Business

Gulf markets fall on Mideast unrest

Persian Gulf markets fell Wednesday amid continuing unrest in the region and as Egypt's economy remained in virtual paralysis since the ouster of President Hosni Mubarak.

Egyptian economy remains at a standstill

Persian Gulf markets fell Wednesday amid continuing unrest in the region and as Egypt's economy remained in virtual paralysis since the ouster of President Hosni Mubarak.

Saudi Arabia's benchmark Tadawul All Share Index lost 1.8 per cent, the Financial Market General Index in Dubai declined 1.3 per cent and Qatar's QE Index fell by 1.8 per cent.

Jobless archeology graduates demand jobs in the Egyptian museum in Cairo Wednesday. Labor unrest continued in Egypt despite a warning by the ruling military that protests and strikes were hampering efforts to improve the economy and return life to normal. ((Hussein Malla/Associated Press))

Hundreds of Libyans calling for the government's ouster clashed with security forces Wednesday, adding to turmoil with the outbreak of protests in Tunisia, Egypt, Yemen, Bahrain and Iran.

The Egypt stock market, which was due to reopen on Wednesday, remained closed through the end of the week, after officials announced a second delay on Monday. It was originally due to resume trading three days ago.

There was no word on when it would resume operating. The market lost nearly 17 per cent of its value in two tumultuous sessions in late January before it was ordered shut to halt the slide.

The Market Vectors Egypt Index ETF — which allows foreign investors to trade in Egyptian stocks — closed up 16 cents to $19.06 on the New York Stock Exchange, but was still seven per cent below its level in mid-January, before the turmoil escalated in Egypt.

Egypt's economy continued to be hit by labour unrest, extended bank closures and an evaporation of tourism — a key source of income for the country.

Banks were to remain closed Wednesday and Thursday, the last day of the business week in Egypt. There was no word on whether they would reopen Sunday, the start of the business week.

The closures were ordered after protests and strikes by poorly paid bank workers, some of them demanding a purge of executives they accused of corruption. Concerns over a lack of security also factored into the decision. Most police disappeared from the streets a few days after the revolt began on Jan. 25 and many have not returned.

The bank shutdown and the draining of ATM machines have paralyzed businesses and left ordinary people scrambling for cash.

Unrest, which has forced many businesses to shut and factories to halt production, has crippled the economy. More than 150,000 tourists fled, dealing a blow to one of Egypt's top sources of foreign revenue.

"Companies are not able to conduct their business in the best manner," said Tarek Amer, board chairman of the National Bank of Egypt, the country's largest public sector bank. "If this continues, it could affect investor confidence."

The exchange has been closed since Jan. 28 after its benchmark index lost about 17 per cent in two consecutive days of trading following the start of 18 days of protests that led to Mubarak's fall and the military's seizing of control.

The Market Vectors Egypt Index ETF 3-month chart.

Worker unrest has mushroomed, with thousands of employees at various public sector joining colleagues from other sectors ranging from textiles to EgyptAir, the national carrier.

Workers at that company succeeded in having the head of the carrier removed by Egypt's civil aviation minister late Sunday.

Economists warned that the push by the government, and public sector companies, to meet the demands of the workers was a double-edged sword.

While they might help curb the demonstrations, they would also strain the government budget at a time when Egypt is likely to face significant drops in foreign investment and tourism revenues — two of its main foreign revenue sources.

Similarly, analysts expect that the government's plans to boost salaries and pensions for civil service employees and pensioners by 15 per cent, along with other programs aimed at minimizing the blow from the unrest to Egyptians, will deepen the budget deficit well past the anticipated 8.1 percent of GDP.

"I doubt that there is sustainability in this situation," said Abdel-Fattah El-Gabali, a monetary policy expert with the Ahram Center for Strategic and International Studies in Cairo.

"Monetary policy is going to be very complicated in the coming period," he said. "After the elation over the revolution (dies down), you will have a sharp blow from reality."

With files from The Associated Press