The escalating violence in Iraq and Syria is disrupting trade routes all across the Middle East, and reversing the region's past decade of growth. Supplies have either been either interrupted, or have needed to be re-routed, increasing costs in any scenario.
Economic difficulties are also hitting Turkey, as the country is Iraq's second biggest export market after Germany, with $12B of sales last year.
“There is no problem with our trade with Kurdistan but to get our trucks down to the rest of Iraqi territory will be very difficult,” says Serif Egeli, a Turkish businessman. “As long as there is no government in Baghdad, it is very difficult to go on with projects and if there are no projects, you can’t sell much more than textiles and food.”
Emerging market equity funds reported $1.3B of inflows for the week ended June 25, with Asia funds - $1.5B in inflows, the largest since February 2013 - being the biggest beneficiaries. LatAm and CEEMMA funds continued to see outflows.
On a country basis, Taiwan (EWT), Korea (EWY), and China (FXI) saw the largest inflows, while Egypt (EGPT), Mexico (EWW), and Turkey (TUR) reported the largest outflows.
Former army chief Abdel Fattah al-Sisi has been sworn in as president of Egypt today. Sisi is said to have won 97% of the vote in last month's election.
Egypt's economy still has a long way to recovery, and a rapidly growing population mixed with widespread poverty should make job creation a number one priority. The forecast for the country's economic growth for the fiscal year beginning July 1 is set at 3.2%.
Last week's military coup in Egypt seems to have resolved nothing as yet, with at least 42 people killed and 322 injured today in clashes between security forces and supporters of deposed resident Mohamed Morsi. The Islamist Salafist Nour party, which had supported Morsi's removal, has pulled out of talks to form a new government in protest, although it has backed London-trained economist Ziad Bahaa-Eldin as interim prime minister. Despite the violence, the Egyptian pound strengthened at a central bank sale of foreign currency to 7.0097 to the dollar vs 7.0184 on Thursday, although the Case 30 stock index is -3%.
Opposition leader Mohamed ElBaradei has been named interim prime minister in Egypt. On watch again in the coming week is the Egypt ETF (EGPT), as investors keep a close eye on the post-coup turmoil. Updated 5:45 p.m.: Egypt's president's office denies reports that ElBaradei has been named PM, according to AP.
WTI crude (USO +1.9%) takes out $103 per barrel for the first time in more than a year as "Rejection Friday" in Egypt turns increasingly violent - a health ministry official claims 10 are dead and 210 wounded. Supporters of ousted President Morsi continue to call his removal invalid and vow continued protests until he is reinstalled. Whatever may be happening, EGPT is up 17.5% in the last 5 sessions, retaking all the ground it lost in June.
Egypt's CASE30 Index soars 7.4% following the army's removal of President Mohamed Morsi last night and the suspension of Egypt's constitution in what may or may not have been a coup d'etat, depending on how delicate you need to be with the use of language. The large rise forced a halt in trading, as it exceeded the Egyptian Exchange's 5% limit on daily movement in the index. Meanwhile, crude oil is -0.3% at $100.90.
Telling the military not to take sides, Egyptian President Morsi pushes back against an army ultimatum and says he will not step down, reports the AP. WTI crude (USO +2.5%) rises to a session-high $102.10 per barrel. EGPT +1%.
The Egyptian military will make a statement at 10:30 AM ET amid reports it is prepping a coup if the government and opposition leaders can't cool the unrest. Egyptian stocks (EGPT) are off marginally today after major gains yesterday.
WTI crude oil (USO) gains another 2.2% in overnight trade, now fetching $101.80 per barrel, the highest level in about 15 months amid political turmoil in Egypt. The situation may be bad enough to threaten the region's oil supplies, but the Egyptian stock market rose 4.9% today suggesting some measure of hope. The Egypt Index ETF (EGPT) gained 5.8% in New York trade. S&P 500 futures -0.2%.
Market Vectors sets reverse splits on 7 ETFs, effective next month. As the share prices on these funds decline, the company is worried bid-ask spreads - on a percentage basis - will get too wide. Splitting 1-for-3: GEX, RSXJ, NLR. Splitting 1-for-4: EGPT, SCIF, GDXJ, REMX.
Where MSCI sees a reclassification risk (previous), some foreign investors see a tremendous opportunity. Non-Arab market participants are net buyers of Egyptian equities (EGPT +3%) in June to the tune of ~$34M. With the EGX 30 Index officially in bear market territory as of Wednesday on fears of an FX crisis and political upheaval, risk takers "can make a huge return," one analyst tells Bloomberg.