Egypt Paper Plunges On Latest Stock Market Reopening Delay, 266 Day Bond Hits 12.47% Following Partial Auction Failure

Tyler Durden's picture

Remember when Egypt said that March 6 is the latest, guaranteed stock market reopen, or else? Well, the day has come and gone, and no Egypt stock market (all those who have been buying the EGPT ETF are forgiven for feeling like total idiots right about now). What however is trading are Egyptian bonds, which have plunged as a result of the ongoing total and complete chaos in the revolutionary country, which is now seeing a second wave of reactionary violence as fighting escalates between the police and protesters in Alexandria. As BusinessWeek reports: "Egypt’s borrowing costs are rising to the highest in more than two years
and stocks listed overseas are tumbling as the Cairo exchange’s
five-week shutdown and new rules on shareholder disclosure keep
investors away. The Ministry of Finance sold 3 billion pounds ($509 million) of bonds
yesterday, 1.5 billion pounds less than planned, as yields on 266-day
notes climbed 31 basis points from the last auction to 12.47 percent
data compiled by Bloomberg show. Global depositary receipts of
Commercial International Bank Egypt SAE sank 15 percent in London last
week to the lowest level since July. Orascom Telecom Holding SAE traded
5.2 percent below its Jan. 27 close, when the Egyptian Exchange shut
down." Our advice: don't expect Egypt to reopen any time soon, and certainly not before the situation in Libya is under control, which won't be for a long time. In the meantime the flight to safety trade (read gold, silver and crude) is raging overnight. And if and when it reopens, look for nothing less than freefall: "The EGX30 may drop another 10 percent when it eventually reopens, said
Slim Feriani, London-based chief executive officer of Advance Emerging
Capital Ltd., which manages $750 million in frontier and developing
nation stocks including Egyptian shares."

From BusinessWeek:

Egypt’s bourse delayed indefinitely the reopening planned for yesterday citing the resignation of Prime Minister Ahmed Shafik in a March 3 statement. Regulators said last week they may require investment funds to disclose their shareholders as part of a probe of officials linked to ousted president Hosni Mubarak. The new rules and the bourse’s closure are deterring foreign funds and may spur selling when trade resumes, according to F&C Asset Management Plc and ING Investment Management.

“The fact that Egypt’s market is not open today is a very big negative, especially as we do not have an idea of when it may reopen,” Ahmed Talhaoui, the Abu Dhabi-based head of investment at Royal Capital PJSC, which is 44 percent-owned by United Gulf Bank BSC, an investment bank in Bahrain, said in an interview yesterday.

Egypt risks becoming “a pariah of an investment destination,” said Jeff Chowdhry, the London-based head of emerging-market equities at F&C, which oversees about $163 billion worldwide. “If they value foreign investment in their stock market, they should get that market open immediately and take off any restrictions in terms of having too cumbersome administrative requirements.”

The bourse extended its suspension on Feb. 14 because of worker protests disrupting bank operations, exchange spokesman Hisham Turk said at the time. The exchange said on Feb. 22 it would have to put off opening in order to implement rules to limit daily share price moves. It postponed a planned reopening on Feb. 28 after investors facing losses criticized exchange chairman Khaled Seyam at a news conference, calling for an extension of the closure.

The Egyptian Financial Regulatory Authority, the bourse’s regulator and the main clearing house, said on its website on March 2 that it may require brokerages and fund managers to disclose the owners of financial assets traded in the country as part of a probe of officials linked to Mubarak.

“It’s difficult for people like us as international investors to do much in these markets, no matter how much they fall in the next few days or weeks,” Feriani said in a phone interview. The outlook for Egypt’s economy and companies is too uncertain to make investment decisions, he said.

Adding insult to injury, if the EGX30 remains halted for more than 40 days, it will be moved to the symbolic equivalent of the pink sheets:

If the market is closed for 40 days or more, MSCI Inc. may begin investor talks to determine whether to remove Egypt from the MSCI Emerging Markets Index, Frank Nielsen, the company’s executive director for equity and applied research, said in a telephone interview from New York on March 1. Argentina removed from the index in 2009, when it was reclassified as a frontier market, according to MSCI’s website.

We are sure the Fadi Al Said speaks for all momentum lemmings who put their money into EGPT when he said..

“On Egypt I’m really disappointed on the way it’s been handled,” said
Fadi Al Said, a Dubai-based senior investment manager at ING Investment
Management, which oversees about $518 billion worldwide. His ING L
Invest Middle East & North Africa fund has beaten 88 percent of
peers in the past year, according to data compiled by Bloomberg. “I hope
that the market will open up soon and let’s get over with this
cleanout, because this will create massive opportunities,” he said.

Look for the escalating MENA panic to shift much more aggressively to Saudi Arabia, which despite the government's plunge protection efforts, is next in line for "delisting", and ultimately to Europe.