DUBAI: Egyptian shares posted their largest one-day percentage gain in more than a year yesterday after the army ousted former president Muhammad 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. EFG recently said it would sell its non-core assets after a planned tie-up with Qatar’s QInvest fell through in May because it failed to get regulatory approvals from Egypt’s government.
Pharos Holding upgraded its recommendation on the stock to “strong buy” and said it would update its fair value estimate for the shares to 25.60 pounds as soon as full political and economic stability was restored.
Investors are also hopeful the new government could secure a long-awaited $4.8 billion 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.
Many analysts said that given the uncertainties, including whether elements of Mursi’s Muslim Brotherhood might resort to violence, it was too early to assume the economy would improve.
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.”
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 UAE companies are likely to report toward the end of July.
