CAIRO: Egypt s bourse slid Wednesday for the seventh straight session led by construction and banking stocks, which were still reeling from the government move to cut tax breaks on energy-intensive firms and hike energy prices.
“The government’s decision to cut tax breaks [for energy-intensive firms in free zones] has helped drag down the market for a week now, explained Teymour El Derini, trader at Beltone Financial. “We did not expect taxation, which weighed on the market.
Egypt’s benchmark Case 30 index slightly dipped 0.7 percent to close at 10,665.82 points on Wednesday.
Shares of Orascom Construction Industries (OCI), which plummeted 17 percent since last week’s decisions, lost Wednesday 3.5 percent at LE366.68. The company, also active in fertilizers industry, has seen its stock decline since May 5.
Fertilizer heavyweight Egyptian Financial and Industrial Company (EFIC) also retreated on the news, with its shares last trading 2.51 percent lower at LE 339.30.
Other heavy industries were also pulled down by the decision, with El Ezz Steel Rebars slipping 0.64 percent to LE 82.40 per share. Shares of Ameriyah Cement slumped a heavy 8.17 percent to LE 30.91, while Misr Cement inched 1.17 percent down to LE 69.27.
The index posted Sunday its sharpest single-day drop in almost four months, as investors reacted to government’s decision last week to raise natural gas prices for energy-intensive industries and impose free zone taxation. The index dropped on Sunday 2.6 percent to 11,246.29 points.
The index continued to plunge throughout the week amid concerns over rising inflation as a result of the government’s amendments. It shed 2.4 percent on Monday and 2.1 percent on Tuesday.
“[Initially], the market expected some drops this week because we’ve seen over 100 percent gains in the last year and a half and we’ve never had a real correction, El Derini said.
“This is actually healthy for the market to fall a little on correction and then rise again.
He added that the current decline is not alarming because there was nothing wrong with the economy at large which will continue growing.
Inflation, however, remains a concern, as it soared 16.4 percent in the year to April. El Derini expects it to shoot to 20 percent when the new rises are reflected on the CPI. “The only way out is appreciation of the Egyptian pound against the dollar, which is good for importers but bad for exporters.
Meanwhile, banking stocks also closed in the red, with shares of Commercial International bank (CIB) sinking 2.99 percent to LE 79.47.
“The stock was affected by news that its talks with Arab African International Bank on a possible merger had failed, El Derini pointed out.
Both lenders announced last October that they had agreed to conduct exclusive due-diligence studies which could lead to a merger.
Shares of investment bank EFG-Hermes bucked its slide on Wednesday after tumbling close to 4.3 percent early in the week. “The bank owns around 30 percent stake in Lebanon [Bank Audi] and was negatively affected by the political tension in the country, he added. EFG-Hermes last traded 4.43 percent up to LE 49.72 per share.
El Dirini does not expect the downbeat market trend to prevail for long and believes the market will reverse slide within days. “Already the market went slightly up this morning before its close. The market could end flat tomorrow or slightly drop, then consolidate side ways, and then rebound.
“Investors should hold their stocks and buy only stocks that have fundamental value because they are getting cheaper and stronger such as OCI, El Sewedy Cables, EFG-Hermes, and El Ezz Steel Rebars.
