Political Stability Brings Investors Back To Egypt ETF

Includes: EGPT
by: Tom Lydon

Egypt's stocks, along with the related country-specific exchange traded fund, shot higher at the start of the month, following the election of the country's first civilian president, but gains have been tempered as the cabinet searches for a competent new Premier.

The Market Vectors Egypt Index ETF (EGPT) rose 14.8% over the past month as investors felt the election of Egyptian President Mohamed Mursi provided some semblance of political stability.

While Egypt's stocks recovered losses since the election, the benchmark index is still over 30% lower than it was at the end of 2010.

Egypt has been roiled with instability as the country operated without a firm government since Hosni Mubarak was ousted early last year.

"It has now been 18 months since we had an administration capable of making policy," Simon Williams, an economist with HSBC Bank Middle East, said in a Bloomberg report. "The economic challenges are huge and external support is essential and a period of reform is imperative. And there will be no access to external funding and all kinds of policy measures that local and foreign investors need to see until we see a government in place."

The government is actively seeking out someone with a solid economic background.

"An economic background is a key criteria in the person to be named prime minister," Said Hirsh, an economist at Capital Economics, said in the article. "Politics is a huge problem at the moment, but sorting out the economic problems there could eventually make or break his tenure over the coming months."

The country is also in talks with Gulf states and the IMF over financial aid to support the battered economy.

Increased stability is also boosting Egypt's tourism industry. The government projects 12 million tourists will visit by the end of 2012, a 23% increase year-over-year, according to Ahram Online.

"Four million people work in tourism, while more than 14 million are impacted by it indirectly," Minister Mounir Fakhry Abdel Nou said in a press conference, adding Egypt could see tourism revenues of $25 billion, double the figure it earned in 2010, by 2017.

Market Vectors Egypt Index ETF

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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