Egyptian Stock Exchange Plummets by 3,750 Points: Geopolitical Tensions and Tax Concerns Spark Market Decline

Cairo, Egypt (CNN) — The Egyptian Stock Exchange saw a negative performance over the past few days, as the main index fell by 3,750 points to reach the level of 25,917 points, and the market capitalization lost 235 billion pounds ($4.9 billion) within a week, falling to the lowest level. of 2 trillion pounds..

Experts attributed the reasons for this sharp decline to geopolitical tensions in the Middle East region, and how traders, especially local institutions, are getting profits after the strong rise of the financial market over over the past two years, and forced “margin loss” selling of stocks increased the severity of the downturn after losses in investors’ portfolios..

The Vice Chairman of the Board of Directors of the Mubasher Capital Property Company for Financial Investments, Ihab Rashad, said, “The heavy losses that the stock market has seen since last Thursday’s trading session, as a result of a lot of negative news, began with the emergence of news about the beginning the implementation of the collection of capital gains tax on investors in the financial market, followed at an ever-increasing pace.” “Geopolitical ills in the Middle East region, which led to losses in investors’ portfolios, and strongly encouraged bankrupt companies. sold (margin call) their clients’ shares, which exacerbated the decline.”.

Egypt’s Stock Exchange lost more than 88 billion pounds ($1.8 billion) of its market value during Thursday’s trading session, after news circulated about the willingness of the Ministry of Finance and the Misr Cleaning Company, which is responsible for settling securities transactions in Europe. Egyptian Market, to collect capital gains tax from investors..

Rashad, in statements to CNN Arabic, said, “The losses that occurred after the announcement of the beginning of the implementation of the collection of capital gains tax on sellers could lead to an investigation of the collection of this tax,” he said that “it would be Egyptian stock market traders should be taxed at the same rate as foreigners to achieve “tax fairness”.

In a statement, the Ministry of Finance denied press reports claiming that it planned to collect capital gains tax from investors in stocks and bonds on the stock exchange within two months, emphasizing that investors are not obliged to file a tax return in respect of capital gains on it. limited securities..

Ihab Rashad did not rule out that the confidence of foreign investors would be affected by the suspension of some trading activities due to the power outage of the settlement company of the stock exchange, saying that this incident “temporary and will not happen again.” “I believe that the state will move to exclude the Misr Cleaning Company from the load reduction plan, while providing back-up electricity sources -support at the company in the event of a power outage to ensure service stability.”.

During last Monday’s session, a power outage from the Misr Clearing Company affected some trading activities on the stock exchange, which is responsible for settling transactions in the financial market Immediately after the service arrived, A large number of Arab and foreign investors entered to sell shares..

Rashad predicted that the stock market would recover in the near term, and that the main index would rise, but not reach the previous levels above the a level of 30 thousand points, because the stock market sees a decline in trading during the summer months, and the lack of strong incentives that push investors to increase the amount of investment in the financial market..

The main index of the Stock Exchange closed this week’s trade at the level of 25,917 points after decreasing by 3.21% during the Wednesday session, which was the last trading session due to the “Sinai Liberation” holiday on Thursday, reducing index profits to 4.11.%.

Rania Yaqoub, a member of the Board of Directors of the Stock Exchange and President of Three Way Securities Trading Company, attributed the decline in stock market indices to strong selling of local institutions to take profits after a rise that lasted for more than two years. . years, and how these institutions tend to find safer investment options such as treasury bills, which see There was widespread demand from foreign investors, ruling that geopolitical tensions would have a major impact on stock market performance.

In the recent period there was a strong demand from foreign investors to buy the Egyptian government’s treasury bills after they raised interest rates by 600 basis points, and Egypt reached an agreement with the International Monetary Fund to value the loan granted increased to $ 8 billion..

Yacoub, in statements to CNN Arabic, said that the real estate, building materials and banking sectors experienced significant declines in recent days, and that the declines were made worse by the forced selling of client shares. , “loss loss,” and directed. to more selling pressure on Egyptian indices..

Rania Yaqoub agreed with the opinion of Ihab Rashad that the loss of power would not affect the confidence of foreign investors, pointing to similar events that saw major companies as well as financial markets recently a new tax on transactions in the stock market, explaining that the Capital Gains tax was suspended for two years before, and they were supposed to start collecting it this month, but so far the mechanism for the collection has not been sorted out..

The Egyptian Parliament had previously approved changes to the income tax law, which included reducing the capital gains tax by 10% on 50% of the profits obtained from the sale of shares in listed companies , was reduced to 25% two years after the changes. approved, with the aim of encouraging initial public offerings..

Rania Yaqoub advised stock market traders to maintain liquidity, buy randomly and open margin positions during this period, and move towards fast trading activity, which she believes is “best suited for cases of volatility violent “.

The Managing Director of Alpha Financial Investment Management Company, Mohamed Hassan, said that geopolitical tension in the Middle East region was the main reason behind the sharp decline in stock market indices over the past period, in addition on other factors, including profit-making activity by traders after the strong rise in the stock market over the past two years, and the news On the start of implementing the collection of capital gains tax.

Hassan, in statements to CNN Arabic, said that the wave of decline in the stock market had a negative impact on all sectors, especially since the forced sale of stocks increases the speed of the decline significantly. in the past three sessions, expect the stock market to move. in a short-term downward trend, until it begins an upward journey once again, in early June or July.