Egypt's benchmark stock index fell to its lowest point in eight months on Wednesday, tumbling more than 6 percent as investors fled the market a day after massive protests engulfed the country's capital and other cities in what emerged as one of the most serious challenges to the government in years.
The market's plunge spotlighted potential challenges confronting Egypt and its efforts to appease investor concerns in the wake of the unrest in Tunisia earlier this month that led to the ouster of that nation's longtime president.
The Egyptian Exchange's benchmark EGX30 index closed down 6.14 percent to 6,310.44 points — just shy of its pervious record drop of 6.2 percent in May, according to traders. The broader EGX70 index fell 10.44 percent in a session that offered investors their first chance to react to the protests on Tuesday, which was a national holiday honoring the police force.
"The market opened in a panic," said Ahmed Hanafi, a broker with Guthour Trading. "It's been a while since we've seen these numbers. The reaction on the market has been very negative to the protests."
The declines were spread across all sectors, with the exchange's Web site showing only six companies posting gains in light trading. Meanwhile, the share prices of 180 more companies fell, led by Misr Oil & Soap, which saw its shares fall 17.51 percent to 14.37 Egyptian pounds, according to Zawya, a regional business information service.
Shares of the Egyptian Real Estate Group were off 16 percent while El Shams Housing & Development fell 15.29 percent. Regional investment bank EFG-Hermes Holding saw its shares drop 7.15 percent
The declines came a day after tens of thousands of Egyptians took to the streets, clashing with riot police in a protest modeled after the uprising in Tunisia that toppled that North African nation's longtime president. The violence in Egypt claimed four lives — two protesters and a policeman died Tuesday while a third protester died Wednesday of injuries sustained the previous day. Another 250 people injured.
The demonstrations were the most serious challenge the government of President Hosni Mubarak has faced in years. They were fueled by growing dissatisfaction in the Arab world's most populous nation with what critics note is a litany of economic ills: Growing disparity in income distribution, poor or inadequate social services, rampant corruption and high unemployment.
The 82-year-old Mubarak, who has ruled Egypt for roughly 30 years, has built his legacy on the country's political stability and role as a close U.S. ally. But many Egyptians complain that the ambitious reforms that have led to economic growth rates of over 7 percent in recent years have failed to trickle down to the masses, and that the government has done little to address crippling poverty in the country.
Egyptian officials have predicted that the economy will grow by about 6 percent in the fiscal year ending in June, continuing a rebound in the post-global financial meltdown period. Mubarak's government has pointed to these figures as evidence of the country's appeal to investors and its continuing success in improving the overall standard of living in the country through enterprise development and job creation.
But Egyptians, weary of seeing their pay increases eclipsed by almost immediate hikes in food and commodity costs, argue that there has been little trickle down effect from the reforms launched in 2005 and largely guided by Mubarak's younger son, Gamal, who is seen as a likely successor to his father. Roughly 40 percent of the country's 80 million people live on or below the World Bank delineated poverty marker of $2 per day.
With presidential elections months away, Mubarak, who has yet to say whether he will run for a sixth term, has stressed recently that his administration was focusing its sights on improving the economic situation for the country's neediest citizens.
Officials, however, have grown concerned that Tunisia uprising would have a ripple effect in the region, panicking investors who would see parallels with Egypt — another Arab country ruled for decades by the same man where freedoms have been trumped by a desire from the regime to stay in power. Egypt's industry and commerce minister, Rachid Mohammed Rachid, who also currently oversees the investment ministry portfolio, said Sunday that the situation in Egypt is different than in Tunisia. But he conceded that concerns about Tunisia could affect investor interest in his nation.
The drop in the market Tuesday, however, offered indications that foreign investors were yet to be frightened off.
Hanafi, the broker, said most of the selling was on the part of Egyptians while foreign investors were seen bargain hunting.