Egyptian Stock Exchange Staggers: Billions in Losses Amid Fears of "War Economy"

Egyptian Stock Exchange Staggers: Billions in Losses Amid Fears of "War Economy"
The exodus of foreign investments from the Egyptian market indicates a decline in confidence in the government's ability to manage crises, which may lead to long-term negative consequences on Egypt's
October 15, 2024, 1:49 am

البورصة المصرية \ تعبيرية

The Egyptian Stock Exchange has witnessed sharp fluctuations in recent days, affected by geopolitical tensions in the region and controversial government statements. The market incurred heavy losses amounting to 60 billion pounds (equivalent to 1.2 billion dollars) during the Thursday and Sunday sessions, before recovering part of its losses valued at 17 billion pounds in Monday's session.

Egyptian Prime Minister Mostafa Madbouly had stirred up a storm in economic circles with his statements about the possibility of implementing a "war economy" if regional conditions worsen. These statements, according to market experts, shook the confidence of local and foreign investors, pushing the latter to reduce their investments in the Egyptian market.

Mohamed Hassan, Managing Director of Alpha Financial Investments, explained that geopolitical tensions led to the exit of large foreign investments from the Egyptian capital market. He also pointed out that "violent" selling operations due to forced stock selling (margin calls) exacerbated the losses.

Despite the gloomy picture, some experts express cautious optimism about the market's future. Mohamed Kamal, a board member of the Egyptian Securities Federation, affirmed his confidence in the stock exchange's ability to recover its losses in the future, driven by positive news for the Egyptian economy and the restoration of foreign institutions' confidence.

It's worth noting that FTSE Russell has kept the Egyptian stock exchange within the secondary emerging markets category in its latest periodic review, which may contribute to boosting investor confidence in the medium term.

However, challenges remain for the Egyptian economy. Rising global oil prices and increasing inflationary pressures may negatively affect the country's economic performance. The continued state of uncertainty in the region may also push more foreign investors to reduce their investments in the Egyptian market.

Under these circumstances, it appears that the Egyptian government is required to adopt clearer and more effective strategies to restore investor confidence and stimulate economic growth. Enhancing transparency in official statements and avoiding alarming signals to markets may be necessary to ensure stock market stability and attract foreign investments in the future.

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