Egypt's financial watchdog has defended the government's recent decision to bar local brokerages from dealing in foreign securities, saying it is necessary to save already wary local investors from more serious losses.
"If you have an Egyptian driving licence that doesn't mean you can drive in England," was the analogy used by Ashraf El-Sharkawy, head of the Egyptian Financial Supervisory Authority, when talking to Ahram Online.
He added if Egyptian brokerages obtain foreign licenses then they will also have the right to deal abroad but that current restrictions will help ease the losses of domestic investors.
The new market law does not apply to global despository receipts (GDRs) -- shares that are traded on both the Egyptian and foreign exchanges -- as they are related to Egyptian listed firms, El-Sharkawy pointed out.
A decree signed this week by Prime Minister Kamal El-Ganzouri amends Egypt's capital market law to make it illegal for brokerages and investment firms to deal in all foreign listed or unlisted securities.
In a statement on Monday, EFSA said it had received many complaints from people dealing with brokerage firms "stating that they have lost large sums of money as a result of following the guidance and advice these firms gave to invest through them in foreign securities traded on foreign exchanges".
Reuters reported objections to the move from brokerages, already troubled by falling revenues.
"It is a shame and I think the decision was taken too quickly, without understanding the effects," said Taimour El-Dreini, a trader at Naeem Brokerage.
He said the measure meant a "huge loss" for investment houses like Naeem, and suggested the main reason for the move was to limit outflows of foreign currency from Egypt, which has suffered a sharp decline in foreign reserves.