11/20/2011 08:15 EST | Updated 01/20/2012 05:12 EST

Egypt benchmark index sheds over 2 per cent on unrest, clashes, in capital

CAIRO - Egypt's benchmark stock index tumbled more than 2 per cent on Sunday as clashes between protesters and security forces entered their second day, rattling investor confidence in the country's already stumbling economy.

The Egyptian Exchange's EGX30 index closed 2.43 per cent lower, at 4,024 points. The slide built on a week of declines that have helped push the index's year-to-date losses to almost 44 per cent. The index had tumbled almost 3 per cent earlier in the day, but recouped some of the losses.

Brokers attributed the drop to the clashes between rock-throwing protesters and security forces in Cairo's central Tahrir Square, the epicenter of the uprising that ousted former President Hosni Mubarak in February.

The fighting entered its second day, with the protesters demanding the country's military rulers quickly announce a date to hand over power to a civilian government. The unrest comes days before the Nov. 28 parliamentary elections — the first national vote in roughly 30 years that doesn't include the former ruling National Democratic Party.

"These are bad times," said Khaled Naga, a senior broker with Mega Investments, adding that even after a thousands-strong demonstration on Friday went relatively peacefully, there were expectations that the market would decline.

"All things considered, this is a reasonable decline," said Naga. "We were expecting worse — maybe 5 per cent."

Shares of Commercial International Bank were down almost 2.6 per cent to 23.13 Egyptian pounds while Orascom Construction Industries' shares were off 3.14 per cent to 220.44 Egyptian pounds.

The Jan. 25 uprising that toppled Mubarak and ended nearly three decades of authoritarian rule has battered the country's economy.

Foreign investment and tourism, which are two of the country's economic pillars, are reeling from the unrest, while frequent labour strikes and other mass protests have disrupted daily life and forced the government to adopt populist policies that have widened the deficit and added to expenses.

Already, Egypt has run through almost 40 per cent of its net international reserves since December.

Brokers said continued unrest in the capital would likely only add to the drop and expected that the market's support point — where it could bounce back — could be around 3,800 points. But hitting that level would involve a number of days of heavy losses and so far the Egyptian market has shown a surprising ability to bounce back despite the continuing unrest and tension in the nation.