Egypt stock and bond markets rally after Morsi ouster

Egyptian shares jump after the country's military deposes president Mohammed Morsi, triggering a thirty-minute cooling off period for investors.

Protesters celebrated after Mohammed Morsi was dramatically ousted Wednesday night after a year as president of Egypt. Mahmoud Khaled / AFP

Egyptian shares jumped sharply this morning after the country's military deposed president Mohammed Morsi, causing the market regulator to suspend trading.

The EGX30 Index of Egyptian equities increased 6.4 per cent to 5,288 in trading yesterday, erasing losses on the market since June, and increased gains when trading resumed.

The leap triggered an automatic thirty minute suspension of market activity, which occurs when stocks leap by 5 per cent or more. After the suspension, shares rallied as much as 7.3 per cent.

Fixed income markets also rallied, with yields on Egypt's bonds maturing in 2020 down by 103 basis points to 9.4 per cent. Bond yields move in the opposite direction from price.

UAE-listed shares with exposure to Egypt, including National Bank of Abu Dhabi, Abu Dhabi Islamic Bank and Etisalat, also made modest gains.

Egypt's generals suspended the 2012 constitution, installed a transitional government lead by supreme constitutional court head Adli Mansour as the new president, and said the country would face early elections.

Economists warned that the military's action was a major setback for Egypt, which is currently negotiating with the International Monetary Fund over a $4.8 billion rescue package.

"In the absence of fresh Arab aid, we think Egypt has a space of six months before the external position tightens markedly again," analysts from Merrill Lynch wrote in a research report.

"The length of the transition period is uncertain but we think that there is every incentive to shorten the transition period, which we believe could end by year-end."

Further aid was unlikely to come from Qatar, which has supplied Egypt with emergency funding and averted an immediate balance of payments crisis, the report added.