By MAGGIE HYDE
2014-01-07 03:22 AM
CAIRO (AP) -- Egypt's stock market completed a year of consistent growth this December, despite serious security issues, nearly 13 percent unemployment, rising prices and ongoing unrest.
By mid-December, the Egypt's main stock index, the EGX30, closed at the highest point since Jan. 24, 2011, the eve of the popular uprising that deposed former President Hosni Mubarak. Though the country has yet to recover from the broader economic losses from three years of unrest, investors have responded favorably to the military-backed interim government that came to power after a coup deposed former Islamist President Mohamed Morsi in July.
"The bullish trend that we have been seeing has mostly been changing by the sentiment politically," said Wael Ziada, head of research at EFG Hermes, one of the largest investment banks in the Middle East. "That sentiment is driven by local events."
Ziada said most local investors are optimistic about the military rule and would respond positively should Defense Minister Gen. Abdel-Fattah el-Sissi run for the presidency. That has been widely speculated in local media, though the general himself hasn't said definitively whether he would contest.
A referendum on the draft constitution is scheduled for Jan. 14-15, and if it's peaceful, has a good turnout and presidential elections are scheduled for soon after, Ziada said the main index likely will continue to rise.
"I think the market is watching the political timetable anxiously," Ziada said.
The market also welcomed the $5 billion promised by Saudi Arabia and the $3 billion promised by the United Arab Emirates the day after Morsi's ouster, which has helped the country strengthen its flagging currency, the Egyptian pound. The two Gulf countries moved quickly to support the interim government and its coup against the Muslim Brotherhood-backed government.
This aid has helped bolster the country's foreign reserves, which are needed to pay for vital imports but also used to prop up the pound.
The interim government also is moving forward with a massive development project planned along the Suez Canal. Prime Minster Hazem el-Beblawi announced on Monday that 14 international companies have qualified for the contract and that a winner will be announced within the year.
But for many Egyptians, the rise in the market shares has not alleviated the problems they face, including inflation and unemployment.
Near-daily clashes continue in the capital and major cities, the military government has issued a law banning protest without a permit and a crackdown continues to target members of the Muslim Brotherhood, of which Morsi was a leader. If Sissi does run for president, many activists worry that the country will be under oppressive military rule similar to that of Mubarak, who kept the country under emergency law for nearly 30 years.
The market clearly prefers military rule, Ziada said, though it has largely stopped responding to clashes and violence.
This August, in the week following security forces' violent dispersal of sits-in that killed at least 288 Morsi supporters, the country's two main stock indexes rose about 10 percent.
"People have gotten used to different political noises, and can differentiate between the clash and something bigger," said Angus Blair, founder of Signet Institute, a research institute on Middle East markets.