An interior view of the Egyptian stock market is seen in Cairo (Photo: Reuters)
Egypt stocks continued to slide on Tuesday as analysts pointed the finger at a recently implemented capital gains tax.
The benchmark EGX30 index fell sharply by 1.92 percent to 8,330 points, bringing year-to-date losses to 6.7 percent.
Egypt’s bourse is struggling to maintain its competitiveness vis-à-vis regional markets after introducing a 10 percent capital gains tax, analysts say.
Last month, Egypt’s government issued regulations for the implementation of the tax, after the law was passed last year in a drive to boost the state’s revenues after over three years of political and economic turmoil.
The regulations were publically criticised by Egyptian Stock Exchange chairman Mohamed Omran last month who said that they were confusing to investors and the procedures cumbersome.
“The regulations are complicated and hard to follow,” said Mohamed Radwan, head of equity at Cairo-based investment bank Pharos Holding, who also said that it is also unclear how the tax is calculated.
“Many managing directors of funds investing in Egypt still do not understand how this tax is calculated,” added Omar El-Shenety, managing director of Multiples Group, a regional investment bank.
However, Egyptian financial watchdog head Sherif Samy told Ahram Online on Tuesday that the regulations contained nothing which contradicted the law passed a year earlier, though he conceded that the tax itself was unpopular with investors.
“This is a tax which hurts the market as well as the government’s income,” says Radwan, pointing out Egypt’s decreased competitiveness in comparison to other markets in the region, none of which impose a CGT.
The move comes at a time when Saudi Arabia is poised to open its stock market to foreign investors for the first time in June. Kuwait has cancelled taxes on foreign investors.
“There is also no new catalyst in terms of positive macro-economic news to trigger the market,” says Radwan.
Egypt’s main index reached a historical peak of over 10,000 points in early February, and has been rapidly dropping since a successful international investor conference hosted in March in which billions of dollars of aid and investments were pledged.
Egypt’s military involvement in two regional conflicts- in Libya and Yemen- is also dampening the appetite of foreign investors, says El-Shenety.
Market bellwether private lender CIB fell 1.42 percent to trade at LE53.40 on Tuesday while most other blue chips saw steeper losses.
The second largest Egyptian property developer Palm Hills, which reported a fourfold increase in its first quarter net profit compared to the previous year, which reached $28.2 million after minority interest, saw its share price tumble 5.28 percent to LE2.51.
The broader EGX70 index fell 3.09 percent.