Selloffs to ease ahead of feast holiday
By Ahmed Kamel
CAIRO, August 18, 2018 - The selloff pressure may ease in Sunday's trading ahead of a four-day public holiday this week. The Egyptian Exchange and local banks will be closed Monday till Thursday marking Eid el-Adha (the Muslim feast of sacrifice).
The stock market will reopen on August 25. A correction trend will likely continue in the coming weeks. Locals will be driven by a wait-and-see tactic.
The benchmark index EGX30 fell by 3.94 per cent to 15295.97 points last week. The broader indices EGX70 and EGX100 shed 1.82 and 2.77 per cent to 740.28 and 1,899.55 points respectively.
The decline was motivated by institutional selloffs after the Tax Authority applied the income tax law on dividends and capital gains from dealing in stocks.
Last week, brokerages requested from shareholders to pay capital gains tax, according to Tax Authority regulations. The Tax Authority has asked the stock exchange to inform brokerages and shareholders to settle their taxation status according to Law 53/ 2014, or the income tax law.
The move stoked market jitters driving non-Arab institutions to sell off Egyptian equities last week. Non-Arab investors were net sellers of LE774.7 million. Arabs were net buyers of LE19.66 million, market data showed.
Non-Arab investors have been net buyers of LE10.4 billion since the beginning of the year, bourse data showed.
Volume rose to LE5.6 billion (around $314.6 million) last week, up from LE4.7 billion the previous week. The market capitalisation plunged LE27.7 billion, or 3.1 per cent, to LE858.02 billion, market data showed.
Locals, Arabs and non-Arabs accounted for 76, 3.8, and 20.2 per cent respectively, bourse data showed.
Institutions, which accounted for 63.5 per cent of trades, were net sellers of LE6.35 million, bourse data showed. The local investors are keeping an eye on the interest rates. The monetary policy set by the Central Bank of Egypt (CBE) has been the market's key driver since the November 2016 currency float.
The CBE kept the interest rates steady last week in a move aimed at stabilising the country's monetary policy. The deposit and lending rates currently stand at 16.75 and 17.75 per cent respectively, according to CBE data.
The CBE's Monetary Policy Committee (MPC) has embarked on gradual easing since February. The MPC cut rates by 100 basis points in both February 15 and March 29.
The gradual easing tactic is well aimed at ensuring a stabilized foreign exchange rate and lower inflation rates in the medium term.
In July, the International Monetary Fund described Egypt's current monetary policy stance as "appropriate to anchor continued disinflation".