CAIRO: Egypt’s benchmark CASE 30 index plunged Monday to its lowest close in nearly 13 months, as investors escaped the market amid a deepening US financial crisis.
The index plummeted 5.52 percent – its biggest one-day collapse this year – to close at 7,541.24 points on a trading turnover of LE 1.1 billion.
Traders explained foreign selling spurred retail panic in the session after news of US investment banking giant Lehman Brothers filed for bankruptcy protection, driving foreigners out of the market.
“The collapse of Lehman Brothers – the biggest financial services provider in the US which caters mostly to institutions – decreased exposure in emerging markets, said Karim Hosny, trader at Pharos Securities.
“Regionally, selling was across the board: in Dubai, Abu Dhabi and Saudi Arabia. They all stumbled, and Egypt followed the global sell off.
World financial markets endured volatile trade Monday when Lehman Brothers announced its bankruptcy after the former Wall Street giant – scarred by the subprime mortgage meltdown – failed to find a buyer.
Another Wall Street giant Merrill Lynch, hit also by huge losses from the subprime mortgage meltdown, was forced to sell itself to Bank of America for $50 billion. The deal, which values Merrill Lynch at $29 dollars a share, was also announced on Monday.
Asian and European stock markets tumbled as worries about Lehman counterparty risk and further financial market turmoil sent investors scurrying for safe havens such as gold, according to news reports.
In Egypt, the stock movement bar glittered red all over, indicating stocks were sagging across the board. “People are taking money out of foreign institutions so the institutions have to sell here, Teymour El-Derini, trader at Beltone Financial told Reuters. There is a retail panic coming after that.
Besides the global market turmoil, other internal factors weighed on the Egyptian bourse. “Foreign sentiment has been very negative in Egypt for a while. Inflation is very high, and they [foreigners] are not satisfied by Egypt’s macroeconomic policy, Hosny pointed out.
Upsurges in local energy prices weighed on Egypt’s inflation rates, which hiked to a 16-year high in the year to August at 23.6 percent and is expected to remain high until the end of the year before dropping in 2009.
“Plus, some of the biggest research houses downgraded valuations on Egypt, Hosny added.
Last Thursday, Morgan Stanley downgraded Egypt to underweight from equal-weight, citing a fall in business cycle. “It’s negative news after negative news.
Blue chips led declines on Monday, with shares of Orascom Construction Industries (OCI) stumbling 10.41 percent to LE 303. “GDR [global depositary receipts] shares in OCI were hit hard on Friday, and the stock has been declining for two days, said Hosny adding that OCI posted the session’s biggest trading turnover at LE 195 million.
Shares of regional mobile operator Orascom Telecom also closed in the red, sinking 2.75 percent to LE 43.15. Shares in the company were still reeling from lower-then-expected quarter results as well as a downgrade report by Goldman Sachs, Hosny explained. Both Orascoms together constitute 50 percent of trading on the index.
Shares of big cap Commercial International Bank (CIB) shed 6.65 percent to LE 41.01, while regional investment bank EFG-Hermes lost 6.73 percent to LE 42.52.
Shares of Talaat Moustafa Group (TMG) skidded 8.49 percent to LE 6.36. “Selling was across the board, Hosny said.