EGX 30 Falls 0.78% In Week Driven By NSGB Takeover Deal Taxes

In a week which witnessed the announcement of imposing tax gains on the acquisition deal of National Société Générale Bank (NSGB.CA) by Qatar National Bank (QNB), the Egyptian Exchange to incur losses of EGP 2.76 billion.

The capital market has hit EGP 358.800 billion at the end of last week, compared to EGP 361.559 billion at the end of a week earlier.

On Tuesday, the Egyptian Tax Authority (ETA) chairman Mamdouh Omar announced that it would impose tax on shareholders and investment funds that make capital gains from the acquisition deal of NSGB by Qatar National Bank.

As pursuant to the tax announcement, Société Générale will be exempted from taxes for the transaction under an agreement to avoid double taxation between Egypt and France, but individual shareholders and investment funds holding minority stakes in NSGB will have to pay a 10% tax on their gains, as per article no. 56 (bis) of law no. 91 of 2005.

The Central Bank of Egypt (CBE) has approved QNB’s request to acquire 100% of NSGB. The offer values the bank at US$ 2.558 billion.

The EGX’s management stated that the total shares offered for sale as regard to the National Société Générale Bank (NSGB)’s takeover deal are 432.183.782 million securities.

Egypt’s stock exchange benchmark EGX 30 index retreated by 0.78% this week, representing a retreat of 41.22 points, ending Thursday’s transactions at 5183.2 points compared to 5224 points at the end of last week.

EGX30 hit its highest point on Tuesday closing at 5404.91 points, where its lowest point recorded on Thursday at 5207.21 points.

Meanwhile, the mid- and small-cap index, the EGX70 dropped by 1.15% closing at 447.77 points during Thursday’s session, compared to 453 points at the end of a week earlier.

Also in a week, the EGX has recorded a volume of trades hit  520.8 million securities; while the traded value reached EGP 1.25 billion.

Companies’ Weekly Performance Highlights:

Orascom Construction Industries (OCIC.CA) closed last week at EGP 238.27, while closed on Thursday at EGP 241.22, upping by EGP 2.95 (1 %).

Stock highest close during the week came on Sunday at EGP 241.76, while the lowest close came on Tuesday at EGP 233.18.

Egypt’s stock exchange halted dealing in OCI on Sunday until the firm responded to queries over a tax dispute with the authorities, the stock exchange said in a statement.

Also on Sunday, The prolonged tax disputes between Orascom Construction Industries (OCIC.CA) and the Egyptian Tax Authority (ETA) will be resolved soon through an anticipatory settlement agreement, Egypt’s Finance Minister said on Sunday.

The tax dispute was over EGP 14 billion tax evasion claims erupted by selling Orascom Building Materials to French Lafarge in 2007.

As pursuant to the expectant settlement agreement, OCI shall pay EGP 7.1 billion to the Egyptian government so as to end the company’s tax evasion dispute.

Egypt’s Finance Minister El-Morsi Hegazy stated that OCI and ETA will be reaching a settlement agreement very soon so as to finally end the tax evasion saga.

On the sidelines of the 2nd International Conference for Public and Private Sector on Sunday, Hegazy noted that the Egyptian government will never be intransigent when it comes to the national firms’ future operations in the country.

The Egyptian government is willing to preserve and support the current investments in the country for they would play a major role in alluring further fresh investments in the upcoming period, the minister added.

OCI sent a release later on Sunday to the EGX stating that negotiations with Egyptian Tax Authority over EGP 14 billion worth of back taxes still ongoing to reach a final settlement.

EGX Administration decided to resume trading on the stock after this disclosure.

On Monday, Statements by Finance Minister al-Morsy Hegazy and the Real Estate Tax Authority over negotiations with OCI to end charges of evading EGP14 billion in taxes have provoked the company’s wrath have resulted in threats from the company not to pay anything, Egyptian Independent newspaper reported.

Earlier reports from the state-run Egynews website had quoted Hegazy as saying that the company had agreed to pay EGP7.1 billion in a bid to end a lawsuit against the country for EGP14 billion in tax evasion.

Speaking on condition of anonymity, a company source said the company has threatened to break off negotiations if authorities continue to speak on behalf of the company during the negotiations and reveal details that are not agreed upon. He also stressed that the country’s stance is legal.

Also on Monday, Kuwait Wadi El Nil Urban Development (Kuwadico) signed strategic alliances with leading Egyptian real estate developer and contractors such as OCI and Amer Group to carry out the “Grand Heights” project in the Sixth of October City allocating more than EGP 8 Billion in investments consigning the world’s leading consultants.

Engineer Ibrahim Hassan; Chief Executive Officer of Kuwadico stated: “We strongly believe in the strength and prospects of the Egyptian real estate market, which represents a backbone to the Egyptian Economy at large, despite any current challenges prevailing, with the first signs of stability and government support, we expect the market to recover and flourish significantly”.

Hassan added: “We are hoping and looking forward to practical results of recent and upcoming government measurements in support of the industry and hence will directly drive more investments in the development and real estate industry, which remains evermore the most attractive market in the whole region”.

Kuwadico plans a long term development venture in Egypt with more expansions and diversified product portfolios building on their strong regional and international expertise as well as leadership in the local market provided through the partnerships between Kuwaiti National Real Estate Company (NREC) and Wadi El Nil for urban development company, both highly reputable and solid entities.

On Wednesday, Mamdouh Omar, Tax Authority Chief, stated that negotiations with OCI over EGP 14 billion taxes are in progressing well, Youm7 reported.

He declined to add more details about negotiations.

National Societe Generale Bank (NSGB) – (NSGB.CA) closed last week at EGP 38.07, while closed on Thursday at EGP 30.68 (lowest close), sinking by EGP 7.39 (19 %).

Stock highest close during the week came on Monday at EGP 38.49.

On Tuesday, Shareholders and investment funds that make capital gains from Qatar National Bank’s (QNB) bid for Cairo-based NSGB will face a 10 percent tax, Reuters reported.

According to Reuters, The Egyptian tax authority said Societe Generale would be exempted from taxes for the transaction under an agreement to avoid double taxation between Egypt and France.

But individual shareholders and investment funds holding minority stakes in NSGB will have to pay a 10 percent tax on their gains, the tax authority wrote in a letter to the stock exchange, which was published on Tuesday.

QNB has offered 38.65 Egyptian pounds ($5.68) per NSGB share, compared with Monday’s close of 38.49 pounds.

On Wednesday, EGX administration announced that OPR market will be opened to allow NSGB shareholders who’ll set back on selling their shares to QNB after imposing 10 % taxes on selling proceeds.

Also on Thursday, EGX announced that, a deal had been executed on NSGB shares amounting to 430,782,421 shares at EGP 38.65 per share.

Regarding Investors’ Activity:

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

Arab investors were the most active buyers this week earning the value of EGP 16,303,865,064.

Foreign investors were most active sellers this week by the value of EGP 14,519,588,321.

Local investors chose also to sell by value of EGP 1,784,276,744.

Retail & Institutions’ Activity:

Retail activity led the market all through the week as it ranged between 3.70 – 53.98 %.

While Institutions activity ranged during this week between 46.01 – 96.29 %.