VZCZCXYZ0014
RR RUEHWEB

DE RUEHEG #0313 0361333
ZNR UUUUU ZZH
R 051333Z FEB 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 3456
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0251

UNCLAS CAIRO 000313 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA 
NSC FOR WATERS 
TREASURY FOR NUGENT AND HIRSON 
COMMERCE FOR 4520/ITA/ANESA/OBERG 
 
E.O. 12958:  N/A 
TAGS: ECON KISL PGOV EG
SUBJECT: MUSLIM BROTHERHOOD CLAIMS ARRESTS HURTING ECONOMY 
 
REF: A) CAIRO 15 
 
      B) CAIRO 144 
 
------------------------------ 
Arrests Affecting the Economy? 
------------------------------ 
 
¶1.  (U) Recent postings on the Muslim Brotherhood (MB) website 
(www.ikhwanweb.com) claim that the arrest of 29 prominent 
MB-affiliated businessmen (reftels) has negatively impacted Egypt's 
economy.  The articles allege the arrests and subsequent freezing of 
assets of the MB-affiliated businessmen has caused domestic and 
foreign investors to withdraw investments from Egypt.  An article on 
January 30 also falsely claimed the arrests caused the Cairo and 
Alexandria Stock Exchange (CASE) to "plunge" on January 29.  The 
assertions have appeared amidst intense MB criticism of GOE economic 
reform policies, including claims that the GOE's highly-touted 7% 
growth rate has widened the gap between rich and poor, benefiting 
primarily the Mubarak government and its inner circle. 
 
¶2.  (U) GOE officials reject MB claims of economic harm from the 
arrests, charging in public statements that assets of arrested MB 
businessmen were used for "money laundering and funding an illegal 
organization."  Capital Market Authority Chairman Hani Sarieldin 
told journalists that claims that investors were withdrawing their 
funds from the CASE because of the arrests were "erroneous 
statements purported by certain internet sites in order to disrupt 
the market."  Sarieldin called for criminal charges against those 
responsible for the claims.  CASE Chairman Maged Shawky told econoff 
the real cause of recent volatility on the CASE is investor fear of 
a repeat of the market "correction" that began in February 2006. 
 
------------------------------------------- 
Market Fears of "Black Tuesday" Anniversary 
------------------------------------------- 
 
¶3.  (U) Most market analysts agree with the CASE Chairman's 
assessment that local retail investors are responsible for recent 
volatility on the CASE.  Retail investors are most susceptible to 
irrational fears, such as the upcoming anniversary of last year's 
market correction, which began in February and culminated on "Black 
Tuesday," when the market fell 6.4% on March 14, 2006.  Foreign and 
institutional investors, on the other hand, have been net buyers 
over the last few weeks.  While the MB website article acknowledged 
investor fears of another Black Tuesday, the article claimed, 
falsely, that the benchmark EFG-Hermes index dropped 12% on January 
29, after announcement of the MB asset freeze.  In fact, the EFG 
Hermes index declined only 0.39% on January 29, an improvement over 
the previous week's results, when the index fell 2.52% on January 
¶24. 
 
----------------------------- 
New Direction in MB Criticism 
----------------------------- 
 
¶4.  (SBU) COMMENT:  Although the MB's claims are not supported by 
facts, the claim itself is a new direction in MB criticism of the 
GOE.  By tying detention of its members to a downturn in the 
economy, the MB is intimating the extensive economic power of the 
organization.  It also appears to be aimed at sending the message 
that politically-motivated attacks on the MB are bound to work 
against the GOE, by undermining the government's one area of 
success, i.e., bringing about economic growth.