Egyptian dollar bonds and a fund tracking the nation’s stocks gained as President Hosni Mubarak pledged to hand authority to Vice President Omar Suleiman. The yield on the government’s 5.75 percent dollar bond due in 2020 fell 15 basis points to 6.48 percent yesterday, according to prices from Royal Bank of Scotland Group, as Mubarak said in a speech on state television that he would hand over the responsibilities of office to his deputy ahead of September elections. The Market Vectors Egypt Index ETF, an exchange-traded fund that holds Egyptian shares, advanced 0.5 percent in New York after earlier rising as much as 6.1 percent. Egyptian bonds are rebounding after yields surged to a record 7.2 percent on Jan. 31 as hundreds of thousands of Egyptians flooded the country’s main squares and thoroughfares to demand Mubarak’s exit after 30 years in power. The violence, which the United Nations says has killed about 300 people, sparked concern about contagion in the region, which holds more than 50 percent of the world’s known oil reserves. “The succession for the president needs to be acceptable to the people,” said Mohammed Ali Yasin, chief investment officer at Abu Dhabi-based financial services company CAPM Investments PJSC. “If so, it will prompt a strong rebound in the stock market and the economy in general.” ‘Very Positive’ Mark Mobius, executive chairman of Templeton Asset Management’s Emerging Markets Group, said in Sao Paulo yesterday he remains “very positive” about investing in Egypt and that political turmoil there will lead to reforms in the country. “It is not a matter of democracy,” Mobius told reporters after a speech to an investor group. “It is a matter of reform. Of letting people get on with business.” Templeton’s $221 million FTIF Templeton Frontier Markets Fund held 6 percent of its assets in Egypt at the end of 2010, according to data compiled by Bloomberg. The ETFs pared gains late in the day when Mubarak said he would stay as president through September. U.S. markets were closing as he said minutes later that he’d delegate authority to Suleiman until then. Oil gained as much as 1.2 percent in New York. Asian stocks fell for a fifth day today, with the MSCI Asia Pacific excluding Japan index down 0.2 percent to 463.75 as of 10:15 a.m. in Hong Kong. Power Transfer “I decided to transfer powers of the presidency to the vice president according to constitutional guidelines,” Mubarak, 82, said at the presidential palace in Cairo. Crowds watching his speech in Tahrir Square responded to his speech with cries of “down with Mubarak.” The GDRs of Orascom Construction Industries, Egypt’s biggest publicly-traded builder, fell 2 percent in London. The GDRs pared losses of much as 9.1 percent after Al Arabiya television said Mubarak may step down, citing Prime Minister Ahmed Shafik. U.S. President Barack Obama said Egyptian authorities must make a “clear and unambiguous” statement that they are making immediate changes, saying last night’s announcement by President Hosni Mubarak failed to explain how or when the transition would occur. The pound was little changed at 5.8800 per U.S. dollar. Egypt’s stock exchange has been shut for two weeks amid the protests. The country’s benchmark stock index lost 16 percent during the week that ended Jan. 27. A decision on when to resume trading will be made on Feb. 12, the official MENA news agency reported yesterday, citing the exchange chairman. The market was set to open Feb. 13. “The one thing I worry about is a certain amount of capital outflow, especially when the stock market is reopened,” Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., said in a telephone interview on “Surveillance Midday” with Tom Keene yesterday. Default Swaps The cost of insuring Egyptian government bonds against default with credit-default swaps fell 17 basis points, or 0.17 percentage point, yesterday to 338. The swaps have declined from 430 on Jan. 28, the highest since April 2009, according to data compiled by London-based CMA. Credit default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. Protests began Jan. 25, inspired by an uprising that ousted Tunisian President Zine El Abidine Ben Ali on Jan. 14. Egypt credit-default swaps cost 268 on Jan. 13 and the bonds due 2020 yielded 5.58 percent. Economic Outlook The crisis is threatening the outlook for an economy that has been one of the biggest recipients of U.S. aid since Mubarak came to power. The country’s central bank intervened in currency markets three days ago to stem a decline in the pound and says it’s ready to do so again. The Standard & Poor’s 500 Index erased losses yesterday of as much as 0.7 percent as Mubarak promised to hand power to Suleiman. The index closed up 0.1 percent. The tremors caused by Egypt in world financial markets have been small compared to those resulting from the uprising in Iran three decades ago that toppled Shah Mohammed Reza Pahlavi, which sparked a 140 percent surge in oil and contributed to a global equity rout. World equity-market capitalization climbed to $53.8 trillion this week, the highest level since June 2008. Egypt has about 0.3 percent of the world’s crude reserves and its foreign-currency holdings exceed overseas debt by $29 billion. Egypt controls the Suez Canal and the Suez- Mediterranean Pipeline, through which 2.5 percent of global oil production moves, according to Goldman Sachs Group Inc. Muslim Brotherhood Suleiman has begun negotiations ahead of the September elections with opposition groups including the Muslim Brotherhood. The talks “are the first way to achieve stability in the country and to get out of the current crisis peacefully,” Suleiman said earlier this week. The Brotherhood, which is banned from a role in Egyptian politics, is the largest group involved in the discussions. Founded in 1928, the Brotherhood has influenced Islamist movements across the globe, including Hamas in the Palestinian territories, which the U.S., European Union and Israel consider a terrorist organization. “The market is concerned about what the outcome of elections would be,” said Timothy Ash, head of Emerging Market Research at Royal Bank of Scotland in London. “Egypt faces a very uncertain future in almost any scenario.” Orascom Telecom GDRs of Commercial International Bank Egypt SAE, the nation’s biggest publicly traded lender, fell 0.8 percent, after losing as much as 10.4 percent earlier. London-traded shares of Orascom Telecom Holding SAE, the country’s biggest mobile network operator by subscribers, reversed an earlier decline of as much as 4.6 percent, gaining 0.6 percent. GDRs of EFG-Hermes Holding SAE jumped 3.3 percent, the most since Feb. 1. The North African country canceled its 4.5 billion Egyptian-pound bond sale planned for this month, deciding instead to issue treasury bills. The government raised 3.5 billion pounds in yesterday’s auction. The yield on the 182-day bills rose 30 basis points to an average 11.78 percent at the sale. “If a peaceful and orderly shift of power occurs, it will result in capital flight into Egypt as the country has strong economic fundamentals,” said Nabil Farhat, a partner at Abu Dhabi-based brokerage Al Fajer Securities. “Investors are looking for a peaceful resolution that respects the well-being of the Egyptian citizens.” To contact the reporter on this story: Zahra Hankir in Dubai at Zhankir@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net To contact the editor responsible for this story: Claudia Maedler at Cmaedler@bloomberg.net

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