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Egypt's stock market reaches new, 5-year high

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MAGGIE HYDE | March 20, 2014 11:28 AM EST | AP

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CAIRO (AP) — Egypt's stock market reached a new, 5-year high Thursday, pushing to levels unseen since the 2008 global economic crisis despite ongoing political turmoil and unrest in the country.

The country's main stock index, the EGX30, closed up at 8,459.38 points. That's a 24.7 percent increase for the last year, something analysts say is linked to investors welcoming the military's plans for the country as it looks increasingly likely that Field Marshal Abdel-Fattah el-Sissi, Egypt's defense minister, will run for the presidency. El-Sissi led the July overthrow of Islamist President Mohammed Morsi, Egypt's first freely elected leader.

Exchange spokesman Hesham Turk said Thursday that the EGX30 reached levels Wednesday higher than on Sept. 9, 2008 — a peak before the global financial crisis and the 2011 revolt that toppled autocrat Hosni Mubarak.

"Having a very tight political agenda is keeping the market solid," said Ahmed Abou el-Saad, managing director at Rasmala Egypt Asset Management. "Egyptian companies are seeing double-digit growth rates."

The market also has been bolstered by Egypt's central bank easing restrictions on foreign currency leaving the country. The bank tightened restrictions in late 2012 as the Egyptian pound depreciated and anxious citizens rushed to convert their savings to dollars.

Many economists still consider the Egyptian pound, which is about 7 pounds per U.S. dollar, overvalued and propped up by the government, which has used fast-dwindling foreign currency reserves to keep the value artificially high.

This week, the government made payments on a number of outstanding debts to foreign investors that had been withheld to slow the flow of currency out of the country. This move, analysts say, is a positive sign for many foreign investors.

The market also has benefited from the $5 billion loan promised by Saudi Arabia and the $3 billion loan promised by the United Arab Emirates the day after Morsi's ouster. The two Gulf countries moved quickly to support the interim government and its crackdown against the Muslim Brotherhood-backed government.

This aid has helped bolster the country's foreign reserves, which are needed to pay for vital imports but also used to prop up the pound.

Since Morsi's ouster, the country has seen a rising insurgency, a crackdown on his Muslim Brotherhood group and regular protests by his supporters. That has yet to spook investors. However, the market's rise has not alleviated the daily economic hardships of many Egyptians, including inflation and high unemployment.