Egypt underperforms region in a reaction to Brexit

The Egyptian stock index was down 5.8 percent in early afternoon

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Egypt's stock market plunged on Sunday in response to Britain's decision to leave the European Union, underperforming other major Middle East markets as investors worried that global instability could further cut capital inflows into Egypt.

The Egyptian stock index was down 5.8 percent in early afternoon. Falling stocks outnumbered gainers by 139 to four.

Naeem brokerage said in a note that the economic impact on Egypt of Brexit would not be very serious, because weakness in the British pound and euro could actually benefit the current account balance of the import-driven Egyptian economy, and 16 percent of the country's external debt was denominated in euros.

But initially at least, investors focused on the risk that the global market turmoil would make it even harder for Egypt to attract fund inflows. That would worsen the hard currency shortage which is plaguing local industry and possibly making more depreciation of the Egyptian pound inevitable.

Commercial International Bank, Egypt's biggest bank and a favorite of foreign investors, sank 4.8 percent and major real estate developer Talaat Mostafa lost 8.7 percent.

Juhayna Food Industries, which exports its products to Europe and could see that business hurt by currency weakness there, slid 10 percent.

Beltone Financial plunged 8.8 percent as tensions worsened between it and market regulators, who have cancelled some trades in the stock during recent months, citing excessive volatility. Sources familiar with the dispute told Reuters that the company was now planning legal action against the stock exchange and the capital market regulator.

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