Egypt Shares Tumble on Gaza as Israel Gains Amid Truce Bets

Egypt’s shares tumbled the most in more than four months as the government struggled to contain public anger over Israel’s attacks on Gaza and a panel writing the country’s constitution teetered on the brink of a breakup.

Commercial International Bank Egypt SAE (COMI), the biggest publicly traded lender, dropped to the lowest level in almost two weeks. National Societe Generale Bank (NSGB), a unit of France’s Societe Generale SA (GLE), plunged the most since March 2011. The EGX 30 (EGX30) retreated 3.3 percent, the most since July 9, to 5,478.38 at the close in Cairo. Israel’s TA-25 rose the most in a month on bets mediation will lead to a cease-fire between Israel and Palestinian militants as fighting enters a fifth day.

As President Mohamed Mursi struggles to maintain peace with Israel without losing the support of his home base, he came under criticism for what his opponents say was failure to end a string of transportation disasters, the latest of which was a weekend crash that killed 49 people, mostly children. The crisis came as members making up a quarter of the constitution panel threatened to pull out over disputes with Islamists who dominate the body.

Stocks fell “in light of weekend developments including Gaza and the growing problems surrounding the government, like yesterday’s train wreck and the constitutional dispute,” Hassan Kenawi, equities trader at Cairo-based HC Brokerage. “The accumulation of negative news should continue to weigh on the market until we see a material reversal in the negative news flow.”

Crumbling Infrastructure

Along with a crumbling infrastructure, Mursi inherited a peace treaty with Israel that his predecessor Hosni Mubarak, ousted in a popular uprising last year, had maintained for three decades. Until his election in June, Mursi was a senior leader of the Muslim Brotherhood, which maintains close ties with Hamas, the militant group fighting Israel. The group, which controls the Gaza Strip, is considered a terrorist group by the U.S., Israel and the European Union.

Shortly after Israel began a military operation against Palestinian militants Nov. 14, Mursi recalled his ambassador to Tel Aviv. Prime Minister Hisham Qandil visited Gaza over the weekend, becoming the most senior Egyptian official to set foot in the Hamas-ruled enclave. At least 50 Palestinians have been killed in Israeli strikes, including the leader of the Hamas military wing. Three Israelis died in one of about 900 rocket attacks launched from Gaza since Nov. 14.

“The shift in Egyptian politics toward Israel, even if only in rhetoric, is a concern to both local and foreign investors,” Wafik Dawood, director of institutional sales at Cairo-based Mega Investments Securities, said by phone.

Cease-fire Talks

Commercial International Bank dropped 4.2 percent to 37.10 pounds, the lowest since Nov. 5. National Societe Generale tumbled 6.8 percent to 40.43 pounds.

Israel’s TA-25 (TA-25) Index gained 1.4 percent, the most since Oct. 2, to 1,198.38, at the market close in Tel Aviv. “There are reports of cease-fire talks,” Richard Gussow, senior analyst at Tel Aviv-based DS Securities & Investments Ltd. “Investors see the military action coming to an end and are coming back into the market.”

Mursi met with Turkish Prime Minister Recep Tayyip Erdogan last night and later said there are indications a cease-fire may be reached between Hamas and Israel. Erdogan, speaking earlier before departing for Egypt, said Hamas is ready to halt missile attacks if it’s given guarantees by the U.S. that Israel will stop firing.

Dubai Falls

Israel’s benchmark bonds rose, sending the yield on the 5.5 percent notes due January 2022 down six basis points, or 0.05 percentage point, to 3.95 percent.

Elsewhere in the Middle East, the Bloomberg GCC 200 Index (BGCC200) of the biggest companies in the Gulf Cooperation Council, fell 0.4 percent. Dubai’s DFM General Index (DFMGI) lost 1 percent, Abu Dhabi’s measure lost 0.4 percent and Qatar’s QE Index retreated 0.8 percent. Oman’s index and Bahrain’s measure declined 0.3 percent while Saudi Arabia’s Tadawul All Share Index retreated 0.4 percent. Kuwait’s gauge lost 0.5 percent.

To contact the reporter on this story: Ahmed A. Namatalla in Cairo at anamatalla@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net

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