Egypt Stocks Drop to 3-Month Low as Authority Announces NSGB Tax
Egypt’s benchmark stock index tumbled to the lowest level in more than three months after the country’s tax authority said it will impose a levy on profit made on the buyout of Societe Generale SA (GLE)’s local unit.
The EGX 30 Index (EGX30) slumped 2 percent to 5,129.09 at the close in Cairo, the lowest level since Dec. 11, as all 30 stocks fell. That brings the measure’s decline this year to 6.1 percent, making it the world’s seventh-worst performer in the period, according to data compiled by Bloomberg. Commercial International Bank Egypt SAE (COMI), the country’s biggest publicly traded lender, fell to the weakest level since Aug. 30.
Egypt will impose a 10 percent tax on shareholders that profited from selling stakes in National Societe Generale Bank to Qatar National Bank (QNBK) SAQ over the past month, the authority said in a letter released by the bourse today. The decision exempts NSGB’s parent Societe Generale SA because of an agreement with France that prevents double taxation.
The news “is affecting the entire market because of the fact that this was announced after closing of the tender offer and ambiguity on how it will be implemented,” said Wafik Dawood, director of institutional sales at Cairo-based Mega Investments Securities. “Investors can’t be pleased with the inconsistency and contradictions in the market’s regulation.”
QNB completed a monthlong offer to buy all NSGB shares yesterday at 38.65 Egyptian pounds apiece, for a total 17.1 billion pounds ($2.5 billion). SocGen had owned 77.2 percent of NSGB, according to data compiled by Bloomberg.
The levy on the NSGB deal comes amid negotiations with Orascom Construction Industries for the payment of 14 billion pounds in back taxes. The government claims the company’s sale of its listed cement business in 2007 to Lafarge SA (LG) should have been taxed. OCI disagreed.
Orascom Construction lost 2.8 percent, the most since March 14, to 233.18 pounds while Commercial International Bank declined 1 percent to 30.89 pounds.
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