Egypt’s Benchmark Index Drops Most in World on Capital Gains Tax

Egyptian shares slumped the most globally after the government said it will tax investor profits a day after the presidential election concluded.

The benchmark EGX 30 Index declined 3.5 percent, the most in two months, to 8,242.94 at the close in Cairo. That made it the worst performer among more than 90 gauges tracked by Bloomberg. Telecom Egypt, the country’s monopoly fixed-line phone company, plunged 5.1 percent.

The North African country, which is struggling to cut the Middle East’s highest budget deficit, will tax net portfolio values at the end of the year, the stock exchange said today, citing the Finance Ministry. Former army chief Abdel-Fattah El-Sisi is expected to assume the presidency after initial results showed him winning more than 90 percent of this week’s vote.

Announcing the tax means “scaring out the few investors who supported you in the past,” Tamer Ismail, head of dealing at Cairo Capital Securities, said by phone. “The timing isn’t good at all and they should have announced a legal explanation for it.”

About 1.3 billion pounds ($182 million) of stocks traded, more than twice the one-year daily average. Telecom Egypt fell to 13.68 pounds, the lowest in five months. Commercial International Bank Egypt SAE, the country’s biggest listed lender, slid 4.5 percent, the most since August, to 36.09 pounds.

The bourse statement on the planned tax didn’t specify the rate that would be levied or when the law establishing it would be passed. Al Mal newspaper reported today the government is studying an annual 10 percent tax on stock profits. Finance Minister Hany Kadry couldn’t immediately be reached for comment.

The government fell about 500 million pounds short of its 6.5 billion pound target at a sale of treasury bills as yields rose. The average six-month yield advanced four basis points to 10.654 percent, while the one-year yield added two basis points to 10.799 percent, according to central bank data on Bloomberg.

The pound was little changed at 7.1503 per dollar in the interbank market, where its movement is controlled by the central bank, after the regulator held a currency auction. The regulator sold $37.6 million, meeting about 20 percent of banks’ demands for the greenback on average, at a weighted average price of 7.1404 pounds per dollar.

The yield on the government’s benchmark 5.75 percent Eurobonds maturing in 2020 fell for a ninth day, decreasing two basis points to 4.91 percent as of 7:30 p.m. in Cairo, the lowest on a closing basis since December 2010.

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