Egypt’s stocks tumbled on Thursday on a decision taken by the current interim government to impose a controversial capital gain tax (CGT) on profits made by investors in the Egyptian bourse.
Finance Minister Hany Kadry Demian revealed to Reuters on Thursday that the Egyptians cabinet has approved levying a 10 percent CGT on profits and dividends of the listed securities in an attempt to shower the public treasury with LE10 billion ($1.4 billion) per annum.
The market benchmark EGX30 significantly slumped 3.4 percent to record 8,242 points, as investors (particularly foreigners) have been less than enthusiastic over the decision.
The broader index EGX70 also slipped 2.6 percent in a session that saw a daily turnover of listed securities worth LE1.3 billion.
Eissa Fathy, deputy head of the securities division at the Cairo Chamber of Commerce, told Ahram Online that the government has made a big mistake, especially in picking the time of the decision, as many people will link the stocks' plunge with the preliminary victory of former army chief Abdel-Fattah El-Sisi on Thursday.
"Also, there are legal issues related to the CGT decision that should be highlighted," Fathy added.
On the other hand, Demian said that the 0.001 transactions tax – imposed in 2013 under the tenure of then-president Mohamed Morsi – is expected to be cancelled next week.
Mostly of the market’s listed stocks turned red on Thursday due to the new tax, with bellwether Commercial International Bank (CIB) leading the pack in a 4.4 percent loss to close at LE35.5 per share.
Real estate developers all declined, with Talaat Moustafa Group (TMG), Palm Hills Development (PHD) and Six of October Development and Investment (SODIC) falling 4.8 percent, 3.1 percent and 4 percent to register LE8.8, LE4.3 and LE25.8 per share respectively.
Domestic investors were net-buyers with some LE12.9 million. However, foreign investors (representing 16.2 percent of the market) ended the week as net-sellers with some LE32.1 million.