uncertainty have been hallmarks of daily life and have affected the markets. It is encouraging therefore to see, as The National reported yesterday, that the Egyptian stock exchange is doing better going into 2015 than it did at exactly the same time a year ago.

And not just better: Egypt’s stock exchange outdid every other index in the Middle East and was the fourth-best performer in the world. In many ways, this is a return to form. For many years leading up to 2011, Egypt’s GDP growth was extraordinary, averaging more than 7 per cent. The revolution destroyed that but the economy is now growing again, if only gradually – the third quarter of 2014 saw growth of just 1.1 per cent – although the IMF has forecast growth of 3.5 per cent this year.

Clearly, growth is what investors are betting on. But the bourse’s excellent showing also reveals a change in sentiment towards the new political leadership ever since Abdel Fatah El Sisi was elected as president in June. A look back at the trajectory of the Egyptian stock exchange across 2014 appears to confirm this analysis. The bourse gradually rose in the first two months of the year but this accelerated once elections were called in March. The two peaks in the first half of 2014 came either side of the May election and the index’s 2014 high came at the end of September – just as Mr El Sisi, who was ending his first 100 days in office, met the US president for the first time. This signalled to the markets that relations between the two countries were back on track.

All in all then, the markets appear to be confident enough that stability and growth will return to the Arab world’s largest country. The countries of the Gulf will be pleased, too – it is they, after all, who have provided billions of dollars in aid and investment to stimulate Egypt’s economy. The Saudis and the Emiratis took a big bet on Mr El Sisi putting Egypt’s financial house in order. It appears that the markets, at least, believe that bet will pay off.