After Entire Red Week, EGX 30 Falls 2.4% Amid Tax Concerns

In a week, the Egyptian Exchange has incurred losses of EGP 6.74 billion driven by the investors’ concerns over imposing a proposed stamp tax on the EGX’s selling and buying transactions at 0.001. The Egyptian government on Monday has announced that it plans to impose a stamp tax on the EGX’s selling and buying transactions as a part of its new amended economic plan for obtaining the IMF’s long-awaited loan.

The capital market has hit EGP 374.200 billion at the end of last week, compared to EGP 380.949 billion at the end of a week earlier.

Benchmark EGX 30 index sank by 2.4%, representing a decline of 137.46 pts, ending Thursday’s transactions at 5489.4 pts, compared to EGP 5626.92 pts at the end of a week earlier.

EGX30 hit its highest point on Sunday closing at 5,579.82 pts, where its lowest point recorded on Thursday at 5,489.46 pts.

Meanwhile, the mid- and small-cap index, the EGX70 pushed down by 1.1% closing at 471.22 pts during Thursday’s session, compared to 476.48 pts at the end of a week earlier.  Price index EGX100 also fell by 1.34% concluding Thursday’s session at 796.55 pts, compared to 807.37 pts during a week earlier.

As pursuant to the new tax, the investor shall pay one Egyptian pound for every transaction that exceeds one thousand pounds.

Following the announcement of the government’s decision, the bourse chairman Dr. Mohamed Omran said on Tuesday a statement to the official news agency MENA, the EGX is conducting a comprehensive study that will be submitted after its completion to the country’s prime minister within this week. The study will be about the impact of the decision and will also tackle the expertise of other countries in imposing similar taxes on their bourses’ transactions.

Omran further added that there are a very limited number of countries around the world which have imposed taxes on their bourses transactions. However, in these countries, the foreign transactions are excluded from such tax.

Also in a week, the EGX has recorded volume of trades hit  429.8 million securities, compared to 453 million a week earlier; while the traded value reached EGP 1.273 billion, compared to EGP 1.727 billion a week earlier.

Mohsen Adel, Vice Chairman of EG-Finance, said  such a tax is totally unsuitable for the current period and will likely discourage investors who will shy away from trading.

Adel added that the EGX is currently suffering from investors’ reduced appetite as well as the lack of liquidity driven by the political turbulence.

Furthermore, Adel referred that the economic return from imposing such tax will be remarkably humble as it will not exceed EGP 200 million yearly. The government ought to create powerful incentives to invest in the EGX instead of adopting decisions that will drive the investors to abandon the market.

Companies’ Weekly Performance Highlights:

Orascom Construction Industries (OCIC.CA) closed last week at EGP 266.9, while closed on Thursday at EGP 258.89 (lowest close), dipping by EGP 8.01 (3 %).

Stock highest close during the week came on Sunday at EGP 264.87.

On Sunday, OCI N.V. announced that as of the latest filings on 21 February 2013, GDR holders holding a total of 156,722,280 GDRs (being 99.0% of Orascom Construction Industries’ GDRs and representing 75.7% of total shares outstanding) have accepted the offer to exchange their GDRs for OCI N.V. shares.

Trading of OCI N.V. shares on the NYSE Euronext in Amsterdam began on 25 January 2013.

OCI N.V. has confirmed that the Offer is wholly-unconditional.

The Offer has now closed.  Settlement of any acceptances received on or prior to 12 noon (New York time)/5 p.m. (London time) on 21 February 2013 will take place on 26 February 2013.

Holders of GDRs that did not tender in the Offer are still entitled to surrender their GDRs to the depositary and receive delivery of the ordinary shares in Orascom Construction Industries represented by their GDRs.

On Thursday OCI N.V.’s wholly-owned subsidiary Iowa Fertilizer Company (IFCo) has announced that its Engineering, Procurement and Construction (EPC) Contractor, the OCI Construction Group (OCIC), has awarded a construction contract valued in excess of US$ 60 million to Matrix Service Inc.

The company added, in a release sent to Arab Finance that, the contract requires the engineering, fabrication, and erection of the tank structures for two double containment ammonia storage tanks and three urea ammonium nitrate storage tanks, to be located within the boundary of the IFCo plant facilities.

Consistent with IFCo’s commitment to maximizing local job creation, Matrix Service Inc. has stated that the firm will spend an estimated 20% of the total contract value on direct expenditures in the Southeastern Iowa economy.

Matrix Service Inc. will recruit local talent using Iowa’s Workforce Development, the state’s employment security agency, and provide work opportunities for various local businesses including surveying, concrete supply, construction and consumables, tank painting and insulation, reinforcing steel supply and fabrication, among other goods and services.

Also on Thursday, Anadolu Agency reported that Palm Hills and OCI signed a EGP 400 million ($ 57.2 million) contract to complete phase construction of one of Palm Hills’ projects in 6th of October City.

An official source in Palm Hills, who demanded anonymity, stated that this contract is included in company’s expansion plan and to prove its commitment before clients as well.

He added that, the contract was signed three days ago in order to finalize the sixth phase of the project.

National Societe Generale Bank (NSGB) (NSGB.CA) closed last week at EGP 37.57, while closed on Thursday at EGP 38 (highest close), upping by EGP 0.43 (1 %).

Stock lowest close during the week came on Sunday at EGP 38.

On Monday, Egyptian Financial Supervisory Authority (EFSA) announced that it approved Qatar National Bank to publish the mandatory tender offer submitted to buy up-to 443.535.902 shares, representing 100 % of NSGB shares at EGP 38.65 per share.

Accordingly, EGX announced that, all sell and buy orders will be open in the OPR market during the period between 26/02/2013 and 25/03/2013.

On Tuesday, NSGB announced that it assigned HC Securities as independent financial adviser to evaluate the mandatory tender offer of Qatar National Bank (QNB) to acquire NSGB entire shares.

Regarding Investors’ Activity:

Local investors led the market activity all through the week, followed by Foreign and Arab investors respectively.

Local investors were the most active buyers this week earning the value of EGP 20,401,974.

Foreign investors were most active sellers this week by the value of EGP 19,111,207.

Arab investors chose also to buy by value of EGP 1,290,766.

Retail & Institutions’ Activity:

Retail activity led the market all through the week as it ranged between 27.51 – 63.11 %.

While Institutions activity ranged during this week between 36.88 – 72.48 %.