Tahrir Square - Firmly Entrenched in Egyptian History

Tahrir Square is seeing history repeating itself given that it has previously played host to another revolution in Egypt. Back in 1952 the square will filled with protesters who sought the removal of King Farouk. King Farouk was successfully overthrown and Egypt was placed under military rule under the leadership of Gamul Abdul Nasser. Two years later the square was renamed Liberation Square.

Source: http://rotaryeltahrir.org/

Liberation Square is the focal point of life in Cairo, the Egyptian capital, as the surrounding area is packed with some of Egypt's most prominent buildings. Buildings such as:

• the Egyptian Museum, which was tragically looted during the protest last week,

• the National Democratic Party (NDP) Headquarters, 

• the Mogamma government building, 

• the Headquarters of the Arab League 

• as well as the original downtown campus of American University. 

Source: http://www.bbc.co.uk/news/world-middle-east-12340082

The square is of such national importance one national newspaper is quoted as saying "whatever happens in Tahrir Square immediately becomes a national concern"  The square has also been the a traditional staging ground for Cairenes with grievances against the government, an examples being the bread riots of 1977 or more recently protests against the US-led invasion of Iraq in 2003.

Source: http://www.guardian.co.uk/world/2011/feb/01/ahdaf-soueif-egypt-protests

Recent Post by Barry Ritholtz from The Big Picture - NYSE Euronext/Deutsche Borse Deal

The recent a merger chatter between the NYSE and the Deutsche Börse got us wondering: How might life at the NYSE change under their new German management?

10. Effective immediately: No more bell ringing when Chairman David Hasselhoff has a hangover.
9. NYSE changes its tagline to “Das Equities.”
8. Sylvia Wadhwa on the cover of the annual NYSE Calendar
7. All Dark Pools will be delicious Bavarian Chocolate
6. Dick Grasso’s honorary new title: der Führer
5. Merger is the last of Germany’s wartime reparations to the Jews (And they really mean it this time!)

4.  The new Art Cashin Biergarten presents ‘Stocktoberfest’!
3. Parisian counter-parties surrender rather than take the other side of trades.
2.  Color-coded lederhosen for specialists, runners and floortraders.
1.  Once a year, pretend Nasdaq is Poland and invade.

Found this very amusing, so felt the need to re-post. Thanks goes to http://www.ritholtz.com/blog/

Hosni Mubarak: A Life, in Brief

Hosni Mubarak, born in 1928 graduated from the prestigious Egyptian military academy in 1949 in Cairo. Afterwards he received advanced flight and bomber training in the Soviet Union, which enabled him to become a commander in the Egyptian air force.  

                His first step to becoming President of Egypt was presented to him when he was appointed chief commander of the air force by Anwar el-Sadat. It was during the Arab-Israeli war of 1972 where Mubarak gained his reputation after the successful performance of the air force in opening days of the conflict. As a result of this in 1974 Mubarak was promoted air marshal. One year later, his political career began in earnest when el-Sadat appointed him to the position of vice-President. It was in this role that Hosni Mubarak gained an international reputation as a statesman and power-broker for the Middle Eastern region after involving himself with most of the negotiations involving Middle Easter and Arab affairs. 

It was to take a moment of political upheaval in Egypt that was to propel Mubarak to the top job in the country after el-Sadat was assassinated in 1981. Mubarak’s years in office marked what was to be a huge transitional phase for the country as a whole. Egypt, under Mubarak’s leadership saw as substantial paradigm shift in relation with other Arab country’s but more significantly with Israel. Mubarak reaffirmed Egypt’s peace treaty with Israel in 1979 under the Camp David Accords, additionally Egypt maintained and cultivated good relations with the United States, which has led the US to become Egypt’s prime aid donor contributing around $1.2bn annually.

Mubarak’s international stature was boosted further still during the Persian Gulf War in 1990-91, when he led the way in supporting the Saudi decision to host US forces, an extremely controversial decision given Saudi Arabia is the place on the two holiest sites in the Muslim world, Mecca & Medina.

After the cessation of hostilities between the US backed forces and Iraq, Mubarak played an influential role in brokering a bi-lateral agreement between Israel and the Palestinian Liberation Organization (PLO) in 1993.

However, towards the mid 1990s, Mubarak began to face increasing opposition and civil unrest, which led to a guerrilla violence that wanted democratic reforms despite his re-election in 1993. Mubarak under pressure began a campaign against Islamic Fundamentalism which carried out a series of devastating terror attacks throughout this period in Egypt.  Four years after an attempted assassination, Mubarak was again elected president for the fourth time, however he was unopposed during this campaign. In 2005 Mubarak won want was widely regarded as a rigged election, which was the first multi candidate election. 

Fast forward to today, Egypt is on the verge on revolution with significant pressure been put on Mubarak to resign after years of failed promises, specifically democratic reform, which has essentially been non-existent. The catalyst for the current situation in Egypt was the Jasmine Revolution which took place in near-by Tunisia, which forced the President Zine al-Abidine Ben Ali from power.

 

 While democratic reforms are the primary objectives for citizens of Egypt, there are other reasons which have fuelled the flames of revolutionary spirit in Egypt. For example;

1. decline in living standards - high youth uunemployment and increase in poverty
2. a substantial increase in commodity prices, which has resulted in high food prices, which has not been match by wage increases (hence the above). Notice last year a sharp increase in protest/riots and demonstrations regarding food prices.
3. add the above with a disaffected population, which has over time become fed-up with their respective ruling governments and you see how the situation has come about. 

Article courtesy of http://www.britannica.com/EBchecked/topic/395776/Hosni-Mubarak

A meeting of historical significance in Egypt

Today's meeting in Egypt of the Supreme Council of the Armed Forces has a huge historical significance in Egypt.

The council has convened only twice before in its history:

1. In 1967 when it fought the war against Israel
2. In 1973 when is again fought the war against Israel
3. and now, today - also of significance is the absence of President Mubarak during this key meeting, which has further fueled speculation that his is about to resign from office.

There is now the potential and/or anticipation that this is the council that will govern Egypt during this transitional phase. Furthermore the meeting released what has been coined "communique, number 1", which would indicate this is beginning of what is likely to be further meetings of this council of the Armed Forces.

A Sense of Optimism Regarding Egypt

If Credit Default Swaps (CDS) are anything to go by then investors would seem to have a some degree of confidence in Egypt at the moment, despite all the political uncertainty.

Also looking at the EGPT (see previous post for details), which is essentially acting like a futures market for actual Egyptian stock market that has been closed for the last week is also showing gains of around 8% since its low during the start of the crisis just over two weeks ago. Upon hearing the news that Hosni Mubarak could be stepping down as President of Egypt the EGPT ETF gained almost 3%.

Egypt: From the Investors Perspective

A Recent article in the FT shed some light on the Economic situation in Egypt and how it differentiates itself from Tunisia

Firstly the columnist highlighted that high inflation and food prices have put severe stain on governments across the Middle Eastern region. Wheat prices in particular have played a major part given severe supply constraints that have resulted from droughts and unusual weather cycles across the global, notably in India, Australia and Russia. Egypt, is highly exposed to the prices of wheat given that they are the worlds largest importer of the commodity, which has added further fuel to the protesters as prices continue to surge.

Additionally with rumours that Hosni Mubarak's son is to take the reins of power when he steps down smacks of the same nepotism that resulted in the downfall of the Tunisian president Zine al-Abidine Ben Ali. This has led commentators to believe that there is a contagion affect spreading across the region given the similarities of their political and governmental structures.

Fueling the citizens of Egypt's anger still further is that the country has been experiencing between 4.5% and 7% GDP growth since 2005 and has seen substantial capital inflows. However the population has seen very little effect of this growth given the high youth unemployment and low standards of living.

Investors initially ran for the exits by pulling substantial amounts of capital out the Egyptian stock market by selling their positions in Egyptian stocks, however this sell off already appears to be overdone as investors have already sought to capitalise on the situation to buy stocks at beaten down valuations. (see chart below - which is ETF traded on the NYSE, which tracks a basket of Egyptian stocks)

EGPT top 10 Portfolio Holdings can be found here http://etfdb.com/etf/EGPT/holdings/

Fadi al-Said at ING In-vestment management in Dubai says the situation in Algeria is in contrast to that in Egypt. Highlighting "the reformist mood in region would have been boosted by the Jasmin revolution, but it is more likely to brought about by a gradual transition to democracy, rather than repeats of violent spasms that ousted Ben Ali 

Zin Bekkali, chief executive at Silk Invest says "longer term, I think this is part of the growing up and the maturing of these countries". He goes on to say that the countries have a level of economic development that is not at a par with the maturity of their political systems, which is a good and bad thing. The bad thing being that this will inevitable "create friction between the two". "The good thing is that are economically developed which should allow then enough stability to get through this situation". 

Does the events in Tunisia and now Egypt represent a Berlin Wall moment in history for the Middle East?

Although the clashes/protests in Egypt are is not an ideological battle as it was in the late 1980s early 1990s during the end of the Cold War. There are three significant themes that are emerging, which have led up to these events in Egypt. All of which are playing a substantial part in fuelling the anger/frustrations of the general populace in countries such as Yemen, Egypt, Syria, Jordan and Algeria.

1. decline in living standards - high youth unemployment and increase in poverty

2. a substantial increase in commodity prices, which have resulted in high food prices, which has not been match by wage increases (hence the above). Notice last year a sharp increase in protest/riots and demonstrations regarding food prices.

3. Add the above with a disaffected population, which has over time become fed-up with their respective ruling governments and you see how the situation has come about.

Also the events in Tunisia over the past month have provided the catalyst for the people throughout the Middle East to begin to challenge their governments rule over them.

Notice also that you have seen protests in Yemen and Jordan, which have had autocratic/one party rule for substantial length of time.

You could go so far as to say it is Globalisation 3.0, especially when you take into account the protests in Burma/Myanmar and in Latin America most notably in Venezuela.