Global Investing

Tunisia-driven ructions in Cairo markets

Traders at the Cairo stock exchangeWhat a week it has been for Egypt.  All the regional political upheaval  happened in Tunisia, half a continent away, but most of the pain has been felt on Cairo’s financial markets. The Egyptian stock market has fallen almost 8 percent and the Egyptian pound is languishing near seven-year lows to the dollar. The cost of insuring exposure to Egyptian debt has risen to 18-month highs.

So are investors preparing for a Tunisia-style popular uprising in Egypt? Or is it that its market, more sophisticated than Tunisia’s, is bearing the brunt of investors’ increasing bearishness on the North African region? Probably a bit of both.

Egypt faces elections later this year and 82-year old Hosni Mubarak, president for almost 30 years, is likely to run again. Just like much of North Africa and the Middle East, inflation, especially food inflation is high while youth unemployment rates are higher than most of the developing world. Risks of uprisings are seen highest in Egypt and Jordan, where there is relatively more political freedom than, say Libya, but leaders lack the oil wealth cushion that the Gulf states or Libya boast. Given Egypt’s “youth bulge” — the proportion of the population comprised of young men aged 15-34 –regime change is a risk, reckons Charles Robertson, chief economist at Renaissance Capital.

Positioning is the main issue, however. Egypt has been Middle East and North Africa (MENA) investors’ favourite market, perhaps by default because of its size and accessibility. Barclays calculates that foreigners hold up to $25 billion in Egyptian stocks and bonds and in bonds, owning 20 percent of the outstanding bonds and 15 percent of the stock market cap, meaning there is significant potential for a market reversal.  Oliver Bell, senior investment officer at Pictet has gone underweight Egyptian stocks, noting: “If alarm bells start ringing in Egypt, there’s potential for quite a lot of money to come out.”

All that means the outlook for the Egyptian pound is poor, though it has stabilised somewhat thanks to the central bank’s efforts. But banks are suggesting expressing any bearishness on North Africa via a bet against the pound – BNP Paribas for instance recommends a short pound position on a three-month non-deliverable forward basis, betting it will depreciate nearly 5 percent in this period. Barclays expects the pound to fall to 6 per dollar over this year from the current 5.80.  Expect little respite before Egypt’s own election, expected in September.

from Global News Journal:

Back to the future in Malaysia with Anwar sodomy trial II

By Barani Krishnan

A decade ago, Malaysia's former deputy prime minister Anwar Ibrahim was on trial for sodomy and corruption in a trial that exposed the seamy side of Malaysian justice and the anxieties of a young country grappling with a crushing financial crisis and civil unrest.

Anwar is Malaysia's best known political figure, courted in the U.S. and Europe and probably the only man who can topple the government that has led this Southeast Asian country for the past 51 years. Photo: Anwar Ibrahim, with a bruised eye, at court on Sept 30, 1998 during his his first trial. REUTERS/David Loh Now the leader of the opposition, will go on trial next week again charged with sodomising a 23-year old male aide. The trial once again looks likely to provide gory evidence and bringing some unwanted attention from the world's media on this Southeast Asian country of 27 million people. It could also embarrass the government and draw international criticism.

Anwar vowed in a recent interview to fight what he says are trumped up charges.