Egypt Shares Retreat on Bets Army Protest Call to Spur Clashes

Egyptian shares fell the most in two weeks as the Arab country’s army chief urged the public to protest and give the military a mandate to combat violence that has escalated since President Mohamed Mursi was toppled.

The benchmark EGX 30 Index fell 1.7 percent, the biggest retreat since July 8, to 5,359.57 at the close in Cairo as all but two stocks dropped. Some 143 million shares traded, compared with a daily average over the past year of 122 million. Orascom Telecom Holding SAE was the biggest decliner on the gauge, losing 2.6 percent, the most since July 8.

The country’s default risk also rose for a second day after Defense Minister and Deputy Prime Minister Abdelfatah al-Seesi called on all “honorable” Egyptians to rally on July 26 and back the army as it seeks to combat “terrorism.” The Muslim Brotherhood, which has held daily protests since the army forced Mursi out of office on July 3, deemed al-Seesi’s call as a “threat to plunge the country into seas of blood.”

“It is now inevitable that violence will occur, we have reached the point that everbody was afraid of,” said Ahmed Abutaleb, a vice president at Cairo-based Pharos Securities. “The escalation is pulling the market down and will do so tomorrow.”

Egypt’s credit default swaps increased eight basis points, or 0.08 percentage point, to 758 at 3:45 p.m. in Cairo, taking the two-day advance to 33 basis points. About 100 people have been killed in political violence this month as Mursi’s supporters demand the former president’s reinstatement and frequently clash with security forces.

Political Tension

The yield on the government’s $1 billion of benchmark 5.75 percent bonds maturing 2020 has increased seven basis points this week to 8.53 percent today.

Declines on the EGX 30 today trimmed this month’s advance to 13 percent, the world’s best performer after gauges in Argentina and Dubai among 94 benchmarks tracked by Bloomberg. Egyptians were net sellers of 4.8 million pounds ($685 million) of stocks today, according to data on the bourse’s website.

“The market went up on optimism,” said Hisham Halaldeen, head of business development at Naeem Holding in Cairo. “The fact that political tension hasn’t eased but keeps going up has caused the pullback.”

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