Last Updated: Tue Nov 29, 2011 13:23 pm (KSA) 10:23 am (GMT)

Egypt stock jumps on relief at smooth vote; pound falls to weakest in almost 7 years

Voters thronged polling stations in Cairo, Alexandria and other cities on Monday in the first election since a popular uprising toppled President Hosni Mubarak in February. (Photo by Amarjit Sidhu)
Voters thronged polling stations in Cairo, Alexandria and other cities on Monday in the first election since a popular uprising toppled President Hosni Mubarak in February. (Photo by Amarjit Sidhu)

Egypt’s benchmark share index jumped 5.3 percent on Tuesday after a smooth first day of voting in the country's parliamentary election eased investor disquiet about political turmoil and a state funding crisis.

Voters thronged polling stations in Cairo, Alexandria and other cities on Monday in the first election since a popular uprising toppled President Hosni Mubarak in February.

The share index slid to its lowest since March 2009 last week as protesters demanding an end to army rule clashed with police, leaving 42 people dead. Yields on Egyptian dollar-denominated bonds soared close to 7 percent, a level not seen since March.

The Egyptian Exchange was closed for the election on Monday.

“Investors were quite pessimistic that the election might be postponed or canceled,” said Mohamed Radwan, the head of equities at Pharos Securities. “There will definitely be some violations but the overall mood is focusing on the fact that this election was secure with a strong turnout.”

Among the most traded stocks on Tuesday, Commercial International Bank soared 7.2 percent and Orascom Construction gained 4.4 percent. Ezz Steel jumped 9.7 percent.

The smooth start to polling failed to stop the Egyptian pound slipping against the dollar. It was bid as weak as 6.0036 to the U.S. currency, its lowest in almost seven years.

The central bank spent almost $2 billion of its foreign reserves in October, partly to support the currency, traders say. The pound was at its weakest since January 2005.

The government has been struggling to finance a growing budget deficit as local banks exhaust their liquidity and the political chaos scares off foreign investors. Yields in treasury bill auctions touched multi-year highs in recent days.

An army-backed interim government that was trying to secure a $3 billion International Monetary Fund financing package to ease a widening budget deficit resigned last week as the political violence spread.

“My biggest fear is the liquidity crunch for the government and the fear that devaluation is imminent unless the new cabinet to be formed does something drastic and miraculous in a very short space of time,” said Radwan.

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