Egypt’s stocks surged the most in a year after the military gave President Mohamed Mursi until tomorrow to find a solution to the political impasse. Bond yields declined from records.
The EGX 30 Index (EGX30) jumped 4.9 percent, the most since last July, to 4,986.81 at the close in Cairo, paring the gauge’s 2013 drop to 8.7 percent. All 30 stocks rose, with Commercial International Bank Egypt SAE (COMI) soaring 8.8 percent. The yield on $1 billion of benchmark 5.75 percent bonds due 2020 fell six basis points to 10.23 percent at 5:28 p.m. in Cairo, while notes due 20 years later yielded 9.89 percent, down 22 basis points.
The stocks extended gains into a fifth day after the ultimatum prompted bets that the army may compel Mursi to steer a way out of the crisis to avoid having the military impose one. Local investors were net buyers of 94.4 million pounds ($13 million) of stocks, the most since November 2012, according to data compiled by Bloomberg. Rifts between the Islamist president and his opponents widened during Mursi’s first year in office.
“The market had been factoring in a case where the country slides into extreme civil unrest or even civil war,” Wael Ziada, head of research at Cairo-based EFG-Hermes Holding SAE, said by phone. “The military’s move is being viewed as helping avert that scenario so it’s having a positive impact on investors.”
The presidency, in a pre-dawn statement, said it wasn’t consulted before the military’s ultimatum and that it would press ahead with national reconciliation efforts -- bids that so far have only galvanized protests not seen since Hosni Mubarak’s 2011 ouster. Five ministers submitted their resignations, including the foreign minister.
The nation’s credit risk continued its advance, gaining 25 basis points to a record 925, according to CMA, a data provider owned by McGraw-Hill Cos. that compiles prices quoted by dealers in the privately-negotiated market. Five-year credit default swaps soared above similarly rated Pakistan’s last month as the country’s financing pressures mount and the government struggles to conclude talks for a $4.8 billion loan from the International Monetary Fund.
Egypt has 1.4 trillion pounds of domestic debt and another $39 billion of external debt outstanding, according to Finance Ministry data. Combined, the liabilities represent about 94 percent of economic output.
“After the dust settles, we still face mounting macro-economic challenges, hence the appreciation of debt assets is less pronounced than stock valuations,” Ziada said.
The 2020 bond yield climbed 211 basis points in June, taking it above the yield on the 6.875 percent securities due in April 2040 for the first time. The EGX 30 plunged into a bear market on June 12.
While Egyptians bought shares today, Non-Arab foreign investors were net sellers of about 80 million pounds of stocks, the most since March, data compiled by Bloomberg show. Shares valued at about 488 million pounds traded, compared with a six-month daily average of 306 million pounds.
Commercial International, the nation’s biggest publicly traded lender, rose to 32.49 pounds. Ezz Steel (ESRS) climbed 8.8 percent, the most in more than a year, after the country’s largest publicly traded steelmaker said it was cleared of monopolistic practices by an Egyptian court.
“The market is reflecting sentiment on the ground, which is things can’t get any worse,” Wafik Dawood, director of institutional sales at Cairo-based Mega Investments Securities, said by phone. “Even though the transition won’t be smooth and the prospect of instability still looms, the military’s backing of the people’s will is giving hope that a resolution that’s more or less acceptable to all parties, will be reached.”
The Egyptian pound, whose movement in the interbank market is controlled by the central bank, was unchanged at 7.0194 a dollar, having lost 12 percent since the regulator started limiting lenders’ access to the U.S. currency.
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