Egypt's stock market is poised to reopen Wednesday after a nearly two-month closure triggered by the unrest that toppled Hosni Mubarak, and analysts expected steep losses in a reflection of shaken investor confidence.
The relaunch of the Egyptian Exchange comes after the prime minister accepted the resignation of the market's chairman and appointed a new, temporary head. The move was the latest step by officials to try to ensure a smooth first few days of trading on a market whose restart was delayed several times amid fallout from the Jan. 25 uprising and ensuing labor unrest.
The decision to reopen the market was based on "taking all required procedures to guarantee its safety opening and trading," said a statement posted on the Egyptian Cabinet's website.
Analysts believe that most, if not all, companies will see their share prices hit hard as investors have their first chance to weigh in with their money on the developments that have reshaped the country's political landscape over the past two months.
"I think the market will come under pressure and we'll see declines in most of the names," Wael Ziada, research head at the Cairo-based Mideast investment bank EFG Hermes, said Tuesday.
But "I don't think that volumes will be significant" in the first few sessions, he said. "As the market declines further, we'll start seeing trading volumes rising."
Several companies have announced plans to buy back shares, according to a statement released Tuesday by the Egyptian Exchange. Topping the list was property developer Amer Group, which planned on buying 101 million of its shares, according to the exchange statement.
The effort is one of many aimed at offsetting losses tied to fears bottled up since the market closed on Jan. 27, after two consecutive days of losses that saw its benchmark index plummet by slightly over 16 percent.
What many had expected to be a closure of a couple of weeks, however, was expanded as the popular unrest that toppled Mubarak was supplanted by waves of labor unrest after his ouster. Banks were shut down as workers demanded higher pay and shifts from temporary to permanent labor contracts.
The strikes rippled through a broad range of sectors, seriously affecting the country's output at a time when tourism revenues were seen falling sharply and foreign direct investment was expected to take a hit amid the political uncertainty in the Arab world's most populous nation.
Egyptian officials enacted measures aimed at safeguarding the market, including triggering a suspension of trading if the broader EGX100 index moves 5 percent or 10 percent. In addition, the finance minister set up a 250 million pound ($42 million) fund that could be tapped if there is a need to boost the market.
The government also called on all Egyptians to step up and invest, either in shares or mutual funds, as a way to prevent the market from collapsing.
"These are all attempts to try to secure the market," said Ziada.
But the uncertainty over when the exchange would actually reopen unnerved scores, raising questions about transparency in a market many viewed as among the most transparent in the region.
Those questions build on other worries, including the overall welfare of Egypt's economy and the stability of the country. Other worries centered on the potential impact on the market of investigations into alleged wrongdoing by former ministers and top businessmen linked with the ousted regime.
On Monday, ratings agency Moody's Investor's Service said it downgraded the foreign currency deposit ratings of five Egyptian banks by one notch, to B1 from Ba3, after having downgraded Egypt's sovereign rating days earlier. The banks affected were the National Bank of Egypt, Banque Misr, Banque du Caire, Commercial International Bank and Bank of Alexandria
Moody's said its negative outlook on the banks reflects its "reassessment of most of the banks' standalone credit strength, reflected in their bank financial strength rating (BFSR), mainly due to their direct exposure to a lower rated sovereign and the deteriorating economic conditions."
Some good news crept in.
After Saturday's referendum in which voters approved several proposed constitutional amendments, Egypt's default risk narrowed, with its five-year credit default swap tightening by about 4.3 percent to 344.1 basis points on Tuesday, according to financial data provider CMA.
Analysts, however, expect that even with the safeguards, support mechanisms and assurances by the government that the country's economy is in decent shape, the market will fall hard.
"What is the bottom that the market will fetch, this is what I'm interested in," said Ziada. "Once you see the volumes start to be significant, this is when the market would have found a bottom."