Egypt’s bourse suffered its biggest one-day loss in three months on Monday after the chief executive of its largest listed firm was banned from leaving the country on charges of tax evasion – a fresh blow to business confidence in the country.
The public prosecutor ordered that Nassef Sawiris, chief executive of Orascom Construction Industries (OCIC.CA), and his father Onsi Sawiris be barred from travel, state news agency MENA reported late on Sunday.
The order was part of an investigation into accusations they evaded about 14 billion Egyptian pounds ($2.1 billion) of taxes during the sale of Orascom Building, an OCI subsidiary, to French firm Lafarge, it said.
A banker and friend of the family told Reuters that the men were out of the country. In a statement to the Egyptian Exchange on Monday, OCI said that beyond a previous request by the Egyptian Tax Authority for the company to pay 4.7 billion pounds related to the Lafarge deal, which it had appealed, it had not received any additional claims from the government.
Shares in OCI sank 3.6 percent to 250 Egyptian pounds as investors feared legal problems would put its buyout offer from Dutch-listed subsidiary OCI NV in jeopardy.
OCI NV offered in January to acquire all the ordinary shares of its parent through a swap offer for its shares in Amsterdam, and gave investors an option to sell at 280 pounds per share.
“The execution of the exchange offer will most likely be delayed as the Egyptian Financial Supervisory Authority will refrain from taking this responsibility until the claim is resolved,” Pharos Holding said in a note.
All except two stocks fell in Cairo’s main index. The index retreated 2.3 percent to 5,375 points in its heaviest one-day loss since Dec. 6; it reached a nine-week low.
The index’s break below major support on the late January low of 5,489 points was technically bearish, triggering a double top formed by the January and February highs; the pattern points down to around 5,200 points in coming weeks.
Beyond the immediate impact on OCI, the Sawiris news fuelled concern about poor relations between Egypt’s post-revolution government and senior members of the pre-revolution business community, which could fuel capital flight from the country.
“Criminally pursuing the CEO of Egypt’s largest listed company after the government drafted a law to reconcile with businessmen sends a very contradictory signal,” said Mohamed Radwan, director of international sales at Pharos Securities.