Egypt plays out

LONDON (Reuters) - If President Hosni Mubarak clings to power, investors will reprice Egyptian and regional assets to brace for weeks, months or possibly years of heightened political risk.

If he goes, global markets could still react with alarm, fearing a rising tide of unrest across the Middle East and possibly other authoritarian economies that could threaten energy supplies and potentially global economic recovery.

Mubarak sacked his government after four days of street protest, but made it clear he had no intention of giving in to demands from the street that he stand down. Tanks and troops deployed on the streets face rising numbers of demonstrators.

Egypt is entering uncharted waters, analysts say, and it is far from clear how much force soldiers will be willing to use.

Mubarak named his military intelligence chief as his first ever vice president on Saturday in a move some observers interpreted as a step toward a handover but others saw as a sign of quite the opposite.

Whatever happens, events in Egypt -- coming close on the heels of the overthrow of Tunisia\'s government by protests that escalated to regime change in less than a month -- have dented previous assumptions of stability.

Either way, Egyptian risk will be priced up on Monday,\" said one investment strategist on condition of anonymity.\" The question now is whether we hit bottom quickly or slowly.\"

Egypt\'s stock market .EGX30 lost 16 percent in two days last week. Along with Egypt\'s banks, it should have reopened on Sunday but officials said both would remain closed. The Egyptian pound has fallen to six-year lows.

But the investment ripples looked to be going well beyond the Middle East. Wall Street\'s S&P 500 index recorded its worst one-day fall in six months on Friday on the unrest.

Egypt has long been seen as a key U.S. ally in the region, and sits astride the Suez Canal through which much of Europe\'s crude oil and imported goods pass.

Particularly if Mubarak does ultimately go, investors will also be querying the survivability of other regional governments including potentially Saudi Arabia.

The world\'s biggest oil producer also has an aging head of state and social divisions, but it also has a colossal wealth from its oil revenue that gives its ruling elite much more flexibility when it comes to effectively buying public support.

This might affect perceptions of Saudi risk,\" said John Drake, senior risk consultant at London consultancy AKE.

Everyone has always said that Saudi will face a crisis eventually -- most likely when they run out of oil, which will not be for a long time. But I\'d be much more worried about countries with a bigger wealth gap -- Algeria, possibly Bahrain, Lebanon


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