The Arab Spring’s Obscured Occasions
The second anniversary of the Tunisia-originated Arab spring coincided with struggling MENA stock markets as pacesetter Egypt retraced its MSCI climb to 30 percent on popular backlash against President Morsi’s pre-emptive constitutional moves and backtracking on tax pledges which delayed IMF board endorsement of a near $5 billion loan into next year. Foreign investors who had tentatively re-entered the local Treasury market and were calmed by the President’s brokering of a ceasefire between Israel and Hamas on the Gaza Strip, reiterated doubts about the Muslim Brotherhood’s political and economic intentions, with key donor Gulf monarchies also wary of the cause in moving to honor previous financial pledges. Foreign exchange reserves are down to $15 billion on trade weakness and intervention to hold the pound at the 6 to the dollar line in the name of stability. The central bank has also stayed the course with the benchmark interest rate as lower food prices bring inflation to 5 percent, although fuel cost has increased with propane subsidy removal. French-owned units may be sold as parents try to raise capital, with FDI and privatization activity otherwise on ice. Big listed companies especially in the property sector are still under investigation, and former president Mubarak’s family members could soon be put on trial for alleged corruption and embezzlement of state funds.
In Tunisia, where the Ben Ali retinue fled prosecution, the bourse was off 10 percent in December amid talk that it too may seek IMF support. Protests and strikes continue against the interim Islamic party-led administration as youth unemployment hovers at 40 percent with migration to Libya again an outlet with the end of the Kaddafi era there. Elsewhere in the Maghreb Morocco, which is under a $6 billion IMF program, was down 15 percent as the other MSCI Arab core member although a $1 billion 10-year sovereign bond was several times over-subscribed. With the technocrat prime minister facing reform opposition and new elections scheduled soon, the eager response was seen more as evidence of global debt froth.
In the Gulf the sukuk wave which surpassed $20 billion has diverted momentum from equities, with only the UAE and Saudi Arabia positive for the year at respective 20 percent and 5 percent gains. The Islamic bond segment was shaken however by the Emirates’ Dana Gas restructuring following a brief default. Foreign hedge funds received a late cash payment and agreed to a swap involving high-yield normal and convertible instruments. Bahrain and Oman were at the bottom of the pack with 10 percent declines, while Kuwait was flat after another round of boycotted elections. Jordon and Lebanon continued to experience a refugee and cross-border commercial toll from the Syrian civil war in another instance of halting historic hope.
