The benchmark for Egyptian index fell today to its lowest level in two years.
The ten percentage point drop forced a halt in trading.
Brokers were quoted saying the drop will continue because of 'panicking investors'.
The article goes on to talk more about the riots in general, I haven't found much more on the economic consequences for Egypt or the area (although it would be assumed to agree with this article - instability always hurts the economy).
4 comments:
Investors are in a way consumers and this is an issue of consumer confidence. The issue of panicking investors is a lot more complex than one may think at could lead to a continuous drop in the Egyptian index. In this kind of situations the central bank or government have to manage people's expectations adequately in order to prevent things from getting worse.
Egypt right now is experiencing a lot of political instabilities which directly lead to economic instabilities. Under such situation, i don't think the government has the ability to regulate economic activities such as people's expectations.
I find this article very interesting because it shed light on the correlation between a state's (Egypt in this case) political stability and it's economic stability.
Additionally, I find this article relevant to the current status of the global market because it is also experiencing turmoil due to the continued unrest in Egypt. As I see it, this global market turmoil is largely a product of Western angst concerning oil prices and the geopolitical importance of the Suez Canal as a major shipping route.
I can imagine that Egypt is having a major foreign investment withdrawal due to "panicking investors" due to political instability, which in this case, is heavily correlated with economic activities. I'm surprised this didn't drive up the oil prices much here, considering that Egypt controls the Suez Canal.
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