Fears over political unrest making investors nervous
Fears over political upheaval in Egypt following Tuesday’s “day of wrath” protests against President Hosni Mubarak’s regime have been felt in the country’s stock market. Egypt’s stock index dropped 6.1 per cent on Wednesday, the biggest drop since November 30, 2009. Meanwhile the Egyptian pound dropped to its lowest since January 2005, at 5.83 to the dollar. The concern facing investors revolves around whether or not protests will continue in the coming days and how the government will respond. If the unrest continues, investors could liquidate their positions in Egyptian equities. Foreign purchases of Egyptian equities have helped the government finance the deficit. Economist Raza Agha said, “if [the government] responds too aggressively, in a fashion similar to Tunisia, then it’s likely it will become a broader thing and people will seek to exit very quickly.” The unrest in Cairo and other Egyptian cities has seen three protestors and one policeman killed, with police arresting over 700 protestors. The Mubarak government has since banned demonstrations.