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Egypt Foreign Investors Get Tunisian ’Wake-Up Call,’ Pictet Says

Foreign investment to Egypt may slow as investors take a "cautious" view on the country before a presidential election this year, said Oliver Bell, senior investment manager at Pictet Asset Management.

The violent ouster of Tunisian President Zine El Abidine Ben Ali served as a "wake-up call" for investors, London-based Bell, who manages about $10 billion of emerging markets assets, said by telephone today. "It’s a very volatile year for Egypt and foreign capital now will be a little bit more cautious." Bell has an "underweight" recommendation on Egypt.

President Hosni Mubarak, in power since 1981 without a designated successor, hasn’t publicly said whether he will run for reelection this year. Opposition groups, including the Muslim Brotherhood, say the president is grooming his politician son Gamal Mubarak to succeed him, a claim that both men deny. Egypt attracted $6.7 billion in foreign direct investment in the fiscal year that ended in June, compared with $8.1 billion in the previous 12 months, the central bank said in September.

The cost of insuring Egyptian government debt rose 64 points to 311, according to CMA prices, since Jan. 7 before the start of the most violent week of the Tunisian uprising that led to Ben Ali’s departure on Jan. 14. Egypt’s benchmark EGX30 stock index tumbled 6.4 percent this week, the biggest such loss since May.

’Political Risk’

An Egyptian man died Jan. 18 after setting himself on fire to protest government policies, emulating the Tunisian graduate whose self-immolation a month ago triggered the protest movement there. Protesters demanding political and economic change in Egypt, the most populous Arab country, have taken to the internet in an attempt to recreate the Tunisian revolution. More than 3,700 users have signed on a a Facebook page calling for public demonstrations on Jan. 25.

“I don’t believe that you are going to get a contagion, but the mix of high inflation, unemployment, one regime for too many years almost without opposition, is there,” Bell said. “Coming into this year there was a lot of complacency about political risk in Egypt.”

Egypt’s unemployment is about 9 percent, according to the state-run statistics agency, though some economists, including Ahmed El-Naggar of Cairo-based Al Ahram Center for Political and Strategic Studies, a state-funded think tank, discredit official figures. Core inflation accelerated in December to 9.65 percent.

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