The main index of the Egyptian stock market fell 2.49 percent Tuesday, the second consecutive day of heavy losses for Egyptian stocks in the midst of controversy over Orascom Construction Industries’ unpaid taxes.
Monday’s losses put the market further in the red for this year to the tune of 4.05 percent so far this year, as companies reacted negatively to government measures that penalized OCI.
Tuesday’s closing value was the lowest the market has been since 16 December. Firms listed on the Egyptian exchange lost about LE5.2 billion in market capital in a single day of trading.
The previous day’s performance was nearly as negative. The EGX30 fell by a whopping 2.30 percent on Monday after the prosecutor general issued a travel ban on OCI founder Onsi Sawiris and his son, who serves as chairman, Nassef Sawiris Sunday evening, according to state news agency MENA.
A judicial source told state-run Al-Ahram on Sunday that the 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 OCI’s moves to transition its company into a Dutch firm and likely delist from the Egyptian stock exchange.
OCI 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 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 shareholders 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.