Egypt hits 4-month low on tax woes, Gulf markets barely move

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 U.S. oil inventories and interest rates.

The Cairo index slid 1.9 percent to 8,331 points, its lowest level since Dec. 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.