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Egypt's Stock Market Drops Most in Two Months After Attacks
July 24 (Bloomberg) -- Egypt's main stock index, the best performer this year among 79 tracked by Bloomberg, fell the most in more than two months after yesterday's attack in the Red Sea resort of Sharm el-Sheikh. Tourism companies led the decline.
The benchmark CASE 30 Index closed 3 percent lower to 4813.99, the biggest decline since May 19. Twenty-eight of the index's 30 members fell and two were unchanged. The measure fell 4.7 percent shortly after the market opened. That was the biggest intraday fall since April 10.
``There was a sharp sell-off in the beginning by jittery investors,'' said Bassim Arida, director of international sales at Commercial International Brokerage Co. in Cairo. ``But investors then began shrugging off concerns that the attacks will have a long-term effect on tourism.''
Orascom Hotels & Development, the largest builder of hotels and leisure facilities in the Middle East, fell 13 percent to 33.94 Egyptian pounds. Orascom Telecom Holding SAE, the largest mobile phone operator in the Middle East fell 1.4 percent to 572 pounds. Orascom Telecom accounts for about a quarter of the value of all Egyptian stocks.
At least 88 people were killed and 200 wounded when attackers struck a hotel and two other sites yesterday in Sharm el-Sheikh, a resort on the Sinai Peninsula popular with Italians and Germans. There have been at least four other assaults in Egypt in the past year, including one that killed 34 people in October in Taba, in northern Sinai.
Past Rebounds
``This attack strikes at the core of Egyptian tourism and will have an economic impact bigger than Taba, which prompted a sell-off of stocks,'' said Philip Khoury, director of research at Cairo-based EFG-Hermes Holding SAE, which manages $700 million of assets in Arab markets.
After previous attacks, the Egyptian stock market rebounded within weeks.
On the first day of trading after the Oct. 8 attack at Taba, Egypt's benchmark CASE 30 stock index fell 3.8 percent, the most since May 17. Between then and the end of the year, the index jumped 24 percent to 2,567.98 points, according to Bloomberg data.
The market fell again after an April 7 blast in Cairo, with the CASE 30 declining 3.4 percent on April 10 to 3,934.78, led by Orascom Construction Industries and Eastern Co., formerly known as Eastern Tobacco. A month later it was up 14 percent and by July 21 it was 26 percent higher.
Tourism Concern
The attack in Cairo, at the Khan el-Khalili bazaar, an area popular with tourists, killed a U.S. tourist, a visitor from France, and a third person who may have been the bomber.
Tourism may take longer to recover. It took more than a year for tourism to Egypt to recover after a 1997 attack in Luxor, in which 58 foreigners were gunned down, said Ben Faulks, a Middle East analyst with the London-based Economist Intelligence Unit.
``In the short-term, the Sharm attack will have a pretty severe effect on tourism,'' Faulks said in a telephone interview from London. ``The longer-term effect will depend on what foreign embassies advise their citizens about traveling to Egypt.''
TUI AG and Thomas Cook AG, Europe's two largest travel operators, canceled some excursions in the Sinai peninsula and are arranging for some customers there to return home early. TUI said today about 1,100 of its German customers currently in Sharm el- Sheikh won't cut short their trips. Kuoni Reisen Holding AG, Switzerland's largest travel company, offered cancellations to customers holidaying in Sharm el-Sheikh.
Hotel Targeted
The bombs in Sharm el-Sheikh went off at about 1 a.m. local time at the Ghazala Gardens Hotel, a taxi stand and a commercial souq or shopping district. The town has hosted a number of peace summits between Israelis and Palestinians.
A group calling itself the al-Qaeda Organization in the Levant and Egypt claimed responsibility for the Sharm el-Sheikh attacks in a statement posted on an Islamist Web site, Agence France-Presse reported yesterday. The authenticity of the statement couldn't be verified. A group purporting to be the terrorist organization al-Qaeda also claimed responsibility for the July 7 bomb attacks in London in which 56 people were killed.
The earlier attacks didn't stop tourists coming. Egypt's tourist arrivals rose to a record 4.3 million people in the first half, up 15 percent from a year earlier, the state-controlled Al- Ahram newspaper said on July 14, citing the Interior Ministry.
In 2004, tourist arrivals reached 8.1 million, an increase of 2 million from the previous year, Al Ahram said. Most come from western Europe, mainly Germany, Italy and the U.K. Egypt aims to increase tourist arrivals by 50 percent to 12 million a year by 2015, Tourism Minister Ahmed el-Maghraby said last year.
Investment Opportunities
As many as 3 million Egyptians depend on tourism for their livelihood, said Commercial International's Arida.
Tourism raised $6.1 billion in foreign currency for Egypt in 2004. The country is the most populous nation in the Arab world with 72 million inhabitants.
Egypt's economy was forecast to grow 4.8 percent in the fiscal year ending June 30 and 5.1 percent in the following year, driven by consumption and foreign investment, according to a May 26 research note from EFG-Hermes, Egypt's largest investment bank.
Egypt is seeking to create investment opportunities to attract funds or to keep at home the record revenue generated for oil producing nations of the Middle East and North Africa. A lack of opportunities over the past four decades and political conflict in the region meant Arab capital was invested in the U.S. or Europe instead.
Egypt will likely have its largest initial public offering ever this year, when the government sells a stake in fixed-line telephone monopoly Telecom Egypt, Investment Minister Mahmoud Mohieldin said in a May 22 interview.
The government expects to raise between $500 million to $1 billion from the sale of about 20 percent of Telecom Egypt, according to official estimates.
Egypt's CASE 30 stock index has more than doubled this year, spurred by record income from tourism, and oil and gas sales in 2004. The balance of payments posted a $2.9 billion surplus in the second half of 2004, a 45 percent increase from a year earlier, according to the central bank's latest figures.
To contact the reporter on this story:
Mahmoud Kassem in Cairo on at
mkassem1@bloomberg.netLast Updated: July 24, 2005 09:56 EDT