CAIRO: The Egyptian Exchange (EGX) extended its losing streak this week, and equities shed around 19.4 billion EGP ($2.54 billion) amid worries over the implementation of a controversial tax on capital gains and stock dividends.
The market was unaffected by President Abdel Fatah al-Sisi’s address to the nation over international and domestic issues Tuesday evening, as traders were provoked by Finance Minister Hany Kadry’s statements, in which he undermined the stock market role in the overall economy.
“The assessment of Egypt’s economy should be limited on a decision related to the stock market,” Al-Masry Al-Youm quoted the minister Wednesday, referring to the 10 percent- tax on capital gains and dividends.
During the course of the week, the benchmark index EGX30 dipped 5 percent to end the week at 8,303 points, compared to 8,742 points a week earlier.
“The benchmark index EGX30 failed to resume its upward correction, retreating sharply toward 8,803 points over intensive selling pressures on most blue chips on the back of government’s rejection to amend the controversial stock market tax,” Osool Securities Brokerage technical analysis head Ehab Saeed told The Cairo Post.
On the other hand, the market bellwether CIB, which comprises more than 38.7 percent of the benchmark, continued its detached movement in sideways between 54.5 EGP to 56.6 EGP, helping the benchmark to sustain as the rest of stocks were collapsing, Saeed added.
“Around 55 shares hit their all-time and several-year price lows during this week,” Saeed detailed.
At the same time, the small and mid-cap index EGX70 slipped 6.3 percent to end at 439.7 points, down from 469.2 in the previous week. The broader index EGX100 also recorded a 4.7 percent decline to 923 points.
Saeed said the EGX70 showed a more negative performance as it approached its lowest level since September, 2013, battered by selling pressures on leading shares.
According to the new regulations, dividend distributions to individual investors with an annual turnover not exceeding 5 million EGP will only be subject to a 5-10 percent tax. Dividend distributions to those with an annual turnover exceeding 5 million EGP, however, will be subject to the general income tax.
“Next week, the EGX30 is projected to focus on former support near 8,340 points. Breaching below this level would drag the index toward the next and key support near 8,100 points,” said the analyst.
Saeed also predicted that the EGX70 would focus on its support near (420-430) points, which could hinder its downward wave on the short-term.