Share prices have recovered across the Middle East after Egpyt returned to work and the country’s military council pledged to uphold international treaties inherited from the Mubarak regime.
By Ambrose Evans-Pritchard The Daily Telegraph 13 Feb 2011
Investors brushed aside concerns that violent protests in the gas-rich state of Algeria and further demonstrations in Yemen could destabilise the region, or in any way threaten oil supplies.
Egypt’s bourse remains shut and will reopen this week with curbs, but companies with large Egyptian interests rallied on other exchanges. Au Dhabi Dana Gas jumped 4.5pc, while Air Arabia and the telecom group Etisalat both rose 0.9pc. Egypt’s EGX 100 index fell 27pc over two weeks before the exchange was closed on January 30 but appears poised for a rebound.
Lars Christensen, emerging markets chief at Danske Bank, said investing in Mid-east shares was akin to buying East European assets after the fall of the Berlin Wall, and might be well rewarded over time if more open societies unleash economic potential. “We’re very positive: the way things are playing out is just about the most positive scenario possible. There has been no civil war in Egypt, and no hostile gestures towards other countries.”
Mr Christensen said Egypt and Tunisia were “star performers” in economic terms before their revolutions and should pick up where they left off. “Our one concern is that rulers across the region try to buy off their people instead of opening up with reforms,” he said. Jordan has raised food subsidies and Bahrain, where a Sunni elite governs a Shia majority, is giving each family a £1,650 bonus for food.
Egypt succeeded in raising $1.1bn on the debt market on Sunday but at stiff cost, paying 11.68pc for 9-month bills. Credit default swaps on Egypt’s debt last traded at 322 points, below Hungary, Portugal, Ireland or Greece.
Egypt’s finance minister Samir Radwan said the country is eyeing a fiscal boost to revive growth even though the budget deficit may hit 10pc of GDP this year, against initial estimates of 7.9pc. “There is a need for a stimulus package that is very closely related to employment,” he said.
Mr Radwan said losses from the turmoil had reached $6.2bn, much of it caused by tourist flight. Growth will drop from 5.8pc to under 4pc in 2011. Egypt must create 700,000 jobs a year to absorb a “youth bulge” entering the workforce.
A key cause of the uprisings in Egypt and Tunisia was that new wealth had enriched an elite but had not trickled down fast enough to the rest of the country, validating once again the Tocqueville theory that revolutions occur because rising prosperity is skewed, rather than because of poverty.