Egypt continues to take a toll on stocks. But while the declines are global, the biggest damage is restricted to stocks and markets with actual exposure to the turmoil in that country. Investors, I’d say as a quick summary, are still looking to sell risk but they’re not selling in anything like Friday’s panic.
Overnight and this morning indexes in  Saudi Arabia, Tunisia, Morocco—all exchanges with regional exposure—and in Thailand and South Korea—exchanges where the selling appears to be part of a global move away from risk—fell by 1% or more. Two stocks fell for every one that rose in Europe’s Stoxx 600 index. The MSCI Asia Pacific Index lost 0.9%
The biggest losers, though, were companies with specific connections to Egypt. In London trading Orascom Construction, Egypt’s biggest publicly traded company, dropped another 1.3%. The stock is now down 27% in six days. Hikma Pharmaceuticals, which gets more than 60% of revenue from the Middle East and North Africa, declined 4.5%. Japan’s Nissan Motor fell 2.2% after closing a factory in Egypt.
Commodities continued to move up with the Standard & Poor’s Goldman Sachs Commodity Index climbing 0.2%, led by cotton, wheat, and corn. West Texas Intermediate oil futures rose 0.4% to $89.72 in New York.
Good for the ETF, but I am staying away from the entire region. In fact, I have never been warmed up to them in terms of investment except some oil rich countries. I think the turmoil is far from over. (It’s not just Egypt.) I don’t see favorable outcome of the whole thing. Instead, the risk of the mass uprising being hijacked by fundamentalists and opportunists is very high. Economically, there is no quick and easy solution to their problems. Particularly Egypt was down graded in the last few days, another down grading was warmed too. Temporary bounce can not last long without fundamental support. Life has become even harder for that country in the last few days. I won’t invest there. Politically, the chance to have another pro-America president in Egypt is low. NYT reported “WH scrambles to size up Elbaradei”. I think they need to size up the new Vice President. Elbaradei, despite all his international resume and Noble Prize, is no friend of US. He spent most his life outside Egypt, has no backing of Egypt’s military which now plays crutial role. Compare to that, the new VP (even though the world does not know him) was put there by Mubarak and we can at least hope he will continue some Mubarak’s policy and as head of security of that country he has better chance to win military support. US also needs to reach out to the military directly to ensure the Suez Canal operation. (Just like US military working with Pakistan military directly on the country’s nuclear safeguard. BTW, the canal is controlled by military.) Now it looks Mubarak has to go, I wish US supports the VP to form new government. I don’t see a better choice at the moment.
By the way, isn’t it increditable that the market went up so much today?! I did quite buying on Friday and Thursday last week. Remember I came out posting “knee-jerk reaction” and “time to pick up some DVN shares” comments, even though I don’t own DVN?
The Egypt ETF, EGPT is up 7.9% today. Is this a temporary bounce from the reaction of last week? Or is the worse of the fear over?
More from CNBC: Suez Canal turmoil will help shipping industry!
http://www.cnbc.com/id/41352233
Shipping analyst: “Suez Canal Concern Overblown.” Even if the canal is disrupted, the effect is that “shipping rate will go up.” We all know shipping has been in slump for some time.
http://www.cnbc.com/id/41351580
Second that — is there long-term fallout that will affect Teva or is it just short-term noise?
PIMCO’s El-Erian: “Egypt will remain an ally and friendly trade partner even as it charts different course.” “Remember, Egypt rely on tourists and Suez Canal”. http://www.cnbc.com/id/41349669
Meanwhile, the key opposition Elbaradi who is also a Noble Prize winner looks like an opportunist. He was the head of UN unclear inspection body under whom Iran made quite progress on its nuclear. Remember during that dispute, he was quite pro-Iran’s right to have nuclear and he was quite stiff to US. Now there is a report saying he and the Muslin Brotherhood are forming some sort of government…..(http://www.haaretz.com/news/international/egypt-s-muslim-brotherhood-eyes-unity-gov-t-without-mubarak-1.340168)
Regardless Mubarak survive or not, the uncertainty and instability in that area are sure and will stay for some time. (Mubarak is 82 years old). Good news is that the biggest oil country Saudi is said pretty stable and its military is pretty loyal according to one of the major oil analysts Charlie Maxwell who was interviewed during the weekend by one of the financial radio programs.
CNBC had couple of articles over the weekend linking the food inflation in third world to cheap dollar policy. One of the article is still on its front page.
I’d like to hear Jim’s assessment on TEVA going forward. Isreal ADRs took beating on Friday….