Egypt's Economic Chaos Drives Stocks down Sharply

Egyptian stocks saw a drastic plunge in session, as investors have been spooked by the country’s economic mess, selling their shares. The main index EGX30 dropped 2.2 percent, recording 4,926 points, as the Egyptian pound (LE) continues to suffer. The pound hit a new sharp fall, driving investors to sell stocks in fear of further currency devaluation.

The value of the dollar is 17 percent higher in the black market than the official rate that stands at average of LE6.8, said Mohamed Radwan, director of international sales at Pharos Securities, Reuters reported. Along with the currency devaluation, the investors have considered the eluded $4.8 billion loan from the International Monetary Fund (IMF) as the government resumed talks over it with the fund's delegation earlier on Wednesday, said Ashraf Abdel-Aziz the head of institutional sales at Cairo-based Arabeya online securities.

The IMF is unsatisfied with Egypt's latest economic reform programme and sceptical of the government's ability to implement it, an anonymous official source of the IMF told Al-Ahram Arabic news website on Tuesday. "We also may have a negative impact from the new taxes draft law that is currently [being] discussed at the Upper House of Parliament (Shura Council), as it may touch the foreign investor," Abdel-Aziz told Ahram Online.

Egypt's Shura Council is discussing a new taxes draft law suggesting a levy on cash dividends to be awarded to shareholders whether inside or outside the country in the Stock Exchange, with the exception of bonus shares. The foreign investors have ended the session as net-seller with some LE20.5 million, while Egyptians stayed as net-buyer with LE16.6 million. All main listed shares decreased, led by the heavyweight shares Orascom Construction Industries (OCI) and Commercial International Bank (CIB) down 1.6 percent and 4.8 percent respectively.

Orascom Telecom (OT) and Egypt's biggest investment bank EFG-Hermes also fell by 1.1 percent and 2 percent respectively. Property stocks Talaat Mostafa Group (TMG), Palm Hills and Six of October Development and Investments (SODIC) did not survive the downturn slipping 0.8 percent, 3 percent, and 2 percent respectively. The broader index EGX70 declined 1.3 in a session saw a total daily turnover of LE253.6 million.