VZCZCXYZ0000
PP RUEHWEB

DE RUEHEG #2212 3341449
ZNR UUUUU ZZH
P 301449Z NOV 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 4345
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS CAIRO 002212 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/ELA 
TREASURY FOR BRYAN BALIN AND FRANCISCO PARODI 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV PGOV EG AE
SUBJECT: DESPITE STOCK MARKET PANIC, EGYPT EXPECTS MINIMAL 
IMPACT FROM DUBAI CRISIS 
 
¶1. (U) Key Points 
 
-- Egypt's stock market traded down 8% in the first trading 
day since the start of the Dubai debt crisis. 
 
-- Analysts see little long-term risk to Egypt's economy but 
note the possibility that FDI flows from the Gulf could be 
diminished. 
 
-- Egyptian company exposure to Dubai is minimal. 
 
-- Trade Minister Rachid downplayed negative investment 
impact. 
 
 
¶2. (U) After a four-day holiday, on November 30 the Egyptian 
stock market opened for the first time since the Dubai debt 
situation became acute. After opening down 6%, at the close 
of trading the benchmark EGX 30 index was down by 8%. The 
broader EGX 70 index was down 6%. 
 
¶3. (SBU) Mark Rorison, Head of Research at CI Capital, told 
us that Egypt's economy should expect only minimal effects 
from the crisis. He added that the Egyptian stock market 
would initially "get pummeled" as the events in the Gulf 
diminish global appetite for risk, but the longer term 
outlook is stable.  Rorison also said that, though it is 
premature to speculate, there could be some slowing of FDI 
from GCC countries if the crisis expands. 
 
¶4. (SBU) Mina Sadek, an analyst at Beltone Financial, a 
leading Egyptian investment bank, said that though the market 
would undoubtedly open down as a result of "panic," she did 
not believe that foreigners would be significant sellers of 
Egyptian equities. She added that her firm expected no major 
impact on Egyptian companies or banks as a result of Dubai 
debt restructuring since there is "no significant exposure" 
to Dubai debt.  She was equally positive on Egyptian 
industrial companies. She said that the only real Egyptian 
exposure to Dubai is through the building conglomerate 
Orascom Construction Industries (OCI), but even that is 
limited. Approximately 5% of OCI's project backlog is in 
Dubai, and most of this is in mature projects. 
 
¶5. (U) Dubai Ports (DP) World in Egypt, a subsidiary of Dubai 
World, has a significant investment in the port at Ain 
Sokhna. This port, located on the Red Sea, is the port 
closest to Cairo and is expected to grow substantially over 
the next few years. Two years ago, DP World spent $670 
million to acquire a 90% stake in the Egyptian Container 
Holding Company (ECHO) which is the controlling shareholder 
in the Sokhna Port Development Company. DP World released a 
statement that its debt was not part of the restructuring of 
its parent company Dubai World. Despite this assurance, there 
remains a risk that DP World expansion plans may be slowed. 
 
¶6. (U) Thus far, the only official statement from GOE 
officials on the crisis came from Egypt's Minister of Trade, 
Rachid M. Rachid, who said that he did not expect existing 
investment from Dubai and the GCC states to be impacted by 
this crisis, but that new investment might be less than 
previously expected. He also suggested that Egyptian service 
companies in Dubai could be hurt by a further slowdown in 
Dubai's overall economy. 
 
¶7. (SBU) COMMENT- Egypt's equity market reaction was much as 
expected, as a perceived increase in regional risks has 
prompted profit taking and sidelined some speculative 
investors.  Post contacts are confident for the moment that 
Egypt will be only mildly impacted by the crisis. The 
Egyptian banking sector does not have any significant 
exposure to Dubai paper, and Egyptian companies, particularly 
in the aftermath of the global economic slowdown, have fairly 
low levels of exposure to Dubai as well. End Comment. 
Tueller