CAIRO: The Egyptian Exchange (EGX) dramatically plunged this week, and market capitalization lost around 21.6 billion EGP ($3 billion) after an investors’ selling spree following a government decision to mull a 10 percent annual tax on stock market profits and dividends.
The market slide came despite the landslide victory of ex-army chief Abdel Fatah al-Sisi in the presidential election by more than 90 percent of total votes, according to the initial results.
The benchmark index EGX30 dipped 5.55 percent to end the week at 8,243 points, lower than 8,727 points last week.
Small and mid-cap index EGX70 slid 5.48 percent to close at 590 points, compared to 623 points last week, and the broader index EGX100 also dropped 5.4 percent to end the week at 1,031 points.
“EGX’s sharp decline was attributed to the government’s decision to mull a tax on stock market profit, while others cited the ‘buy on rumors sell on facts’ sentiment which coincided with presidential election, but the market was approaching a correction and all these reasons have just motivated the selling wave,” technical analyst Walid Helal told The Cairo Post.
The benchmark index dropped more than 500 points within three sessions, including 300 points on Thursday which the analyst considered “the worst since June 30.”
Helal added that “the market is likely to continue its downward movement Sunday to approach the most support areas at 8,100 to 8,150 which may see some purchases that could temporarily back the market rebound.”
“Selling pressures surged dramatically on Thursday’s session and the market shrugged off Sisi’s landslide victory in the presidential election according to the initial indicators,” Osool Securities Brokerage head of technical analysis Ehab Saeed told The Cairo Post Friday.
“EGX30 lost more than 3.4 percent Thursday as reports about the new tax was affirmed,” said Saeed, adding that he expects the benchmark index to find support at 8,150 points next week.
“Meanwhile, the index could maintain its downtrend to 7,800 points, if it failed to stay above 8,150 without any developments concerning the new tax,” the analyst concluded.
Last week, the market rallied due to investor sentiment preceding the presidential elections, and market capitalization gained around 5.5 billion EGP to hit its highest daily level since March 27 at 497.89 billion EGP.
EGX30 jumped 2.27 percent to end last week above the 8,700 resistance level at 8,727 points.