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, financial regulator EFSA said.

 

Traders said the restrictions were imposed after Egyptian investors suffered losses from a sharp drop in Facebook shares after the social platform's initial public offering.

 

But they said the new restriction could be motivated by a desire to limit transfers of hard currency abroad.

 

In a statement, 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".

 

It said the trading ban was motivated by efforts to make markets safer and more stable and protect investor rights.

 

It gave local fund managers six months to adjust their portfolios in line with the decree.

 

"It is a shame and I think the decision was taken too quickly, without understanding the effects," said Teymour el-Derini, 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.

 

Tourism and foreign investors were hit hard by a popular uprising that ousted Egypt's president last year. Ganzouri's government has struggled to revive the economy and lure aid from foreign donors to avert a balance of payments crisis.

 

"This will make it harder again to transfer dollars out of the country," said Derini. "They are trying to lock up as many dollars as they can in the country and Facebook gave them an excuse to expedite the decision."