Egypts benchmark stock index drops for 3rd consecutive day on fears over new unrest..
Egypt’s benchmark stock index drops for 3rd consecutive day on fears over new unrest
CAIRO — Egypt’s benchmark stock index extended its decline for a third consecutive day on Tuesday, pulled lower by an escalation of tension in the country over the pace of reforms and accountability of police and former regime officials.
The decline came as protesters laid siege to a key government building and threatened to expand their demonstrations, drawing a stern warning from Egypt’s military rulers against “harming public interests.”
Brokers attributed the declines to investor fears about the new round of protests in Cairo and other Egyptian cities by demonstrators calling for the removal of police officers implicated in the deaths of more than 900 people during the 18-day uprising that began on Jan. 25.
“The sales pressure shows that people are unloading because of fears about the protests,” said Ahmed Hanafi, head of research at Gothour Trading.
Hundreds of protesters have camped in Tahrir Square since a demonstration on Friday that was one of the largest outpourings in the capital since the former leader handed over control on Feb. 11 to the military.
“If there’s a decision showing that people will get their rights, ... this could stabilize the market,” said Hanafi.
Foreigners dominated the selling, as did institutional investors, brokers said, and the declines covered a range of sectors.
The latest declines came a day after the Finance Ministry for the first time set a new public sector salary cap of 36 times the minimum wage — a step aimed at addressing one of the many complaints of striking workers and protesters who maintain that consultants in government ministries were pulling in exceedingly high salaries.
Egypt’s market, and its broader economy, have been hit hard by the protests. Labor strikes and general demonstrations have continued five months after Mubarak’s ouster, undercutting productivity and manufacturing in the country while a general collapse in the security situation has battered tourism — a sector that generates billions of dollars in foreign currency for the nation.
“The initial expectations of a rapid economic transformation were premature,” said London-based Capital Economics in a research note. “The Egyptian government is stuck between the public’s demands and market expectations.”
“While the latter may be looking for greater economic openness and structural reforms, the average Egyptian is after an improvement in living standards, holding the previous administration accountable and greater political freedoms,” wrote Said Hirsh, Capital’s Mideast economist. “These interests may clash in the near term especially since current economic conditions are deteriorating.”
Egypt’s caretaker government and the military rulers are trying to accommodate a host of protester demands, many of which center on improving the livelihood of citizens of a nation in which, according to the World Bank, about 40 percent live on or below the poverty threshold of $2 per day.
Spending on social services has been boosted in the budget for fiscal 2011-2012 and a new minimum wage has been set at about 700 pounds ($118) per month for the public sector.
The Finance Ministry said in a statement that the salary cap of 25,200 pounds, or $4,270, had been set. The statement said a cap had also been placed on incentives or bonuses, but did not specify how much. Such incentives and bonuses often more than doubled or tripled the core salary.
The step is a key part of the government’s efforts to narrow an income gap that mushroomed under Mubarak’s regime.
Egyptians complained that the core salary paid in the public sector was so low that government workers either balked at performing their jobs, or do so only with a boost in the form of bribes.
Others claimed that consultants hired at the various ministries or government offices were paid salaries that would have Wall Street brokers envious.
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