Egypt ETF Hits Record Low as Yields Jump After Deadly Clashes

An Egyptian stocks fund traded in the U.S. sank to a record low and bond yields surged after clashes between security forces and protestors left at least 22 people dead, prompting the cabinet to offer to resign.

The Market Vectors Egypt Index ETF declined 6.5 percent to $10.34 in the U.S. yesterday, the lowest since the fund’s inception in February 2010, while the Bank of New York Mellon Egypt index of global depositary receipts tumbled 9.7 percent, the most since July 2010. The yield on Egypt’s 5.75 percent dollar notes due April 2020 jumped 56 basis points, or 0.56 percentage point, to 6.70 percent.

Egypt bonds and stocks are retreating on mounting concern that violent clashes will disrupt efforts to transition the most populous Arab country to democracy. In three days of demonstrations, protesters pressed the ruling military council to set a time-line for presidential elections. The government offered to step down, putting its resignation “at the disposal” of the ruling military council, according to a cabinet spokesman, Mohamed Hegazy.

“Egypt has a lot more issues in terms of its payment risk when you look at the political and economic concerns,” said Win Thin, the head of emerging market strategy at Brown Brothers Harriman & Co in New York. “There’s so much dust running around. They’re sort of in a vicious cycle.”

Egypt, where Hosni Mubarak was forced out in February in the wake of a popular uprising, is seeking $3 billion from the International Monetary Fund to help ease pressure on government finances.

Default Swaps

Five-year credit default swaps for Egyptian debt surged 67 basis points, or 0.67 percentage points, to 537 by 5 p.m. New York time, the highest level since March 2009, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

The Egyptian pound earlier weakened to as low as 5.9900 a dollar, the lowest intraday level since January 2005. It ended 0.1 percent weaker at 5.9888.

The benchmark EGX 30 Index stock index plunged 4 percent to 3,860.99 yesterday, the lowest level since March 2009.

In London, shares of Orascom Telecom Holding SAE and EFG- Hermes Holding SAE fell the most in three months. Orascom declined 6.1 percent to $2.40 and EFG-Hermes sank 14 percent to $3.55.

Note Sale

Egypt raised 2 billion pounds ($334 million) from the sale of nine-month securities on Nov. 20, out of the 3.5 billion pounds it sought, according to central bank data on Bloomberg. The yield on nine-month treasury bills increased 45 basis points to 14.71 percent at the sale, the highest level since Bloomberg started tracking the data in 2006. The Finance Ministry also sold 1.5 billion pounds in three-month notes, with the average yield rising 71 basis points to 13.490 percent.

The death toll in the clashes that continued for a third day rose to 22, Health Ministry spokesman Mohammed el-Sherbeeny said in a telephone interview yesterday. Security forces fired tear gas at protesters who have occupied Tahrir Square in the capital since Nov. 18, state television footage showed.

Parliamentary elections are due to start Nov. 28. A date for presidential elections hasn’t been set by the military council. The council, which has ruled since the ouster of President Hosni Mubarak in February, issued a draft law on political corruption, state-run Nile News reported yesterday, without saying how it got the information.

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