After former Egyptian army chief Abdel Fattah al-Sisi’s win in the presidential election, Egypt exchange traded fund plunged Thursday on a new capital gains tax for investors and the new administration’s unclear objective for the economy.
The Market Vectors Egypt Index ETF (NYSEArca: EGPT) fell 5.2% Thursday. EGPT, though, is still up 32.4% year-to-date.
The benchmark EGX 30 Index declined 3.5% Thursday, the most in two months. The index advanced to a six-year high ahead of the elections on May 25, but it has since been steadily falling.
Many Egyptians don’t feel that Sisi has provided a clear solution for the high unemployment rate, widening budget deficit and widespread corruption, Reuters reports. Investors are looking for Sisi to end the country’s costly energy subsidies, impose a clear tax plan to reduce the debt deficit and provide guidance on the weak currency.
Egypt’s weak turnout – only 46% of the country’s 54 million eligible voters filled their ballots – also raised questions on the credibility of Sisi’s mandate.
“All in all the weak turnout will make it harder for Sisi to impose painful economic reforms that international institutions and investors are demanding,” Anna Boyd, an analyst at IHS Jane’s, said in the article.
A day after the elections, the new administration imposed a tax on investor profits, scaring off local investors, Bloomberg reports. Egypt will tax net portfolio values at the end of the year as a way to cut the Middle East’s highest budget deficit. [Egypt ETF Soars as Investors Warm to Local Stocks]
Announcing the tax means “scaring out the few investors who supported you in the past,” Tamer Ismail, head of dealing at Cairo Capital Securities, said in the Bloomberg article. “The timing isn’t good at all and they should have announced a legal explanation for it.”
Market Vectors Egypt Index ETF
For more information on Egypt, visit our Egypt category.
Max Chen contributed to this article.
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