Market Report: Egypt's exchange wallows in tax uncertainty

Ahmed Feteha, Monday 6 Jun 2011

Conflicting news about the proposed capital gains tax overshadows investor optimism in a weak trading day

Traders do not know what to make of conflicting news (Photo: Reuters)

Egypt's stock market declined 0.79 per cent, with the EGX30 main benchmark losing 43 points to reach 5,402.82,  in a cautious trading day prompted by conflicting news about capital gains taxation.

News agencies reported earlier Monday that a proposed 10 per cent taxation on dividends would be revoked. But informed sources have told Ahram Online that the issue is still under study by the Ministry of Finance and Bourse officials.

Unlike yesterday, individuals’ activity dominated the market with 60 per cent of total trading volume, which reached a total of LE491.6 million.

“It is like this day never happened,” says Ashraf Abdel Aziz, head of institutions sales at Arabia Online, describing the session.

All sectors ended in the red but only declined minor amounts. The communications sector saw the largest fall, losing 1.25 per cent.

Of 185 traded stocks, 116 declined while 60 realized gains.

Abdel Aziz views market behavior as a natural result of the blunder among regulatory circles.

Egyptians investors, making up 63 per cent of market activity today, were net-buyers and hit the LE25.5 million mark. Foreigners, on the other hand, comprised 33 per cent of the market; net selling LE22.5 million of stock.

“Foreign investors are the group most affected by the proposed capital gains tax; they mostly invest in heavyweight companies that distribute dividends,” Abdel Aziz explains.

He thinks Egyptians do not seem particularly bothered by the new taxation; they mostly invest in speculative stocks and don’t depend on dividends for returns.

Perhaps as a result, the broader EGX70 declined 0.43 percent; a smaller dip than that seen by the more exclusive EGX30.
Monday's top gainer was Prime Holding, up 7.73 per cent, while biggest loser was East Delta Flour Mills, down 4.03 per cent.

Egyptian Company for Mobile Services (Mobinil) witnessed the highest volume of trade in over a year, ending the day on a 2.67 per cent decline.

“This decline can be attributed to today's distribution of LE3.16 cash dividends,” Abdel Aziz explains.

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