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What's Next For Egypt? (EGPT)

What's next for Egpyt?

By now, we all know that the situation in Egypt is horrible, with protests happening around the country, and the government is restricting internet and cell phone access to help stifle the protests.

Earlier this week, Twitter was banned in the country, in an effort to try to stem the protests.

Obviously it's not working, and things are only getting worse, for the country's image, as well as its economic health.

The country's stock market, the EGX30, has fallen 20% this week, as the situation continues to worsen. Egyptian debt is getting killed in the markets, and yields and credit spreads are soaring as a result. The index fell 6% on Wednesday, and 11% yesterday on the back of the news that the country's youth is trying to end the 30 year reign of Hosni Mubarak, the country's president. The rating agencies have also cut Egyptian debt on the back of this political uncertainty.

Shares of the Egypt ETF (NYSE: EGPT) continue to get hammered this week, down another 2.6% today.

There are also concerns that some companies operating in Egypt, particularly Apache (NYSE: APA), could see disruption over their operations. Apache gets about 25% of its revenues from Egypt. The company said it is not seeing any issues yet, and will continue to monitor the situation.

There are rumors that the Suez Canal is being blocked by protesters, which could be the reason for the spike in crude prices the past couple of days. The Suez Canal allows 30% of the world's oil to pass through it, and any type of disruption in the canal leads to speculation that oil will not be able to reach its intended destinations for an extended period of time.

The situation is ever fluid and ever evolving, as reports are coming out now that Egypt has imposed a 6 p.m. to 7 a.m. curfew in Cairo and 2 other cities, which likely will only make things worse.

Mohamed ElBaradei, the former head of the UN's nuclear watchdog, a Nobel Peace Prize winner and an opposition leader in Egypt returned to the country last night and has participated in recent protests. ElBaradei said he would lead a "transition" if asked, as the country seeks to move towards a democracy. So far, 7 people are dead, and this number is only expected to escalate, as the protests continue.

"This is a revolution," one 16-year-old protester said in Suez . "Every day we're coming back here."

The Muslim Brotherhood, which is the largest activist group of Muslims in the region, has now joined in on the protests over Mubarak. The organization previously was not participating, watching from the sidelines, but as the situation has intensified, the group has entered into the foray.

All of this stems from the revolution in Tunisia, where the president was ousted after a reign of 23 years.

The United States is in a precarious situation, as President Obama has long called for democracy in the Middle East, but Egpyt, and specifically Mubarak, is a major Washington ally in the Middle East. The country has received large amounts of military aid as a result.

"It is very important that people have mechanisms in order to express legitimate grievances," Obama said as he answered questions on Youtube. Obama has pleaded with Mubarak to make changes to the political system to appeal to the protesters. "I've always said to him that making sure that they are moving forward on reform - political reform, economic reform - is absolutely critical for the long-term well-being of Egypt."

Dr. ElBaradei has been critical of the U.S. in this situation, as he believes the West has listened to what Mubarak has to say about the Muslim Brotherhood, and likening them to Al Qaeda.

ElBaradei said, “For years, the West has bought Mr. Mubarak's demonization of the Muslim Brotherhood lock, stock and barrel, the idea that the only alternative here are these demons called the Muslim Brotherhood who are the equivalent of Al Qaeda.”

He went on to say, “I am pretty sure that any freely and fairly elected government in Egypt will be a moderate one, but America is really pushing Egypt and pushing the whole Arab world into radicalization with this inept policy of supporting repression.”

It's quite clear the youth of the country want Mubarak out. "Leave, leave, Mubarak, Mubarak, the plane awaits you," people chanted in the streets of the country.

As for what's next for Egpyt, a revolution is taking place, no matter what Mubarak wants or does.

For the rest of us outside the situation, all we can do is wait to see what happens and hope for the best.

Posted-In: Emerging Market ETFs Politics Economics ETFs General Best of Benzinga

 

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