US embassy cable - 05CAIRO2899

UNCLAS SECTION 01 OF 02 CAIRO 002899 
 
SIPDIS 
 
SENSITIVE 
 
NSC FOR POUNDS 
TREASURY FOR MILLS/NUGENT/PETERS 
COMMERCE FOR 4520/ITA/MAC/ANESA/MTALAAT 
USAID FOR ANE/MEA MCCLOUD 
 
E.O. 12958: N/A 
TAGS: ECON, PTER, EG 
SUBJECT: ECONOMIC IMPACT OF CAIRO TERROR ATTACK:  MODEST 
FALLOUT, FOR NOW 
 
This message is sensitive but unclassified.  Please handle 
accordingly.  Not for Internet distribution. 
 
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Summary 
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1.  (U) Reaction to the April 7 bombing in Cairo has been 
muted on the economic front, with the stock market 
registering a slight dip in the opening hours of trading on 
the first day after the bombing.  The downturn was quickly 
reversed, however, and the market recovered the following 
day.  For the tourism industry, the sector most likely to be 
affected by the bombing, reaction was mixed.  Most travel 
agents and hotel managers reported normal cancellation 
levels, with some anecdotal evidence of tourists departing 
immediately after news of the bombing was announced.  Tourism 
representatives in Upper Egypt reported no impact on their 
cancellation rates.  Tourism industry representatives agreed 
that due to the nature of the tourism cycle, the impact of 
the incident will be difficult to calculate precisely.  End 
Summary. 
 
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Stock Market Dips Quickly, Then Reverse 
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2.  (U) Trading value on the Cairo and Alexandria Stock 
Exchange (CASE) fell sharply at the beginning of the day on 
Sunday, April 10, the first day of trading after the April 7 
bombing.  The benchmark Hermes Financial Index (HFI) fell 3.7 
percent and market turnover fell 23 percent .  The biggest 
loser was Orascom Tourist Holdings, the share value of which 
fell 20 percent.  Foreign traders accounted for 12 percent of 
the day's activity.  The downward trend in value reversed 
slightly toward the end of the day on Sunday and continued 
upward the following day, April 11, with market turnover 
inching up one percent and trading by foreigners increasing 
to 23 percent of total trading.  Most market analysts 
predicted that the attack would not have a long term negative 
impact on the market, especially in light of the continued 
strong performance of key companies traded on the CASE and 
the GOE,s quick response to the attack and discovery of the 
perpetrator.  Banks and exchange bureaus reported business as 
usual in the week after the attack, with no increase in 
demand for foreign currency. 
 
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Tourist Reaction Mixed 
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3.  (SBU) Reaction from the tourist industry was mixed.  The 
General Federation of Egyptian Tourism Chambers held an 
emergency meeting on April 10 and concluded that no industry 
reaction was needed, as the attack had not had an immediate 
impact on tourist numbers.  Hotel and flight cancellations 
had not increased, and the hotel occupancy rate remained in 
the normal range for this time of year. 
 
4.  (SBU) Managers from two large Western hotel chains did, 
however, report anecdotal evidence of an impact from the 
attack.  One hotel manager saw a large American tour group 
check out and head for the airport within hours of the 
bombing; the daily "no-show" rate at this hotel also jumped 
from the usual 6-10 percent to 22 percent in the week after 
the incident.  The jump was caused more by no-shows of 
business travelers than leisure travelers.  Another hotel 
manager reported few cancellations but noted that tour groups 
have shrunk, i.e., a tour company that booked 25 rooms might 
only occupy 20.  The manager did note that a direct 
correlation to the bombing could not be made, as spring is a 
transition period for tourism in Egypt.  Western travelers 
begin to taper off as the spring holidays end and 
temperatures in Egypt rise.  They are replaced in the summer 
months by Gulf Arabs escaping the scorching temperatures in 
the Gulf. 
 
5.  (SBU) The Director of Public Relations for the Tourism 
Federation in Luxor said that the number of visitors to that 
city had not dropped off since the bombing.  Tour companies 
and hotels also reported no drop off in group bookings, but 
hotel managers did report a few individual cancellations. 
Tourism industry representatives do not expect tourism in the 
Sinai or Upper Egypt to be affected by the incident in Cairo. 
 
 
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Comment 
 
6.  (SBU) The muted response thus far to the incident from 
the capital and foreign exchange markets indicates that 
Egypt's overall economy is not likely to experience a 
significant negative impact from the bombing, so long as it 
is not followed by other attacks.  Tourism representatives 
believe that the cyclical nature of that industry will make 
it hard to determine precisely the impact of the attack.  In 
particular, it may be impossible to judge if a mild downturn 
should be attributed to the attack or to external factors 
unrelated to Egypt. 
 
7.  (SBU) Most industry representatives are hoping that 
foreign tourism will show the same resilience it demonstrated 
after the October 2004 Sinai bombings.  Those attacks 
resulted in much higher casualties than the attack in Cairo. 
They also received extensive coverage in the international 
media, while the April 7 incident was overwhelmed by coverage 
of the Pope's funeral.  Despite the severity of the Sinai 
attacks, foreign tourism has not suffered in the past six 
months.  Indeed, the contrary is true, with tourist numbers 
at all time highs.  End Comment. 
 
 
Visit Embassy Cairo's Classified Website: 
http://www.state.sgov.gov/p/nea/cairo 
 
You can also access this site through the 
State Department's Classified SIPRNET website. 
 
GRAY