A strong performance by Egypt's stock market in the last few days, despite a string of negative political and economic news, suggests the market's year-long downtrend has ended and investors will continue flocking back.
Stone-throwing protesters clashed with riot police this week in violence triggered by last week's deaths of 74 people at a soccer match, while the government risks losing US military aid in a dispute over foreign-funded democracy groups. The central bank revealed this week that foreign reserves continued to fall rapidly in January, threatening a currency crisis.
But the Egyptian stock index climbed 2.7 percent on Wednesday, erasing losses suffered in the days after the soccer disaster, as investors focused instead on signs that the ruling military might be willing to accelerate the transition to civilian rule. This issue, rather than Egypt's economic problems or the level of street violence, is for now the key issue for many investors.
Officials announced on Monday that the new date for presidential election nominations was 10 March; previously it had been set for around mid-April.
"The sentiment is now that the political environment in Egypt is steadily heading towards a civilian power transfer," said Mohamed Kotb of Naeem Brokerage.
"This market rally will be sustainable, especially because stocks are still relatively cheap for international investors."
The index is still 35 percent below a peak hit in January last year, just before the uprising that toppled Hosni Mubarak. Rising trading volumes, which have increased by about 50 percent since last month, suggest stocks could be poised to rise across the board, especially blue chips, Kotb said.
"The market exit that occurred in 2011, I think, is now reversed and investors are coming back."
Orascom Telecom Media and Technology (OTMT) may be a focus for the market next week. It surged 7 percent on Wednesday after its founder Naguib Sawiris discussed expansion plans in Europe, the Middle East and Africa in a Reuters interview.
OTMT's subsidiary mobile phone company Mobinil also soared this week on unconfirmed market talk of a reorganization of shareholdings between the two companies.
