MIDEAST STOCKS-Egypt tumbles on Sawaris travel ban; most Gulf mkts slip

Mon Mar 4, 2013 9:12am EST

Related Topics

* Egypt's 2.3 pct loss is biggest in three months

* Tax evasion charges could threaten OCI buyout offer

* Negative signal on government-business relations

* Banks keep weighing on Saudi Arabia

* Arabtec continues plunge on dilution in Dubai

By Nadia Saleem

DUBAI, March 4 (Reuters) - Egypt's bourse suffered its biggest one-day loss in three months on Monday after the chief executive of its largest listed firm was banned from leaving the country on charges of tax evasion - a fresh blow to business confidence in the country.

The public prosecutor ordered that Nassef Sawiris, chief executive of Orascom Construction Industries, and his father Onsi Sawiris be barred from travel, state news agency MENA reported late on Sunday.

The order was part of an investigation into accusations they evaded about 14 billion Egyptian pounds ($2.1 billion) of taxes during the sale of Orascom Building, an OCI subsidiary, to French firm Lafarge, it said.

A banker and friend of the family told Reuters that the men were out of the country. In a statement to the bourse on Monday, OCI said that beyond a previous request by the Egyptian Tax Authority for the company to pay 4.7 billion pounds related to the Lafarge deal, which it had appealed, it had not received any additional claims from the government.

Shares in OCI sank 3.6 percent to 250 Egyptian pounds as investors feared legal problems would put its buyout offer from Dutch-listed subsidiary OCI NV in jeopardy.

OCI NV offered in January to acquire all the ordinary shares of its parent through a swap offer for its shares in Amsterdam, and gave investors an option to sell at 280 pounds per share.

"The execution of the exchange offer will most likely be delayed as the Egyptian Financial Supervisory Authority will refrain from taking this responsibility until the claim is resolved," Pharos Holding said in a note.

All except two stocks fell in Cairo's main index. The index retreated 2.3 percent to 5,375 points in its heaviest one-day loss since Dec. 6; it reached a nine-week low.

The index's break below major support on the late January low of 5,489 points was technically bearish, triggering a double top formed by the January and February highs; the pattern points down to around 5,200 points in coming weeks.

Beyond the immediate impact on OCI, the Sawiris news fuelled concern about poor relations between Egypt's post-revolution government and senior members of the pre-revolution business community, which could fuel capital flight from the country.

"Criminally pursuing the CEO of Egypt's largest listed company after the government drafted a law to reconcile with businessmen sends a very contradictory signal," said Mohamed Radwan, director of international sales at Pharos Securities.

SAUDI BANKS

In Saudi Arabia, banks led declines as investor sentiment continued to weigh on the sector in the wake of last month's fourth-quarter earnings, which mostly showed weak growth. Al Rajhi Bank and Samba Financial Group each slipped 1.1 percent.

The kingdom's benchmark dropped 0.5 percent to its lowest close since Jan. 2.

Elsewhere, United Arab Emirates markets declined with property-related stocks the main drag. Dubai builder Arabtec plunged 10 percent to a 13-month low of 2.17 dirhams as investors dumped the stock ahead of a planned capital increase that will be dilutive to shareholders.

The stock has fallen 27 percent in three sessions since the company announced plans to raise $1.8 billion in capital. Analysts said it could continue to fall until it reached around 1.50 dirhams, a price at which the rights issue would be factored in.

Dubai's benchmark retreated 1.9 percent to a two-week low.

In neighbouring Abu Dhabi, shares in Aldar Properties and Sorouh Real Estate, which plan to merge, tumbled to two-week lows as investors booked recent gains. The pair dropped 5.2 and 3.7 percent respectively.

Both stocks have more than doubled in price over the past year in anticipation of the state-backed merger. Sorouh is still up 43.7 percent in 2013, while Aldar has gained 14.8 percent.

A majority of shareholders at both companies approved the merger on Sunday. Sorouh shareholders will receive 1.288 Aldar shares for every share they hold in Sorouh, which will then be delisted on completion of the merger.

"Aldar and Sorouh should be trading within the range of the swap - people may be reducing some positions after the news of the merger," said Ali Adou, portfolio manager at The National Investor. Aldar was expected to be under slight selling pressure as it adjusts to the swap, he added.

Abu Dhabi's index slipped 0.3 percent, down for a third consecutive session since Wednesday's 40-month peak.

MONDAY'S HIGHLIGHTS

EGYPT

* The index dropped 2.3 percent to 5,375 points.

DUBAI

* The index fell 1.9 percent to 1,899 points.

ABU DHABI

* The index declined 0.3 percent to 3,026 points.

SAUDI ARABIA

* The index slipped 0.5 percent to 6,957 points.

KUWAIT

* The index climbed 0.2 percent to 6,487 points.

QATAR

* The index retreated 0.2 percent to 8,514 points.

OMAN

The index advanced 0.3 percent to 6,001 points.

BAHRAIN

* The index slipped 0.3 percent at 1,094 points.

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