A general view of brokers working at the Egyptian stock exchange in Cairo.
DUBAI: Egyptian shares posted their largest one-day percentage gain in more than a year yesterday after the army ousted former president Mohammed Mursi and an interim president was sworn in.
Cairo’s index rose 7.3 percent, trimming its year-to-date losses to 2.3 percent. It was the biggest one-day surge since June 25, 2012, the day after Mursi was declared the country’s first democratically elected president.
This week’s rebound has erased sharp losses during June that were triggered by severe political unrest. Although the country still faces huge political and economic challenges, many investors feel Mursi’s ouster could lead to a more technocratic government which addresses issues such as a sliding currency and ballooning state budget deficit.
“The technocrats will know how to deal with institutions - they will help the country financially because they have a clear agenda,” said Sebastien Henin, portfolio manager at The National Investor, an Abu Dhabi-based investment firm. “There will be a definitive change to the business environment for international and domestic investors.”
Some analysts began to revise their outlooks for companies that were perceived to suffer for political reasons under Mursi’s administration, or were hit by a falling currency and fuel shortages. EFG Hermes, one of the largest investment banks in the Middle East, rose 10 percent to 8.73 pounds.
Investors are also hopeful the new government could secure a long-awaited $4.8bn emergency loan from the International Monetary Fund, which may be necessary to prevent an uncontrolled slide of the Egyptian pound.
This could remain difficult in coming months, however, as the IMF may prefer to negotiate the politically sensitive deal with an elected government - and it is not yet clear when the next elections will be held.
Fabio Scacciavillani, chief economist at Oman Investment Fund, a sovereign wealth fund, said the next government might be more willing to push economic reforms. But he added, “Economic consequences are hardly predictable. The horizon is clouded.”
In Saudi Arabia, banks helped lift the index 1.1 percent to its highest level since April 2012. A positive start to the second-quarter earnings reporting season buoyed sentiment across the market. Saudi Investment Bank climbed 2.0 percent after posting earnings; quarterly profit rose 44 percent compared with the same period last year.
“The initial reaction has been positive in the banking sector and we need to see signs of future profitability to invest for the longer term,” said Abdullah Alawi, assistant general manager and head of research at Aljazira Capital, adding that the market overall was fairly priced.
Top lender Al Rajhi Bank rose 1.3 percent to a one-year high after it announced a SR2.25bn ($600m) dividend payout for the first half.
Heavyweight chemical maker Saudi Basic Industries Corp climbed 1.4 percent and retailer Fawaz Abdulaziz Alhokair advanced 2.4 percent. The latter has operations in Egypt.
Elsewhere in the Gulf, markets were thinly traded and moved within a tight range in a typical summer lull. Earnings announcements in Qatar will start next week, while United Arab Emirates companies are likely to report towards the end of July.
Reuters
