Egypt’s benchmark stock index dropped the most in three weeks and dollar bonds fell after President Mohammad Mursi reinstated parliament, reversing the military’s decision. The EGX 30 Index slumped 4.2 percent, the most since June 19, to 4,698.52 at the close in Cairo. The gauge had fallen as much as 5.5 percent before Parliament Speaker Saad al-Katatni called the legislature to convene Tuesday. The nation’s 5.75 percent dollar bonds due April 2020 fell for the first time in seven days, sending the yield four basis points, or 0.04 percentage point, higher to 6.24 percent at 3:30 p.m. in Cairo.
Mursi’s decree, which also called for a fresh parliamentary vote within 60 days after the approval of a new constitution in a public referendum, came after the military last month dissolved the assembly and assumed legislative authority. The military’s move followed a decision by the high court that the law that governed voting for the Islamist-controlled chamber was unconstitutional. Until his election last month, Mursi had been the chairman of the Freedom and Justice Party, the political arm of the Muslim Brotherhood.
“The drop is a little stronger than we expected,” said Teymour al-Derini, Cairo-based director of Middle East and North Africa sales trading at Naeem Brokerage. “Parliament may be reinstated but it will be powerless. This is round one between the Brotherhood and the military, and it will likely continue to have a negative effect on the market.”
The Supreme Council of the Armed Forces, which took over executive powers from the ousted Hosni Mubarak until Mursi’s election, convened an emergency meeting last night to discuss Mursi’s decree, the official Middle East News Agency reported. Members of parliament were allowed into the legislature’s building Monday, the agency said separately.
The Egyptian pound, subject to a managed float, weakened 0.1 percent to 6.0614 to the dollar, extending its losses since the start of last year’s uprising to about 4 percent.
One-year non-deliverable forwards were unchanged at 7.45 Egyptian pounds to the dollar, indicating investors expect the pound to plunge 19 percent within 12 months.
A version of this article appeared in the print edition of The Daily Star on July 10, 2012, on page 5.