President Hosni Mubarak's resignation offered new hope for a rebound in bruised investor confidence in Egypt, with the cost of insuring the country's sovereign debt retreating sharply. Analysts and economists cautioned that other questions remained, such as the pace of reform and what role the military would play.
Friday's announcement was made by Vice President Omar Suleiman, who said Mubarak was handing control of the country over to the military. Mubarak's exit signaled an apparent end to the nearly three-week crisis, which many had feared would descend into violence and cripple the country politically and economically.
"It's a move definitely toward the right direction," said John Sfakianakis, chief economist with the Riyadh, Saudi Arabia-based Banque Saudi Fransi. "But what we still don't know is exactly the direction that we're taking or the steps to get there."
In an indication of the easing of investor angst, the country's five-year credit default swaps dropped 24 basis points to 313 basis points, according to CMA data. Meanwhile, the Market Vectors Egypt Index ETF — which allows investors to invest in Egyptian stocks — was up about 4.3 percent to $18.52. It had reached almost 6.7 percent within minutes of the resignation announcement.
But plenty of questions remained about the next steps, and whether the president's resignation would be enough to appease millions whose demands included the dismantling of his entire regime.
Wael Ziada, head of Egypt research at the Cairo-based Mideast investment bank EFG-Hermes, said the news should help "restore confidence because it means the country is approaching a more-or-less stable state."
But, he said, "We need to know how the military will be ruling the next period."
The announcement was a rare bit of good news for millions in a nation that had seen the economy grind to a standstill in the first week of the demonstrations.
As banks closed, businesses were shuttered and lawlessness broke out, tensions built over the past 18 days in an outpouring of protester vitriol directed against a man who had ruled Egypt for nearly 30 years. Banks reopened, spared a much-feared panic of investors withdrawing their money.
But the 7 percent growth rates that Egypt enjoyed for three years before the global financial meltdown struck appeared to be a wistful memory. Tourists fled in droves, and foreign investors dumped holdings. Others who had pumped hundreds of millions of dollars into ventures such as megastores Carrefour saw their stores turned to ash by firebombs after the businesses had been looted.
Egypt's image as a pillar of stability in a restive region had, to put it mildly, been marred, and it was anyone's guess how deep the repercussions would go.
Even before Suleiman's announcement, it was unclear whether the Egyptian Exchange would reopen as scheduled on Sunday after a two-week closure. The market's benchmark EGX30 index had dropped almost 17 percent in two consecutive trading sessions before it closed on Jan. 28. That prospect now appeared more likely.
Also in question was whether the Egyptian pound might endure another pummeling or whether foreign capital outflows would continue and at what pace. The Central Bank had stepped in to prop up the pound as foreigners pulled their money and others shifted deposits from the pound to the U.S. currency. It said it was ready to intervene again, if necessary, citing official foreign currency reserves of about $36 billion.
Initial indications offered an upbeat assessment.
The Dow Jones industrial average reversed an earlier slide and was up 12 points, as European markets also drifted higher. Oil prices dropped, with the U.S. benchmark crude futures contract for March delivery dropping $1.21 to $85.52 in midday trading on the New York Mercantile Exchange. In London, Brent crude fell 31 cents at $101.13 on the ICE Futures Exchange.
The wide spread between the two benchmarks had been at least partially cemented by concerns that unrest in Egypt could affect Suez Canal traffic and spill over to other countries in the oil-rich Middle East where autocracy was the norm and popular discontent rife.
While analysts are skeptical that the same unrest could seriously threaten the Gulf Arab states where oil wealth can be funneled to appease the population, they were less certain about the prospects — at least in the short-term — in Egypt.
At stake was the pace and structure of the reform that would emerge in the coming period. In addition, whatever government that emerges from the shadows of Mubarak's regime will still be hoisting the baggage he left behind.
"It remains to be seen whether the euphoria on the streets of Cairo which greeted Mr. Mubarak's resignation is sustained through what could still be a very difficult transition period," Nomura said in a report issued Friday.
About 40 percent of Egypt's population of 80 million people lives on or below the World Bank's $2 per day poverty benchmark. Corruption is rife and Egyptians have accused Mubarak's business friends and fellow power brokers of robbing the country blind for years through the privatization process, sweetheart business deals, cut-rate prices for state lands and other kickbacks that came with the trappings of power.
Also to be reckoned with was a swollen deficit, a wide income gap, a bloated public service sector, week-old promises of a 15 percent pay and pension increases for its workers and retirees, unemployment unofficially pegged as high as 25 percent and even higher among the under-30 age group that makes up at least 40 percent of the population.
Compounding the litany of woes was the beating the tourism sector could take in the wake of the protests. Foreigners had fled the country in droves as the protests unfolded and it remained unclear whether they would be willing to risk returning soon to a country where the military was ostensibly in control.
Then, there remained the perennial political concern: the Muslim Brotherhood — the largest and best organized opposition movement in the country. While the group renounced violence long ago, it is still viewed with concern by many in the West who fear it aims to turn Egypt into a draconian Islamic state.
"The biggest question that remains unanswered is what will happen to the opposition and the role of the Muslim Brotherhood," said Sfakianakis.
"If we go into free elections, the Muslim Brotherhood will, for certain, play a major role in determining whether the investor community sees Egypt as a value proposition or a selling off proposition," he said.