Egypt’s main index ended down on Wednesday as the ratification of a controversial Capital Gains Tax and news of an Egyptian court sentencing billionaire Nassef Sawiris to prison for tax evasion rattled the market.
The benchmark EGX30 index plummeted earlier in the session before rallying to register a milder 0.24 percent loss by market close, standing at 8,142 points, while the broader EGX70 ended a sideways session with a 0.85 percent rise.
Earlier this week, Sawiris was sentenced to three years in prison and fines worth LE50 million on charges of failing to pay checks due to Egypt’s Tax Authority.
Sawiris’s Orascom Construction Industries (OCI) had settled a tax dispute with Egyptian authorities in April 2013, agreeing to pay LE7.1 billion in instalments until 2017.
But last February, mother company OCI NV announced that the Egyptian prosecutor-general had "fully exonerated Orascom Construction Industries, the company’s Egyptian subsidiary, of any wrongdoing and all charges of tax evasion" and quit paying further dues.
But the Egyptian Tax Authority maintained that the case was ongoing and took the company to the public prosecution for refusing to pay the second instalment, which resulted in the latest ruling.
Earlier in June, Sawiris had announced the creation of a new investment company, Nile Holding Investments, with already LE400 million in investments in the country’s healthcare sector.
“This ruling has spooked investors, and along with the CGT is the main reason for the drop in today’s market,” Mohamed Radwan, head of equities at Pharos Holding, told Ahram Online.
Egypt’s government on Tuesday passed a 10 percent tax on capital gains (CGT) and dividends in the stock market.
The CGT, which authorities announced in May, was watered down last month after the bourse recorded its biggest daily drop in almost a year.
In the main index, market bellwether Commercial International Bank was down 0.65 percent, to trade at LE35.37 a share.
Metallurgical giant Ezz Steel witnessed the largest drop, falling 2.99 percent to LE16.52 a share.
Telecom Egypt dropped 1.19 percent to LE13.24.
Global Telecom Holding and Orascom Telecom Media and Technology Holding were gainers, climbing 0.58 percent to LE5.16 and 0.83 percent to LE1.22, respectively.
In the real estate sector, TMG Holding was down, shedding 0.82 percent to trade at LE8.47 a share, and Palm Hills Development Company also fell 0.25 percent to LE3.98. Six of October Development and Investment Company (SODIC) however, soared 4.05 percent to trade at LE33.68.
EFG-Hermes, on which there is a tender offer for 20 percent of its shares by rival Beltone Financial Holding and billionaire Naguib Sawiris at LE16 a share, saw its market price fall 0.39 percent to LE15.26 a share.
Egyptian investors were net-buyers, for LE130.4 million, while non-Arab foreign investors, who accounted for nearly 22 percent of market activity, were the main net-sellers, for LE124.1 million, as total turnover registered a weak LE640.8 million.