Markets rally after coup to depose Morsi

MARKETS responded positively to the ousting of Egyptian president Mohamed Morsi yesterday, recovering much of the previous days’ losses as optimism about potential economic reforms pushed the EGX 30 Egyptian equity index up by 7.3 per cent.

Bonds yields also fell as the risk of default receded, although Egyptian gilts remain a risky investment prospect. And British firms with interest in the country also recovered, with Egypt-focused gold miner rising 14.77 per cent and shares in oil firm BG Group up almost three per cent.

The country’s military issued arrest warrants for hundreds of individuals associated with the political party of former President Mohamed Morsi, hours after he was deposed in a coup.

Interim President Adli Mansour, the head of the supreme court, was sworn in amid the crackdown on members of the Islamist Muslim Brotherhood.

Supporters of Morsi, who is under house arrest, refuse to recognise the coup and insist the military has acted against the democratic wish of the people by deposing a leader who won Egypt’s first free election just 13 months ago. Morsi’s downfall was in part down to Egypt’s terrible economic record and high youth unemployment, prompting hopes that a new government will adopt radical measures to boost growth.

Fabio Scacciavillani, chief economist at Oman Investment Fund, said the next regime might be more willing to push economic reforms. But he added: “Economic consequences are hardly predictable. The horizon is clouded.”

Meanwhile fears of instability and disruption to the Suez Canal retreated, and the price of US light crude oil slipped back 12 cents to $101.12 a barrel.

President Mansour insisted he will hold fresh elections but did not provide a timetable as supporters from both sides took to the streets. Dozens of people have been killed in the latest round of protests.