Shares set to fall as unrest in Egypt rattles investors
Sydney Morning Herald
Monday January 31, 2011
THE sharemarket is expected to open lower this morning after sell-offs in foreign markets as demonstrations seeking to overthrow Egypt's President Hosni Mubarak unsettled investors and pushed oil prices up.Cairo's bourse plummeted 16 per cent before it and banks were closed for two days because of the violent street demonstrations.Saudi Arabia's sharemarket fell 6.4 per cent on Saturday and Dubai dropped 6.3 per cent yesterday. Markets in Jordan and Kuwait were also down.However, the turmoil spreading across north Africa could be the selling opportunity investors were looking for in an overheated market, the chief investment officer at Wingate Asset Management, Chad Padowitz, told BusinessDay. He expects the market to fall 1 to 2 per cent today."Markets have in the last four or five months pretty much gone up in a straight line. There have been very few down days," Mr Padowitz said yesterday. "There is a level of over-heatedness anyway and usually [traders] just look for an excuse to sell off."Although Egypt is not really an important country economically, it does control the Suez Canal through which a lot of oil passes and if an issue were to happen there you could get massive spikes in oil."Barrels of West Texas Intermediate crude oil gained $US3.70 to $US89.34 a barrel in New York on Friday, amid fears supplies could be interrupted if the Suez Canal is affected by political unrest.The unrest, combined with weak results from Ford and Amazon in the US, dragged the S&P 500 down 1.8 per cent on Friday, while London's FTSE 100 closed 1.4 per cent lower after consumer confidence measures were lower than expected. The market volatility index - known as the Vix - jumped 24 per cent to 20 points on Friday, the highest level since December 2. Australia's economy does not have much exposure to the Egyptian economy. Two-way trade topped $467 million in 2009.Protests are directed towards empowering citizens rather than against foreign investors or disrupting the economy, according to Dr Bob Bowker, of the Centre for Arab and Islamic Studies at the Australian National University, and a former Australian ambassador to Egypt."Twelve months from now it is very unlikely that President Mubarak will still be the president of Egypt," he said yesterday. "But the system which has produced Mubarak and given Egypt a large measure of stability over the last 20 years is fundamentally sound, so long as it gives greater expression to popular sentiment."
© 2011 Sydney Morning Herald