Egypt’s Curbs on GDR Proceeds Send Stocks Below 100-Week AverageTamim Elyan
Egyptian stocks plunged the most this year, sending the benchmark gauge below the average of the past 100 weeks, as the government’s tightening of foreign-exchange rules for arbitrage trading reduced demand for local shares.
The EGX 30 Index dropped 4.2 percent to 7,870.78 at the close in Cairo, led by a 4.1 percent decline in Commercial International Bank. Emaar Misr for Development SAE, the Egyptian arm of Dubai’s Emaar Properties PJSC, slid below its initial-public-offering price on the second day of trading.
The equities gauge traded below its 100-week moving average for the first time in two years after the government last week said Egyptian investors who buy shares locally and sell them as global depositary receipts abroad must collect the proceeds in the local currency. Egypt has struggled with a foreign-currency shortage since the 2011 Arab Spring protests sent investors and tourists fleeing.
“The exchange ruling last week of limiting the revenue of GDR sale proceeds into Egyptian currency has killed this artificial demand in the local market on CIB,” Mohamed Radwan, the head of equities at Pharos Holding in Cairo, said by phone. “Sentiment overall is bad worldwide due to the Greek crisis. We are getting affected more and more.”
Greeks, voting in a referendum Sunday, rejected European demands for austerity in return for the extension of the country’s bailout program, setting up a new showdown between the government in Athens and its creditors.
Egypt last week devalued the pound to a record low to boost economic growth, after keeping the currency unchanged since February.
CIB’s shares headed for the biggest slump since December last year and its GDRs dropped 4.2 percent. Emaar Misr fell 9.9 percent to 3.55 pounds, compared with the IPO price of 3.80 pounds.
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