Cairo - The verdict in the trial of ousted President Hosni
Mubarak, due on Saturday, is a new cloud hanging over Egyptian stocks which
were hammered this week after the country’s two most divisive figures made it
to the presidential election run-off.
Mubarak, 84, was charged with graft, abuse of power and
ordering the killing of protesters during the 18-day uprising that ousted him
on February 11, 2011. Court hearings in the trial concluded earlier this year
and the verdict is due on June 2.
A not-guilty verdict would probably work against Ahmed
Shafiq, who was Mubarak’s last prime minister, in the presidential election
run-off but analysts say any violent street protests against such a verdict
could work in his favour.
“The consequences of Mubarak’s verdict could be huge,
whether for Shafiq’s candidacy or for the street,” said Ahmed Abu Taleb of
Pharos Securities. “Next week all depends on Saturday’s verdict. Volatility
will be high.”
The benchmark index lost 3.5% on Sunday and 1.3% on Monday
after it became clear that Ahmed Shafiq, a 70-year-old former air force chief,
would be pitted against senior Muslim Brotherhood official Mohamed Mursi in the
June 16 and 17 run-off vote.
The index fell a further 1.1% on Tuesday to a six-week low
after an arson attack on Shafiq’s headquarters added to the tension surrounding
the landmark election.
“I don’t think anyone is paying attention to individual
stocks. They are just looking at the political situation,” said Mike Millar, head
of research at Naeem Brokerage.
An exception might be Orascom Construction Industries (OCI)
, which plans to separate its construction and fertiliser businesses into two
new companies. It got shareholder approval on May 17 and is now awaiting a final
go-ahead from the regulator.
The market could also be affected by any number of other
political events, Abu Taleb said.
“Foreigners have been dumping for the last few months. Only
some speculative Arabs have been buying,” he said.
Gulf investors will remain cautious next week as eyes are
trained on developments in the eurozone’s spiraling debt crisis, while trading
volumes will be depressed as many investors and traders escape the summer heat.
A lack of regional news has seen local bourses track
declines on global markets but volatility has lessened in lackluster trade.
Many institutional investors are waiting for clarity on the global front before
they can increase positions.
Saudi Arabia’s market, the largest in the Arab region with a
market capitalisation of $368bn, is seen holding its ground though, with
chances of gains in the coming sessions following recent declines.
“The short-term view may be slightly dull due to summer, but
we feel a small rebound is likely in Saudi next week given that the market is
oversold and selling pressure has abated,” said Sleiman Aboulhosn, assistant
fund manager at Al Masah Capital.
The kingdom’s index has tumbled 11.3% to levels near 7 000
since early April’s three-and-a-half year peak. It rallied 31% early this year,
boosted by confidence in the local economy.
The medium-term outlook is also upbeat for the world’s top
oil exporter whose real estate and infrastructure sectors are benefiting from a
$93bn handout from the king announced in March last year during the Arab
This included $66.7bn
for building 500 000 new homes.
“We're seeing continued growth in bank deposits, up 8%
year-on-year, and oil revenues are ensuring that spending plans remain intact.
Of course, there will be a time lag when it comes to project awards but we
expect to see a lot more before year-end,” Aboulhosn said.
For those investors willing to sit through the traditionally
slower months of summer, current levels are attractive, according to investors.
“After the rally we had in the beginning of the year, this
is a very good place to reallocate funds - for some people who didn’t
participate, they can jump in to catch up with the gains,” said Faisal
Al-Othman, portfolio manager at Riyadh-based Arab National Bank.
Technical analysis however, points to a dip towards 6 800
levels before the market can rebound towards 7 200 points.
Al-Othman said the
market will be caught within this range for the coming few months.
Elsewhere in the Gulf, Dubai and Abu Dhabi’s bourses have
seen little volatility and trading volumes have tapered off as eurozone gloom
and approaching summer spurred many investors to cut risk.
“In the bigger global picture, I think many equity markets
are due for further declines after a short-term rally. That could put pressure
on UAE and GCC (Gulf Cooperation Council) markets,” said Bruce Powers, head of
research and analysis at Trust Securities.
He said the Dubai index was hovering around a support area -
near 1 470, which could hold for a rally.
Abu Dhabi’s benchmark, which closed at 2 450 on Wednesday,
may target 2 462, with a bullish divergence on the relative strength index, a
commonly used price momentum indicator.