By: Heba El Kourdy
Cairo – Mubasher: After the Egyptian Exchange’s (EGX) decision to cancel transactions carried out on Egypt Gas’ stock due to its “unjustified” rise and breaking the level of EGP 200, analysts are wondering whether this could lead to a possible deal cancellation between Beltone Financial Holding and Egypt Gas.
The EGX attributed the cancellation decision to the provisions of Article 21 of the Capital Market Law No. 95 for 1992 and its executive regulations.
It is expected that what had previously happened with Beltone’s stock may be repeated with Egypt Gas due to the current rise in the stock’s price, analysts told Mubasher.
The EGX decided to cancel the transactions executed on Egypt Gas’ stock during three sessions (26, 27, and 30 30 July), as well as cancelling all bids and requests recorded during the exploratory session. Meanwhile, the company announced the absence of undeclared substantial events that would affect the share’s price in the EGX.
Egypt Gas’ stock rose to its highest level since listing last Monday, after the company's proposal to increase the issued and paid up capital through the distribution of bonus shares.
Previously, Beltone had sued the chairmen of the EGX and the Egyptian Financial Supervisory Authority (EFSA) for the repeated suspension of trading on Beltone shares from February to June 2016.
Beltone’s stock had previously jumped after bidding for the acquisition of the investment bank CI Capital, and the deal was not executed due to some obstacles.
Although Egypt Gas’ board announced a capital increase through bonus shares and the adjustment of the statute of the firm, in addition to other activities in favour of the stock’s performance, the EGX decided to cancel the transactions carried out on Egypt Gas’ stock.
The company had previously said that the board approved the increase in issued and paid capital through the distribution of one bonus share per share.
3Way Finance chairman Rania Yacoub questioned the cancellation of transactions on Egypt Gas despite the company’s announcement of reasons behind the rise of the stock, stating that other stocks that had been fluctuating at 70% and 80% did not witness the same fate.
There are approximately 20 stocks that had recently achieved extreme hikes without any substantial events such as Arab Aluminum, Egypt Aluminum, Asek Company for Mining, and others, Yacoub added.
The EGX hinges on Article 21 of Capital Market Law No. 95 of 1992 to suspend transactions, which stipulates that trading offers and bid requests could be cancelled by the EGX chairman, and he has the right to cancel transactions that violate the provisions of to law and regulations or that are at an unjustified price.
The traders in the market are waiting for an explanation of the reasons for the cancellations, and whether there are manipulations behind this cancellation, in order to preserve transparency and disclosure advocated by the EGX, Yacoub said.
In August 2016, the EFSA decided to add a new article to the rules for listing and delisting on the EGX, allowing it to demand listed companies to present a study for the fair value of their stock when the stock is undergoing a significant change in a short period.
Despite being an attractive stock to investors, Egypt Gas’ stock is expected to continue its decline if the EGX continues to cancel transactions executed on it, Yacoub highlighted, noting that the stock’s future remains unclear.
The support level for Egypt Gas’ stock ranges between EGP 186 and EGP 162, Yacoub added.
Similarly, financial expert Tony Kamal concurred with Yacoub regarding the repetition of the Beltone scenario with Egypt Gas, pointing out that the repeated cancellations on the stock are illegal and are considered an intervention in market mechanisms.
The reasons announced by Egypt Gas are insufficient to prompt a 120% rise over one-and-a-half months, Kamal said, stressing that there were other undeclared reasons.
Meanwhile, Atef ElSherif, chairman of El Sherif Law Firm & Consultants, said that the excessive cancelling of trading transactions on the stock harms the market, particularly in the absence of clear criteria for application.
He also wondered as to the why the EGX tends to cancel transactions only when stocks rise, not when they see sharp declines.
Translated by: Mai Ezz El-Din
