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CAIRO, Feb 11 (Aswat Masriya) – Egypt's stock market sharply dropped Thursday by 4.1 per cent in response to the plunge of Egypt's largest listed lender by market value, the Commercial International Bank (CIB), as well as a general decline in European and Gulf markets.
Blue-chip CIB stocks slumped 5 per cent at closing, after the bank decided to cut its planned dividend payment, in order to boost its capital adequacy ratio, Reuters reported.
EGX 30 reached 5,813 points down from 6,062 points the day before and fell by 0.9 per cent in early trade. The main index witnessed on Thursday its biggest drop since Jan. 20, bringing its losses this year to 17 per cent, according to Reuters.
Both the index for small and medium enterprises EGX 70 and the broader EGX 100 witnessed a decline of 1.01 per cent and 1.34 per cent, respectively.
Arab and foreign investors recorded net purchases, while Egyptian investors were inclined towards selling, with the value of trade reaching EGP 403.748 million (EGP 1= $0.127).
Egyptian investors accounted for 93 per cent of trade, while foreign and Arab investors accounted for 4 per cent and 3 per cent of trade, respectively.
Egypt's bourse halted trade on a large number of shares after their values dropped below 5 per cent.
Mohamed Radwan, Sales Manager at Pharos Holding for Financial Investments, told Aswat Masriya that the results of CIB's operations came below expectations, this is in addition to the effect of the bank's decision to increase its provisioning in order to lower the risk of borrowers' not being able to repay their loans.
Oil prices dropped Thursday in response to a significant increase in American storage.
Egypt's stock exchange has been hit hard by the instability created by the dramatic fall in oil prices in the past year and a half, with the global market being flooded with supply.
Mohamed Elnaggar, the head of research and investment at El Marwa Brokerage, told Aswat Masriya that the pressure to sell have affected European and Gulf markets due to the drop in oil prices; and fears of a global economic slowdown contributed to the Egyptian market's decline.
Several major stock markets in the Middle East dropped Thursday, with Saudi Arabia's index retreating by 2.95 per cent, the Qatari market by 1.4 per cent, Abu Dhabi by 0.8 per cent, and Dubai by 2.6 per cent.
The CIB announced today an increase in its net annual profit by EGP 4.7 billion, compared to EGP 3.7 billion in the previous year. However, the Board of Directors' decision to distribute EGP 0.75 per share as dividends, down from EGP 1.2 the previous year, prompted the decline in its shares' value.
Elnaggar expected Egypt's bourse to continue its decline through the upcoming week.