Egypt Shares Fall to 4-Month Low as Pound Drop Repels Investors

Egypt’s benchmark stock index tumbled to the lowest level in almost four months on investor concern the weakening local currency will diminish the value of their holdings.

All shares on the EGX 30 Index declined, pushing the measure down 2.2 percent to 4,926.22 at the close in Cairo, the weakest level since Dec. 6. The gauge has tumbled 9.8 percent this year, the sixth-worst performer among 93 indexes tracked by Bloomberg. Commercial International Bank Egypt SAE fell to an eight-month low. EFG-Hermes Holding SAE decreased after reporting a fourth-quarter loss.

Assets denominated in Egyptian pounds have lost value this year after the local currency depreciated 6.6 percent in 2013 to 6.8178 a dollar at 3:24 p.m. in Cairo, according to Bank of Alexandria prices. A dollar shortage spurred the creation of an unregulated market, where buyers pay a premium of as much as 17 percent to the official rate, three money exchangers said, asking not to be identified because the trade is illegal.

“The sharp movement of the dollar in the parallel market reinforces the fragility of economic situation of the country,” Wael Ziada, Cairo-based head of research at EFG-Hermes, said by phone. “Investors can see it’s eroding the value of stocks in dollar terms.”

The pound depreciated to 7.85 a dollar yesterday from 7.65 a dollar in unofficial trading, according to the average of three quotes from the dealers.

‘Sinking In’

The central bank started limiting access to the U.S. currency on Dec. 30, when it introduced dollar auctions aimed at stemming the depletion of foreign reserves, which plunged more than 60 percent in two years. The regulator auctioned $462 million in March, down 11 percent from the previous month and about half the amount sold in January, according to data compiled by Bloomberg.

The stock market slump “shows sentiment has turned and economic realities are sinking in,” Ziada said.

EFG-Hermes retreated 2.1 percent to 9.49 pounds, the lowest level since June. The investment bank reported a fourth-quarter loss of 21 million pounds ($3.1 million) compared with a 31 million-pound profit a year earlier, as expenses rose faster than revenue. Commercial International, the country’s biggest publicly traded lender, fell 4.8 percent to 27.35 pounds.

Daily trading volume was 107 million shares, compared with a 12-month daily average of 128 million shares, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal.