Egypt Shares Rise on Speculation Drop Overdone; Gulf Stocks Drop

June 05, 2011, 11:38 AM EDT By Zahra Hankir and Ahmed A Namatalla

June 5 (Bloomberg) -- Egypt shares rose the most in a week on speculation the recent drop was overdone as the exchange said a government plan to impose capital gains tax applies only to dividend distributions and not to profit from stocks trading.

Orascom Construction Industries, Egypt’s biggest publicly traded property builder, jumped 2.5 percent. Commercial International Bank Egypt SAE advanced the most in a week. The EGX 30 Index gained 1.6 percent, the most since May 29, to 5,445.01 at the 2:30 p.m. close in Cairo. The measure slumped 2.7 percent on June 2 after the government unveiled the capital gains tax on dividends and higher corporate tax bracket to curb the budget deficit. In the Persian Gulf, the Bloomberg GCC 200 Index declined 0.3 percent.

“The negative effect we saw last week from the capital gains tax announcement was very short-lived because the market is still trading at a discount and small investors now see that their trading profits will not be affected,” said Ashraf Akhnoukh, senior equity sales trader at Cairo-based Commercial International Brokerage. “There still remains a growth story here.”

The bourse is studying the capital gains tax plan and will discuss it with the business community and the markets regulator before advising the government, the exchange said June 2. The 24 percent decline in Egypt’s shares this year has left the 30 companies on the benchmark index valued at an average 7.7 times estimated earnings, data compiled by Bloomberg show. That compares with 11.1 times for the MSCI Emerging Markets Index.

Budget Deficit

Egypt is trying to rein in a widening budget deficit as the North African country raises subsidy spending and salaries of state employees to meet public demand for improving living standards after a popular revolt ended 30 years of rule by former President Hosni Mubarak in February.

Orascom Construction advanced the most since May 29 to 268.04 Egyptian pounds. Commercial International, the biggest publicly traded bank by assets, rose 1.4 percent, the most since May 29, to 30.39 pounds.

Qatar’s QE Index retreated 1 percent, while Kuwait’s index dropped 0.8 percent. Oman’s gauge declined 0.6 percent and Dubai’s DFM General Index was little changed. Abu Dhabi’s ADX General Index lost 0.2 percent and Bahrain’s measure slipped 0.1 percent. Saudi Arabia’s Tadawul All Share Index gained less than 0.1 percent.

Israel’s TA-25 measure advanced 0.2 percent in Tel Aviv. The benchmark Mimshal Shiklit government bond due January 2020 declined, pushing the yield two basis points higher, or 0.02 percentage point, to 5.09 percent.

--With assistance from Alaa Shahine in Dubai. Editors: Shaji Mathew, Shanthy Nambiar

To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net; Ahmed A Namatalla in Cairo at anamatalla@bloomberg.net

To contact the editors responsible for this story: Shanthy Nambiar at snambiar1@bloomberg.net; Claudia Maedler at cmaedler@bloomberg.net

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Egypt Stocks Rally Most Since March on U.S., Saudi Arabia Aid

May 22, 2011, 10:19 AM EDT By Zahra Hankir and Ahmed Namatalla

May 22 (Bloomberg) -- Egypt’s shares gained the most in almost two months after the U.S. and Saudi Arabia pledged $6 billion for the North African country as it recovers from a popular uprising that ousted its president.

Orascom Telecom Holding SAE surged to the highest level since October after Deutsche Bank AG raised the country’s biggest mobile-phone operator to “buy.” Ezz Steel soared 6 percent. The EGX 30 Index climbed 3 percent, the most since March 29, to 5,405.52 at the 2:30 p.m. close in Cairo. The gauge has declined 24 percent so far this year.

Saudi Arabia’s $4 billion in aid will be granted in “soft loans, deposits and grants,” state-run Saudi Press Agency said yesterday, citing a statement by Egyptian Field Marshal Mohamed Hussein Tantawi, ruling military council head. U.S. President Barack Obama on May 19 pledged support, including $1 billion in loan guarantees, and canceling $1 billion in debt.

“The money coming in from the U.S. and Saudi Arabia is definitely affecting the market positively,” said Ashraf Akhnoukh, senior equity-sales trader at Cairo-based Commercial International Brokerage. “It gives the government space to breathe, regardless of where the money will be spent.”

The economy has suffered from inflation, a lack of investment, a budget deficit and decline in tourism since the uprising, Mohamed ElBaradei, a possible candidate for the Egyptian presidency, said in remarks to CNN’s “Fareed Zakaria GPS.” Economic growth may slow to 1 percent this year, the lowest rate in almost two decades, the International Monetary Fund said April 11. Former President Hosni Mubarak ceded interim authority to the Supreme Council of the Armed Forces on Feb. 11.

‘Buy’ Rating

The yield on Egypt’s 5.75 percent note due April 2020 tumbled 33 basis points, or 0.33 percentage point, to 5.86 percent on May 19, the least since Jan. 25, according to data compiled by Bloomberg. The rate gained one basis point to 5.87 percent on May 20.

The cost of protecting government debt against default for five years fell 30 basis points to 322 basis points on May 19, according to CMA prices in London. They were at 325 on May 20.

Orascom Telecom rallied 4.1 percent to 4.54 Egyptian pounds. The company’s global depositary receipts were assigned a 12-month price estimate of $4.20 at Deutsche Bank. One GDR represents five ordinary shares of Orascom Telecom, according to Bloomberg data. Ezz Steel, Egypt’s largest producer of the metal, soared to 10.91 pounds, the highest since April 6.

Saudi Gains

Saudi Arabia’s Tadawul All Share Index increased 0.3 percent. The Bloomberg GCC 200 Index of Persian Gulf stocks rose 0.1 percent and Oman’s MSM30 Index gained 0.3 percent. Kuwait’s measure increased 0.2 percent. Bahrain’s BB All Share Index lost 0.5 percent. In the United Arab Emirates, the DFM General Index and Abu Dhabi’s ADX General Index each dropped 0.3 percent.

Israel’s TA-25 Index slid 1.5 percent, the most since Feb. 24, to 1,273.97 after Obama and Israeli Prime Minister Benjamin Netanyahu made little effort to disguise their differences over the borders of a future Palestinian state after a two-hour meeting at the White House on May 20.

“There is a lack of conviction with buyers,” said Omri Weissman, head of stock trading at Excellence Nessuah Investment House Ltd. in Ramat Gan, Israel. “The whole thing that happened with Netanyahu and Obama on Friday looked bad on television and there’s a fear of what international investors will do tomorrow.”

The benchmark Mimshal Shiklit government bond due January 2020 gained, pushing the yield on the 5 percent bond down one basis point to 5.15 percent.

--With assistance from Gwen Ackerman in Tel Aviv. Editors: Claudia Maedler, Shanthy Nambiar

To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net; Ahmed A Namatalla in Cairo at anamatalla@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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