The main index of the Egyptian stock market fell by a whopping 2.30 percentage points on Monday, the biggest losses in a single day in over a month, after the prosecutor general issued a travel ban on the CEO of Orascom Construction Industries Sunday evening.
The prosecutor general’s office placed a travel ban on the founder of Orascom Constructions Industries Onsi Sawiris and his son, company chairperson Nassef Sawiris on Sunday, state-run news agency MENA reported.
A judicial source told state-run Al-Ahram that the prosecutor general’s decision is related to Finance Minister Morsy Hegazy’s request that the two be questioned over their role in the sale of Orascom Cement to the French company Lafarge. The government has accused the company of evading taxes on the profits from the 2008 transaction.
But some also speculated that the travel ban was related to Orascom Construction Industries’ move to transition its company to a Dutch company and delist from the Egyptian stock exchange.
Orascom Construction Industries announced mid-February that a majority of its shareholders had agreed to transfer their shares to a Dutch-based company to be known as OCI NV.
Also on Sunday, the Egyptian Financial Supervisory Authority placed a limit on the amount of shares local companies can transfer into internationally-traded global depository receipts, Reuters reported. The new regulations seem aimed to prevent other companies from following OCI’s move abroad.
“There are new regulations that were set in place by the authority to impose a limit to the [number] of local shares that can be changed into GDR certificates,” an official from the Egyptian Financial Supervisory Authority (EFSA) told Reuters on Monday.
The amount transferred into GDRs, which foreign investors often use to invest in companies based in emerging markets, must not exceed a third of the company’s capital, the official said.
Under the ruling, which came into force on Sunday, firms must also obtain approval from an extraordinary shareholders” meeting before they can make the transaction.
“This is in order to prevent a replication of the case of OCI … so no-one can make any acquisitions or tender offers on GDRs except through the local market and through EFSA so that it can have control over any transaction,” Mona al-Shazly, an equities analyst at Pharos Securities, told Reuters.
Monday’s losses also put the EGX 30, the market’s main index of stocks, in the red for this year so far. On Sunday, the index had stood at a gain of .7 percentage points for this year. On Monday the market stood at a loss of 1.6 percentage points.