Cairo, Egypt (CNN) – A week after the Egyptian government announced a stimulus package to support the capital market, the Egyptian Stock Exchange continued to perform negatively, with market capital exceeding £ 10 billion ($ 63.6 million) lost. and the main index lost 27 points to fall.To the level of 11 453 points, while the indices of small, medium and broader stocks (EGX70 and EGX100) changed in the red zone, with a decrease of 5.24% , 3.4%, respectively since the beginning of the year, amid the continuing decline in trading volumes, which did not record one billion pounds in any session. Experts explained during this week that the stimulus package with regard to the capital gains tax is insufficient, and demand to renew its postponement, in addition to the negative impact of the cancellation of some trading operations.
Last Wednesday, the Egyptian government announced a package of incentives to support the stock market and improve the investment and business environment, which included reducing the trading expenses of the Financial Supervisory Authority, the Stock Exchange, the Clearing House, the Investor Protection Fund of not commercial risks, and the abolition of the stamp duty on stock market transactions for the resident investor. The tax on the profits realized in the new offers is 50% for the first two years of the law’s issuance, in addition to not opening tax files for individuals investing in the stock market, and the clearing house will calculate and collect the tax after all expenses have been deducted.
Adel Abdel Fattah, chairman of the board of directors of the Egyptian Arab Company (Themar) for Security Brokers, said that the capital market incentives announced a week ago by the Egyptian government include changing the method of payment of capital gains tax only, while market participants waited for it to be postponed or canceled again.In view of the low trading volumes on the stock exchange, which requires new proposals to be attracted to deepen the market and attract new liquidity and foreign investment funds to increase trading volumes.
The government statement announced that it had agreed that no tax files would be opened to individuals investing in the stock market, and the clearing house would calculate and collect capital gains tax after deducting all the expenses requested to import and the incentive, and it will be at the end of each year and on the total investment portfolio transactions, with the adoption of the method of offering by capital increases as a non-taxable event.
Abdel-Fattah added, in exclusive statements to CNN in Arabic, that despite reports from all international institutions praising the development of the Egyptian economy and the success of the economic reform program, the Egyptian Stock Exchange does not reflect this success due to a defect. in managing the system, which requires allowing real incentives to encourage companies to register on the stock exchange. He continued, “The state should be interested in reforming the stock market, not from the perspective of trying to solve the problems of workers in the money market, but it should recognize the role of the stock market in building the economy.”
In an official statement in the middle of last month, the Egyptian Minister of Finance, Mohamed Maait, stated that the Egyptian economy has gained a lot of international prestige due to the positive improvement in financial indicators, and its flexibility to address internal and external crises. despite the repercussions of the Corona virus pandemic, which has cast a shadow over many economies of the world. Having managed to achieve a growth rate of 3.3% of GDP during the last financial year, to record a primary surplus of 1.45%, and the total budget deficit to about 7.4%.
Abdel-Fattah has linked the revival of the Egyptian Stock Exchange to tax incentives, either for companies to encourage them to register in the money market or for traders, by canceling the capital gains tax on transactions. The framework highlights the most prominent competitive advantages of the stock market, whether economic reforms, low prices and the low profitability multiplier for stocks, which varies between 2-3 times.
On the impact of the repeated cancellation of some operations on the Egyptian Stock Exchange, Adel Abdel Fattah confirmed that these cancellations were detrimental to the traders; Because it causes the traders to miss the opportunity to make a profit, as trading operations are canceled after the brokerage company has implemented the sales currencies to the client and achieves profitability, which in this regard points to the need to find another mechanism to the manipulators to punish only without punishment the entire market in this way and the good faith investor, which This leads to problems in the portfolios of investors and brokerage firms.
The Egyptian Stock Exchange issued a statement announcing its meeting with the Financial Supervisory Authority on Wednesday to discuss some files, including the need and importance of changing the methodology for dealing with financial market violations instead of the current approach that has not borne fruit in the development and growth of the market, so that only offenders are held accountable instead of The damage to the whole market, and even increases the fears of many investors in the Egyptian stock market due to the cancellation of operations, which adversely affects the settlements, and in particular harms the bona fide parties in the transactions.
In turn, Mohamed Kamal, a member of the Board of Directors of the Securities Division of the Federation of Chambers of Commerce, said that the Egyptian Stock Exchange is experiencing the selling pressure of individual investors – which represents 80% of the transactions in the stock exchange – during the last period, indicating their dissatisfaction with the government’s incentives to support the capital market And it is not enough to encourage investment in the stock market, adding that stock market investors have been waiting for a clear plan to the To save Egyptian financial market. and not just stimulus decisions.
Kamal, in exclusive statements to CNN in Arabic, pointed to the importance of reforming the Egyptian Stock Exchange, saying that the Egyptian capital market was one of the branches of the economy as the market value reached 98% of the national product in 2008, compared to a rate currently not exceeding 6%, which requires The speed of development of an integrated government plan to reform the capital market, which includes the speed of implementation of the government’s proposals program, and the lack of to successive intervention in the market that spoils the investment climate.
Kamal pointed out the file of repeated cancellations of operations on the stock exchange, which negatively affects the money market and leads to investors’ losses, as these cancellations cause not only the manipulative investor to be punished, but there are other non-manipulative investors who are punished and he believes that it is better to stop the manipulator’s code than to cancel the operation. This leads to a loss of confidence in some traders in the stock exchange or in the market.
Meanwhile, the management of the Financial Supervisory Authority has announced the approval of the Board of Directors to reduce by 20% the cost of services obtained from trading activities on the Egyptian Stock Exchange, and to send the draft resolution to the Prime Minister to take measures to issues it to increase trading volumes on the Egyptian Stock Exchange.