Egypt's bourse fell to a four-month low on Tuesday because of the introduction of taxes on capital gains and dividends this month, while most Gulf stock markets barely moved, awaiting news on US oil inventories and interest rates. The Cairo index slid 1.9 percent to 8,331 points, its lowest level since December 18, ignoring positive news such as first-quarter earnings. Egypt's second-biggest listed property developer Palm Hills , for instance, tumbled 5.7 percent despite saying that first-quarter net profit had more than quadrupled to 215 million Egyptian pounds ($28.2 million).
Market players have blamed the continuing sell-off on regulations for taxes on capital gains and dividends. The new rules have been criticised by the head of the Egyptian stock exchange among others; he said they were too complex. Fund managers complain they are too burdensome.
The taxes were originally introduced in July 2014 but could not be implemented without detailed bylaws which the government approved this month. The Egyptian Association for Financing and Investment Studies and a group of investors filed a lawsuit this week seeking to scrap them. Another concern is Egypt's continuing shortage of foreign currency, which hurts companies that rely on imports of goods, feedstock or equipment. Through administrative measures, authorities appear to have largely stamped out the currency black market, but this has made it more difficult for some firms to obtain hard currency.
The Egyptian benchmark has strong technical support at its December low of 8,125 points. In the Gulf, Saudi Arabia's index was nearly flat as Brent oil stood unchanged ahead of weekly US crude inventory data. Crude reserves are expected to hit another high, but a weaker dollar helped to put a floor under oil prices on Tuesday. Equities investors across the world were cautious before the two-day US Federal Open Market Committee meeting starting later on Tuesday.
Market expectations for a US interest rate increase have been pushed further down the road, with few investors now expecting a rate hike in June and most predicting a move later this year. But there is risk associated with this week's Fed meeting because the US dollar's strength has hurt Gulf-based exporters such as Savola Group, Saudi Arabia's top food maker. Savola shares fell 0.8 percent on Tuesday. Dubai property stocks are also sensitive to the US rate outlook.
Saudi Arabian heavyweights Saudi Basic Industries and National Commercial Bank were among the main supports on Tuesday, climbing 0.5 percent each. Most other Gulf markets also moved 0.1 percent or less, with the exception of Dubai, which climbed 0.7 percent to a new 4-1/2-month closing high of 4,182 points. It faces major technical resistance at 4,251 points, the 200-day average.
Emaar Malls was one of the main supports, jumping 2.9 percent. Dubai brokerage Arqaam Capital said this week it expected index compiler MSCI to add the stock to its emerging market index in the May 12 semi-annual index review. Conglomerate Dubai Investments jumped 4.2 percent to 2.99 dirhams, attracting the attention of investors focused on technical analysis as it rose above its mid-April peak of 2.96 dirhams.
But telecommunications operator du lost 1.0 percent after reporting a 0.6 percent fall in first-quarter profit. The firm made 487.1 million dirhams ($132.6 million); analysts polled by Reuters had on average forecast 564.7 million dirhams. Qatar's index inched up 0.1 percent and Qatar Navigation (Milaha) climbed 1.5 percent, even though the company warned investors of a challenging 2015 on Monday, saying conditions in its offshore business remain weak and its investment business is exposed to instability in local equity markets. The shipping and offshore service firm reported a 4 percent rise in first-quarter net profit to 365 million riyals ($100.3 million). That was in line with the forecast from QNB Financial Services, which had expected 370.3 million riyals.
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