Traders and money market experts said the 5-percent decline in the stock indices since the beginning of Sunday’s trading session was a reaction by investors to the finance minister’s decision to impose a 10 percent tax on stock market capital gains.
Trading was ceased for the first time since former President Mohamed Morsy’s constitutional declaration of November 2012.
Stock Exchange Director Mohamed Omran said trading is automatically suspended when the EGX100 index loses 5 percent, but is resumed half an hour later.
Financial expert Mohamed Fathallah said the government did not listen to the various financial institutions when they said the tax could topple direct and indirect investments in Egypt. “It seems there are no communication channels between the state institutions,” he said, adding that investors would direct their investments to the banking sector where no tax was levied.
Hany Helmy, president of a brokerage firm, said small investors were affected most. “The government will not achieve the target of the tax because trading will drop and Arab and foreign investors will escape to markets that do not impose taxes,” he said.
Indices fell against collective selling on the part of Arab and Egyptian investors versus foreign purchases.
The main EGX30 index fell by 4.22 percent to 7894.73 points, the small and medium stocks EGX70 index fell by 4.88 to 560.7 points and the broader EGX100 index fell by 4.42 percent to 985.2 points.
The capital market lost LE16 billion to close at LE460.2 billion in 27,800 transactions totalling LE871 million.
The session suspended trading of 124 shares for surpassing the minimum decline level, while only six shares went up, 161 shares declined and 17 shares maintained the same levels of their previous close.
Total losses since the imposition of tax reached LE34 billion.
Edited translation from Al-Masry Al-Youm
