Egypt Stocks Drop Most in World as Currency Weakens Amid Turmoil

Egyptian shares fell the most in the world and the nation’s currency and dollar bonds tumbled as escalating unrest since the second anniversary of the Jan. 25 uprising stoked concern the political crisis may be prolonged.

The North African country’s benchmark EGX 30 Index fell 2 percent, the biggest drop among 93 indexes tracked by Bloomberg, to 5,495.30 at the close in Cairo. The pound weakend 0.3 percent to 6.6782 a dollar at 4:30 p.m. in the Egyptian capital, taking its depreciation in the past month to more than 7 percent, prices compiled by Bloomberg show.

The equities gauge has retreated 3.4 percent this week as escalating violence left dozens dead. Egyptian Defense Minister Abdelfatah Al-Seesi warned of a “collapse of the state” after the National Salvation Front, a group of secular opposition parties, refused talks with President Mohamed Mursi, an Islamist. The yield on the government’s 5.75 percent dollar-denominated 2020 bonds soared the most in almost two months.

“People are starting to realize we’re not getting closer to a resolution,” Wafik Dawood, director of institutional sales at Cairo-based Mega Investments Securities, said by phone. “There’s real concern now about the implications the clashes have on the International Monetary Fund deal and currency.”

After defying a curfew last night, protesters in the Suez Canal province of Port Said -- one of three areas the president has placed under emergency rule -- vowed today to continue rejecting the measure imposed by Mursi to quell the unrest.

Reserves Drop

The country is due to receive an IMF delegation this month to finalize a $4.8 billion loan agreement that’s been stalled by political unrest since an initial agreement was signed in November.

The pound has weakened the most among emerging-market currencies since the central bank started foreign-exchange auctions on Dec. 30 to limit banks’ access to dollars. The central bank curbed the pound’s decline in the previous two years to 6.2 percent. Net international reserves have tumbled by almost 60 percent during the period to $15 billion in December, a level the regulator called “critical.”

“It’s becoming more apparent that the central bank’s capacity for defending the pound is becoming limited as reserves continue to fall,” Mona Mansour, chief economist at Cairo-based CI Capital Holding, said by phone. “If unrest persists we’re sure to see the pound decline even further.”

The yield on the 2020 bonds has jumped 29 basis points, or 0.29 percentage point, since unrest started on the Jan. 25 anniversary of the revolt that toppled Hosni Mubarak. It climbed 15 basis points today to 5.85 percent, set for the highest level on a closing basis in more than three weeks.

Commercial International Bank Egypt SAE, the country’s biggest publicly traded lender, slumped 5.3 percent, the most since Dec. 6, while Talaat Moustafa Group Holding retreated to a seven-week low.