Egypt's stock index up after placid elections

Markets Update: Egypt investors like democracy - the nation's stock markets led the world as parliamentary elections got under way peacefully.

Egypt investors like democracy - the nation's stock markets led the world as parliamentary elections got under way peacefully. EPA/KHALED ELFIQI

Egypt seems to like democracy.

The EGX 30 index rose 5.4 per cent to 3,987.30 yesterday, the biggest rise of any index worldwide and the country's biggest intraday gain in eight months, as the first day of parliamentary elections proceeded peacefully.

Fears that the election would be called off proved unwarranted, as the country brushed off the first major political protest since the revolution earlier this year that overthrew Hosni Mubarak, then the president.

Leading the rally were shares in Commercial International Bank, which rose 7.5 per cent to 23.07 Egyptian pounds each.

Also among the biggest gainers were EFG-Hermes, up 9.9 per cent to 11.13 Egyptian pounds per share and Orascom Construction, which rose 4.3 per cent to 218 Egyptian pounds a share.

Although there would be plenty of opportunities for further unrest ahead of announcement of the election's results due on January 13, the peaceful election offered many encouraging signs, said Daniel Broby, the chief investment officer at Silk Invest, an emerging market investor.

"The record turnout we're seeing in the election shows that the middle class is still committed to [Egypt's] future," he said.

The Egyptian pound has also held up relatively well against the US dollar, Mr Broby said, with the currency having fallen 2 per cent against the greenback since the government fell in February.

Yesterday's gains may come as little consolation to stock market investors in Egypt, with the exchange having fallen 44.3 per cent since the start of the year, putting the country in bear market territory.

Further challenges loom. Standard & Poor's said the recent violence had "weakened the prospects of a smooth transition to democracy", as it lowered Egypt's credit rating to junk status. The ratings agency cut Egypt's rating one notch to "B plus" with a "negative" outlook on Thursday.