EGX Loses EGP 17 Billion Due to Push for "Capital Gains Tax"

The Egyptian Stock Exchange (EGX) concluded Sunday's session with the main market index EGX30 declining by 1.82% to close at 11.095 points.

The market cap of the listed shares incurred losses amounting to EGP 17 billion; to close at the level of EGP 728.641 billion, amid a trend of selling among Egyptian and Arab investors with the return of the controversy of imposing a tax on capital gains resulting from the sale and purchase of securities within the stock exchange.

The total trading value amounted to about EGP 5.3 billion; with a turnover of 481 million shares executed on 58,000 transactions, of which only 17 companies rose, and 153 companies dropped, and 26 did not change.

A number of capital market experts expected that the movement of the Egyptian Stock Exchange indices during the last quarter of this year’s transactions will record a mixed performance, with the reopening of the capital gains tax file on the sale and purchase of securities, which is scheduled for early January.

Last Thursday, the Official Gazette published the Ministry of Finance's decision regarding the issuance of a guide to tax amendment rules for capital gains resulting from the selling of securities, shares, treasury bills and stamp tax on dealing in securities.

The guide stipulates the start of applying a tax of about 10% on a separate base that includes the net profits of dealing in the stock exchange, starting January 1, 2022.

Experts indicated that the market improved during the trading month of August, in terms of the movement of indicators, investors’ transactions and trading volumes, with the support of the state’s plans to offer large entities in the market, such as the companies operating in the new administrative capital.

Experts stressed that reopening the capital gains tax file pushes the market into a wave of decline and mixed performance during the transactions of the last quarter, which will necessarily reflect on trading volumes and plans for targeted offerings, whether from the government or the private sector.

Several experts called on the responsible authorities and the capital market associations to move quickly to stop the application of the tax on the pidends of investors from the stock exchange, and to prevent the aggravation of its repercussions and its expected negative impact on the market movement.