Egypt bourse bans 45 firms

A total of 45 companies have been suspended from trading on Egypt's reopened stock exchange for failing to meet disclosure requirements.

Almost half of the top companies listed on the Egyptian stock exchange were banned from trading yesterday as the market was forced seconds after the opening bell to suspend activity for half an hour.

The country's biggest publicly traded steel producer, Ezz Steel, was among the companies banned from trading for failing to meet disclosure requirements on whether they have assets or shareholders under investigation, an Egyptian Exchange official said.

A total of 45 companies from the top 100 listed were suspended from trading as foreign investors sold about 342 million Egyptian pounds (Dh210.3m) of shares in the first day of trading in almost two months. Institutional investors accounted for 97 per cent of trading.

Since Hosni Mubarak was forced to give up the presidency on February 11, hundreds of investigations have begun into prominent businesses and deals done with his government.

Some businessmen have already been arrested, including Ahmed Ezz, the founder of Ezz Steel who is accused of illegally setting up a monopoly.

The suspension will be lifted when the companies announce "all their disclosures including operations, balance sheet, strategy", said Hisham Turk, a spokesman for the Egyptian Exchange.

Mr Turk said 61 companies were facing suspension before the stock market was due to resume trading, but 16 disclosed the necessary information just before the opening.

It is estimated that more than one in five companies listed have links to the former government or the Mubarak family.

The EGX 100, the benchmark index, shed 10 per cent of its value at the opening bell after a long hiatus aimed at calming investor nerves did little to keep the army of sellers at bay. Foreign investors rushed to sell shares. Some losses were pared back when the exchange reopened a second time 30 minutes later. The bourse eventually closed down 8.9 per cent at 5,142.71.

Sherif Faisal, a broker on the exchange floor, was not surprised by the drop and said he had been unable to make a single trade in the first session.

"It will be the same tomorrow - maybe the third day will be OK," said Mr Faisal, staring at a frozen trading screen. "I felt I had to be here, just because it was an important day."

In spite of the losses, the mood was largely festive. Before the first bell, brokers joined the Egyptian finance minister Samir Radwan in an impromptu rendition of the Egyptian national anthem, and shouted "Long live Egypt" when Mr Radwan saluted the country's youth. Confetti showered from above, covering some of the brokers' computers.

A minute into the second trading session that started shortly after 11am, loud applause broke out across the floor after a large buy order had come in for the telecommunications company Orascom Telecom, boosting its share price. The stock eventually closed down 2.7 per cent.

The Russian company VimpelCom had announced shareholders had voted in support of a US$6 billion (Dh22.03bn) deal to acquire the telecoms assets of the Egyptian billionaire Naguib Sawiris, a majority stakeholder in Orascom.

Over the next half hour, brokers cheered and clapped every few minutes with each new buy order that recovered some of the earlier losses.

Shares in big blue-chip companies including Orascom Construction Industries, Telecom Egypt and Commercial International Bank of Egypt all slumped 10 per cent almost instantaneously.

The non-disclosure ban on companies comes as bad news for many institutional and retail investors who have positions in some of the suspended stocks.

"It's very disappointing from our perspective and adds a new element of uncertainty," said Daniel Broby, the chief investment officer at Silk Invest in London.

Silk Invest owns shares in Ezz Steel and Amer Group, which is also banned from trading.

But Mr Broby said this had not deterred him from keeping an eye on undervalued stocks.

"We expected the exchange to open in fits and starts but there's a price for everything and … we will be buyers at levels that will be impaired," he said.

Weeks of planning and debate among brokers, investors, the stock market regulator and exchange officials led to several attempts to limit the shock of reopening.

The Egyptian government and the stock market clearing house stepped in with a 318m pound support package for the exchange to limit the shock of a dramatic fall in stock prices at the opening.

Officials from the exchange said the prime minister Essam Sharaf agreed to advance the money in a meeting late on Tuesday night.

But the prime minister is yet to approve a further advance of between 500m and 600m pounds, said an official from the exchange.

An 850m pound loan was initially slated to prevent brokers and traders from going bankrupt

Mohamed Abdel Salam, the acting chairman of the exchange, told Reuters it would not shut down again.

By opening its stock market, Egypt reduces the chance of a possible omission from the MSCI Emerging Market Index, which is tracked by thousands of fund managers and directs foreign investment into the country.

Under MSCI rules, consultations to have a country removed from its indexes can be instigated if the exchange in question remains shut for more than 40 consecutive working days.

Yesterday was the 38th business day since the Egyptian Exchange shut its doors. The EGX 100 slumped more than 20 per cent in the days leading up to the closure.

Officials from the exchange also decided to retain previously announced index circuit breakers that suspend trading for 30 minutes if the market dropped by 5 per cent, and would again be suspended if it lost 10 per cent for a period to be specified by the head of the exchange.