CAIRO: President Barack Obama touches down in Cairo this morning, facing an abundance of high expectations and needing to address a region in a state of economic crisis.
While much of the business news coming out of Iran, Afghanistan, Gaza, Lebanon, among others, has not been very positive recently, Obama is arriving at a time in which the Egyptian economy seems to be on a relative upswing.
But is Obama’s visit playing any role in driving up the market, boosting various industries, and lifting the hopes of businessmen and investors?
The answer, of course, isn’t clear cut, but one thing is for certain, the stock market has been rallying in recent weeks.
Just last Thursday, the EGX 30 Index opened around 5,665 and was trading just below 6,200 at midday yesterday.
It ended the day down slightly at 6,174.25 points.
Investors in the Egyptian market took profits on Wednesday after recent sharp rises took the benchmark index to near-eight month highs, while Ezz Steel and Ghabbour Auto add to gains, Reuters reported.
“It’s a very temporary profit-taking period, Sara Shadeed from CIBC Brokerage told Reuters. “Some of the buying pressure we’ve witnessed over the last couple of days has obviously instigated some short-term trades.
The index has gained 34 percent since the start of the year.
Starting late February, Egypt’s bourse had investors optimistic with an 11-week rally that has since tapered off slightly. On Feb. 24, the stock market closed at 3,473 points, and since then, it has surged more than 60 percent.
While recent rally can’t fully, if at all, be attributed to Obama’s choice of Egypt for his speech to the Muslim world, it’s not to say the president’s visit isn’t helping.That’s not to say the president’s visit isn’t helping.
“From my perspective, politics always have an impact on the markets, said Walaa Hazem of HC Brokerage, adding that historical evidence shows that markets rise and fall on the fortunes of governments and political events.
But Hazem is quick to note that Obama is only a contributing factor to what’s been a robust rally.
“The market has been performing well, Hazem said, “since it hit bottom on Feb. 5. So it is not a phenomenon associated with this week only.
US market history, itself, lends evidence that Obama isn’t capable of driving markets based on optimism over his presidency alone. When Obama took the oath of office on Jan. 20, the Dow Jones closed just below 8,000.
The market continued to slide precipitously in the wake of his inauguration. After almost two months in office, the Dow bottomed out around 6,500, having lost almost 20 percent of its value.
The Dow has since clawed its way back, just as the Egyptian market has done, climbing in late April to levels exceeding Obama’s inauguration day numbers.
Analysts are quick to note a number of reasons that the Egyptian market has performed well in the last couple of weeks. It’s clear from what they say that Obama isn’t a leading cause.
“I believe the main trigger for the market is a hike in oil prices, said Hazem, who noted that Arab markets traditionally react positively to increases in oil prices because of the liquidity it brings to the region.
When asked whether Obama’s visit deserved credit for boosting the economy, Sherif ElKholy of Actis investment firm echoed Hazem’s opinion.
“Not really, he said. “I think it has to do with rebound in the oil price and the fact that many stocks have been over penalized.
But the complex engine of the Egyptian economy suggests that there are other reasons for the market gains too.
“We’ve seen a lot of foreign buying in the market over the past two weeks, which we hadn’t seen until now in this rally. And we had news on the Mobinil saga, which lifted telecoms on Sunday, said Simon Kitchen of investment bank EFG-Hermes.
The Egyptian economy was not impacted by the global economic recession in the same way that many of the developed country’s economies were.
Many analysts were quick to note that industry held up better in Egypt, though the country did take hits in tourism and Suez Canal revenue.
And Egypt’s economic comeback from its moderate slump has been strong.
If President Hosni Mubarak wants to make the case for Egypt as a regional leader, there are few better places to look than the economy.
Though many in the financial world are loathe to credit Obama’s visit with giving the Egyptian economy a boost, his trip is important economically for other intangible reasons.
Most importantly, is that political stability is sine qua non for economic growth. Should the president be able to advance peace in the region, economies throughout the Middle East would benefit.
His visit may also contribute to sense of Egypt as a regional leader, which might inspire confidence among Egyptians, causing them to adopt a more bullish stance on their investments.