Egyptian investors in wait-and-see mode before presidential elections
A growing number of Egyptians are playing it safe, preferring to wait until after the presidential elections to decide whether to invest in local markets.
Many have cited the current political and economic instability as a hindrance to traditional spending habits and say these have curbed their choices to invest in industry, manufacturing and real estate.
The Stock Market has itself experienced more than a year of volatility in a roller coaster ride of losses and gains. Since the January 25 popular uprising, the Stock Market has lost at least EGP 15 billion but regained most of it by late March of this year.
But in April, it suffered a six-day streak of losses only fully stabilizing by the end of the month. Analysts say investors are waiting to see how an International Monetary Fund loan of $2.5 billion in mid-May will affect the local market.
But some experts warn that the current market stagnation is likely to last until the end of summer, after the country has chosen a new president and after he has set in motion a clearer vision for the future.
Rafik Talaat, a salesman at SODIC, one of Egypt's more prominent real estate companies, is certainly hoping the election of a new president will end the country's economic dry spell.
"The company [SODIC] witnessed remarkable decline in its overall sales over the past year, as many of our customers retrieved their assets or liquidated them," Talaat said.
He said that some customers were delinquent in paying their instalments.
SODIC's woes reflect an overall slowdown - if not general halt - in real estate activity especially for off-plan properties, those which are still under construction.
He said the company is trying its best to keep as many investors on board and at the same time increase sales by providing less restricted facilities and longer periods of payments.
Ahmed Fahmy, an independent broker, pointed out that during the coming season of summer, demand for properties in certain areas outside Cairo, such as the Ain Sokhna and Northern Coast, traditionally increases.
But this year due to the economic and political uncertainty, people are less concerned with the idea of the "second or summer home"; real estate is always the first thing that is affected by any crises or recession in the country.
"I bought a big family house three years ago on Road 90 in [the Fifth Settlement, New Cairo] and had planned to move in by 2012. But due to the period of presidential elections and the potential occurrence of any political [upheaval], real estate is not consider anymore a secured investment and I prefer liquidity over owning an asset," said Sherif Azmy, a businessman.
Wael Ziada, Head of Research at EFG Hermes, one of the leading investment banks in the region, emphasized the fear of risk among investors. Many feel that the situation could worsen in Egypt and that their money goes down the drain.
"Although the existence of huge supplies of stocks has pushed their prices down, demand is still low and people are not enthusiastic enough to risk their money until this period of political uncertainty passes," Ziada told The Caravan.
According to a 2011 EFG Hermes Earnings report published last month, Hermes reported consolidated net income of EGP 133 million for the year 2011, compared to EGP 708 million the year before.
Despite these frustrated figures, Ziada is optimistic that 2012 could be a booming year economically once political stability and order are restored. "If the consumer, investor and companies felt that the economy and political situation is safe and stable, they will invest more to gain more revenues and refresh the recessed market."