EGX loses LE 25.8B of market cap. in 4 sessions

CAIRO – 8 May 2019: The Egyptian Exchange (EGX) witnessed a sharp drop in market capitalization backed with a downtrend of the bourse indices.

Market Capitalization lost LE 25.81 billion in four sessions from May 2 to Tuesday, May 7.

Vice Chairman of Horizon Company for securities trading Mutasem al-Shahidi attributed this declined performance to several reasons, including lack of new liquidity in the Egyptian capital market and the decrease in the number of active and new codes.

Shahidi added that not listing new companies in the bourse was also one of the reasons, as the listing creates diverse and attractive opportunities for Egyptian and foreign investors. He explained that the offerings that the companies make are in the stage of maturity and not growth.

“The high cost of trading on EGX due to the imposition of a stamp duty of 1.5 per thousand on all transactions, whether profit or loss, which reduces the competitiveness of the Egyptian capital market compared to neighboring markets,” he stated.

Shahidi further elaborated that the high interest rates, which drive investors to invest in high-yield savings certificates, are also behind this performance.

The government started early this month to apply the third tranche of stamp duty on the stock exchange of 1.75 per thousand paid by the buyer and 1.75 per thousand paid by the seller. The Ministry of Finance aims to collect total taxes of LE 2.5 billion in the coming fiscal year 2019/2020.

According to Shahidi, another reason was the low down rate of decline in profits of companies after the liberalization of the exchange rate contrary to expectations.

He also attributed the decline to joining of the Saudi stock market for the FTSE index, which withdrew the liquidity of foreigners from the Egyptian stock exchange.

Shahidi pointed out that these problems have existed for some time, but were not visible due to the high volume of trade.But with the decline, they appeared clearly. He noted that solving these problems will take place through offering large government companies on EGX at attractive prices and removing the burdens of trading imposed on investors.

Additional Reporting Hany el-Houty