Identifier
Created
Classification
Origin
08CAIRO2160
2008-10-08 14:10:00
UNCLASSIFIED
Embassy Cairo
Cable title:
FINANCIAL TURMOIL REACHES THE NILE: EGYPT'S STOCK
how-toVZCZCXYZ0033 PP RUEHWEB DE RUEHEG #2160 2821410 ZNR UUUUU ZZH P 081410Z OCT 08 FM AMEMBASSY CAIRO TO RUEHC/SECSTATE WASHDC PRIORITY 0611 INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
UNCLAS CAIRO 002160
SIPDIS
DEPT FOR NEA/ELA
TREASURY FOR BRYAN BALIN AND FRANCISCO PARODI
COMMERCE FOR TOM SAMS AND NATE MASON
E.O. 12958: N/A
TAGS: ECON EFIN EINV EG
SUBJECT: FINANCIAL TURMOIL REACHES THE NILE: EGYPT'S STOCK
MARKET SINKS
UNCLAS CAIRO 002160
SIPDIS
DEPT FOR NEA/ELA
TREASURY FOR BRYAN BALIN AND FRANCISCO PARODI
COMMERCE FOR TOM SAMS AND NATE MASON
E.O. 12958: N/A
TAGS: ECON EFIN EINV EG
SUBJECT: FINANCIAL TURMOIL REACHES THE NILE: EGYPT'S STOCK
MARKET SINKS
1. (U) Summary: Egypt's benchmark stock index has fallen 22%
in the last two days to reach multi-year lows. Traders and
analysts have at long last begun to worry that global
economic turmoil will hurt the Egyptian economy more than
originally thought. Despite having well-capitalized banks and
limited exposure to mortgages and derivative investments, a
global slowdown will take a bite out of Egypt's recent high
levels of growth. End Summary.
2. (U) On the heels of global equity market turmoil, the
Egyptian stock market's benchmark CASE 30 index has fallen
22% in the last two days to 5471. The current levels
represent a multi-year low and an astonishing 54% drop over
the past five months from a historic high of 11936 on May 5.
3. (U) On Tuesday, the first trading day after the extended
week-long Eid al-Fitr and Armed Forces Day holiday, the
market fell 16% almost immediately and maintained that level
throughout the trading session. On Tuesday, after early
losses of nearly 14%, the market recovered somewhat to end
with just over a 7% loss for the day.
4. (U) Local market analysts, who have insisted that the
Egyptian economy is somewhat insulated from the global credit
crisis, attributed the losses to a number of factors ranging
from built up pressures from the markets being closed last
week to actions by the government to remove corporate tax
exemptions and fuel subsidies from companies operating in
duty-free zones. Several analysts have reiterated that the
Egyptian economy is strong and is still on track for
continued high GDP growth.
5. (U) Comment: While it is true that Egyptian banks have
plenty of liquidity and the country has only a tiny mortgage
market, it appears to us that the fall in Egypt's equity
market is indicative of Egypt's strong ties to global markets
and the world economy. Above and beyond the volatility in
equity markets, we expect that the next 12 months will show
evidence of the impact on Egypt of lower growth across the
globe. Slowdowns in foreign tourism, lower Suez canal
revenues and lower than forecast FDI (particularly from GCC
investors) have some economists reducing GDP growth estimates
to the 5-6% range down from earlier forecasts of 6-7%.
SCOBEY
SIPDIS
DEPT FOR NEA/ELA
TREASURY FOR BRYAN BALIN AND FRANCISCO PARODI
COMMERCE FOR TOM SAMS AND NATE MASON
E.O. 12958: N/A
TAGS: ECON EFIN EINV EG
SUBJECT: FINANCIAL TURMOIL REACHES THE NILE: EGYPT'S STOCK
MARKET SINKS
1. (U) Summary: Egypt's benchmark stock index has fallen 22%
in the last two days to reach multi-year lows. Traders and
analysts have at long last begun to worry that global
economic turmoil will hurt the Egyptian economy more than
originally thought. Despite having well-capitalized banks and
limited exposure to mortgages and derivative investments, a
global slowdown will take a bite out of Egypt's recent high
levels of growth. End Summary.
2. (U) On the heels of global equity market turmoil, the
Egyptian stock market's benchmark CASE 30 index has fallen
22% in the last two days to 5471. The current levels
represent a multi-year low and an astonishing 54% drop over
the past five months from a historic high of 11936 on May 5.
3. (U) On Tuesday, the first trading day after the extended
week-long Eid al-Fitr and Armed Forces Day holiday, the
market fell 16% almost immediately and maintained that level
throughout the trading session. On Tuesday, after early
losses of nearly 14%, the market recovered somewhat to end
with just over a 7% loss for the day.
4. (U) Local market analysts, who have insisted that the
Egyptian economy is somewhat insulated from the global credit
crisis, attributed the losses to a number of factors ranging
from built up pressures from the markets being closed last
week to actions by the government to remove corporate tax
exemptions and fuel subsidies from companies operating in
duty-free zones. Several analysts have reiterated that the
Egyptian economy is strong and is still on track for
continued high GDP growth.
5. (U) Comment: While it is true that Egyptian banks have
plenty of liquidity and the country has only a tiny mortgage
market, it appears to us that the fall in Egypt's equity
market is indicative of Egypt's strong ties to global markets
and the world economy. Above and beyond the volatility in
equity markets, we expect that the next 12 months will show
evidence of the impact on Egypt of lower growth across the
globe. Slowdowns in foreign tourism, lower Suez canal
revenues and lower than forecast FDI (particularly from GCC
investors) have some economists reducing GDP growth estimates
to the 5-6% range down from earlier forecasts of 6-7%.
SCOBEY