The Egyptian stock market fell precipitously Sunday as traders reacted to controversy surrounding last week's presidential vote and a newly proposed capital gains tax.
The securities benchmark, known as EGX30, fell 5.7%, prompting the stock exchange to suspend trading for 30 minutes at one point as a precautionary measure. Losses reached $2.8 billion at the peak of the decline.
The stock market had been falling since May 29, the day after the presidential election. Balloting was originally scheduled for May 26-27, but was unexpectedly extended for a third day, apparently in response to low turnout. While the election of the country's former military leader, Gen. Abdel Fattah Sisi, was never in doubt, the poor turnout appeared to reflect Egyptians' disgust at the political system.
Initial estimates show that Sisi, the former defense minister who has led the interim government since the ouster of former President
The decision to extend voting appears to have been a factor in the stock slump, said Mohamed Basha, a senior analyst at the investment bank EFG Hermes.
"Then the tax law created negative sentiments among investors, since it is the first tax of its kind here in Egypt," he added. "No one knew exactly how it would be implemented and there were still talks that the law might not eventually be passed, but everything was confirmed by the finance minister last night and that is what mainly led to today's falling."
On Sunday, the finance ministry announced that a draft of the new law, which imposes a 10% capital gains tax on profits of listed securities, has been approved by the Cabinet and referred to the presidency as a final step before it is officially approved.
Finance Minister Hany Kadry Demian said the new tax is expected to bring in $1.4 billion a year.
The tax proposal has been widely criticized by private Egyptian media, perhaps foreshadowing a clash between the president-to-be and Egyptian investors.
"Only a day after the elections, a famous TV presenter devoted a long segment of his prime time talk show to attack the government's decision to impose a capital gains tax," columnist Mohamed Hani wrote in the daily Al Masry Al Youm newspaper.
"The attack — that was soon joined by other privately-owned media — provided a glimpse into the nature of the conflict that is likely to dictate Egypt's new era," Hani added.
Egypt's new president is expected to be sworn in by next week.