Drastic developments in Egypt overnight:
At 22:34 UTC (00:34am local time), Renesys observed the virtually simultaneous withdrawal of all routes to Egyptian networks in the Internet’s global routing table. Approximately 3,500 individual BGP routes were withdrawn, leaving no valid paths by which the rest of the world could continue to exchange Internet traffic with Egypt’s service providers. Virtually all of Egypt’s Internet addresses are now unreachable, worldwide…
One of the very few exceptions to this block has been Noor Group (AS20928), which still has 83 out of 83 live routes to its Egyptian customers, with inbound transit from Telecom Italia as usual. Why was Noor Group apparently unaffected by the countrywide takedown order? Unknown at this point, but we observe that the Egyptian Stock Exchange (www.egyptse.com) is still alive at a Noor address.
Like other bourses in the region, the EGX is closed until Sunday in any case — but we don’t know how long Egypt’s internet will be shut overall, following the ‘Friday of Anger’ on the country’s streets.
Drastic — but not at all surprising, actually.
Egypt in 2011 has merely done what Burma did in 2007. The only real difference is that investors into Egypt elected to forget that they were buying into Burmese-style political risk all along — a gerontocracy sat upon a societal volcano.
But you’d really have to ask what the hell you’re doing investing in this country — its banks, its telecoms, and its transport infrastructure — if security forces can block it all off at a moment’s notice. You’re investing upon Pharaoh’s terms. That’s why keeping the exchange site open is astonishing — it just makes the charade transparent.
So you might want to look at actual fundamentals that are driving the country’s social revolution. As our FT Tilt colleagues have pointed out, Egypt’s government has doubled down on the threat of food riots; committing to increase subsidies even further. Twenty-five per cent of Egypt’s budget is already devoted to food and energy subsidies, and it’s also the world’s biggest importer of wheat…
Interestingly though, the relationship between wheat futures and Egypt CDS has been loose at best, at least until recently:
How much else needs repricing by the wall of cash that’s been sent to emerging markets, we wonder.
Related links:
Egypt: bye-bye to the carry trade? - FT beyondbrics
Mideast turmoil should spur rethink – FT
The Mubarak effect on equities – FT Alphaville