The Egyptian Exchange (EGX) is cancelling all upcoming operations on Beltone Financial Holding’s shares that could lead to recording unjustified increases in the price of the share, as a precautionary measure for traders and the market, according to a high-ranking source in the EGX.
The source stressed that EGX Chairman Mohammad Omran and his counterpart in the Egyptian Financial Supervisory Authority (EFSA) alone are entitled to make this decision, according to capital market law.
No party is allowed to object to Omran’s decision to cancel operations on Beltone’s share, as Article 21 of the Capital Market Law gives him absolute authority to make this decision, depending on his own personal evaluation of the situation. This authority is considered similar to that of the president of the republic’s authority to issue presidential pardons for convicts by court orders, according to the source.
If a party objects to the decisions made by Omran, it must first appeal against the law, the source said.
The EGX has cancelled all executed operations on Beltone’s shares during the Tuesday and Wednesday sessions, without revealing the reasons behind the cancellation. Beltone’s shares have been exposed to several decisions by the EGX to cancel operations, after the shares recorded major increases in value.
Moreover, the results recorded by the shares during various exploratory trading sessions were also cancelled. These sessions took place prior to the actual trading sessions, whereby exploratory sessions are relied upon to determine the trading price during the actual session.
According to Article 21, offers and trading requests that manipulate prices are subject to cancellation upon the EGX chairman’s order. The chairman also has the right to cancel all operations that violate the law’s provisions and regulations, or those that take place at unjustified prices.
The EGX chairman can also cancel trading using a certain currency if continuing operations with it will cause damage to the market or traders. Article 21 also emphasises the right of the EFSA’s president to exercise this authority at the right time.
The source explained that Beltone’s shares registered a record price-earning ratio (P/E ratio) “without justification”, in a manner that may harm the market and traders, which requires intervention from Omran.
According to a statement Beltone sent to the EGX, Beltone shares recorded a P/E ratio a record rate of 1,372.143 times on 10 April.
The P/E ratio is considered an indicator of the attractiveness of the share’s trading price in the EGX, compared to recorded profits. It is also one of the indicators used to predict the chances of the share increasing.
The P/E ratio is calculated by dividing the market price of the share over its portion of the company’s profits. When the P/E ratio decreases, this indicates the share’s chances of increasing, and vice versa.
Despite the repeated decisions to cancel Beltone’s trading operations, the source stressed that the transactions did not include any manipulation of prices.
Meanwhile, head of the investors’ relations department in Beltone, Osama Rashad challnegd the EGX’s decision to cancel trading on the company’s share, especially as the EGX was unable to prove any manipulation of the share’s trading.
Beltone was not delayed in responding to the EGX’s enquiry, whether in announcing the P/E ratio or any essential reasons that led the shares’ value to increase, Rashad said.
Rashad explained that Beltone made an offer to acquire CI Capital in order to form a large investment entity that can compete regionally. Some investors believe that this alliance is considered a great opportunity for investment, hence leading to high demands on the share.
The share value recorded an increase based on large trading operations, which means that the share is not directed by a certain group or according to a certain desire, but rather it is according to the general movement of buying and selling, he said.
According to Rashad, the decisions to cancel operations have become arbitrary and unjustified, as in the following sessions the share recorded the same level as during the session where its trading was cancelled.
“This happens because investors understand that as long as the share records a certain price level before cancellation, it can reach the same level again,” he said.
Despite the cancellation of trading operations on Beltone’s share during the Tuesday and Wednesday sessions of last week, the share closed Thursday’s dealings at EGP 23.26, compared to EGP 20.75 on Monday.