Egypt’s political risk has risen steadily since the 2011 revolution. To manage the availability of foreign currency reserves in short supply since the Arab Spring, Egypt has used currency controls, creating what Lystra calls a “major barrier” to efficient trading in the market.
It’s been three years since Hosni Mubarek was ousted during popular protests in Cairo. In summer 2013, protesters took to the streets and squares of the city once more, calling for the removal of President Mohamed Mursi. In late February, most of Egypt’s government resigned from power, adding to the political uncertainty facing Egyptian markets. Egypt’s military chief Abdel-Fattah el-Sissi is now seen as the front runner, should he choose to enter presidential elections later this year. No date has been set and el-Sissi has not decided to step down from his post in the military to become president. But in a speech on Tuesday, el-Sissi said he “can’t turn his back” if Egyptians want him to run for office.
Egypt still has a way to go before it gets its act together.
The reclassification of Egypt by Russell Indexes stems from a three-year market risk review process, in which Egypt did not meet macro- and operational risk criteria for emerging market status.
The Russell Index country classifications are announced each year in March. Changes become effective at the conclusion of the annual index reconstitution process in late June.
The Dow Jones Egypt Total Stock Market Index is having a good year, up 14.89% since Jan. 2. The Russell Frontier Index is up 12.85% year-to-date ending Mar. 3. The top five countries are currently Kuwait, Nigeria, Qatar, Argentina and Pakistan.
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http://www.forbes.com/sites/kenrapoza/2014/03/04/egypt-gets-demoted-to-frontier-market-status/