Egyptian stocks surged the most in almost two years after the government backtracked on taxing investor profits.

The benchmark EGX 30 Index climbed 6.5 percent, the most since July 2013, to 8,798.17 at the close in Cairo. It's the world's best performer among 93 gauges tracked by Bloomberg. Commercial International Bank Egypt SAE, the country's biggest listed lender, advanced the most since December 2013.

Egypt postponed implementation of a capital gains tax for two years to protect the competitiveness of its financial markets, the state-run Middle East News Agency reported, citing Cabinet spokesman Hosam Alkaweesh. President Abdel-Fattah El-Sisi signed the tax into law in July among measures taken to cut one of the Middle East's highest budget deficits. It stipulated a 10 percent annual tax on net realized profit from financial securities.

"There is no doubt that the news about the capital gains tax is moving the market," Radi Elhelw, the executive director for Arqaam Securities Brokerage SAE, said by telephone from Cairo. "It was confusing to a lot of people as to methodology for calculation, especially for important fund managers."

The EGX 30 is trading at 12.4-times estimated earnings for 2015, according to data compiled by Bloomberg. That compares with 13.9 times for Dubai's gauge and 13.1 times for the MSCI Emerging Markets Index.

Estimated Earnings

Index provider MSCI Inc. said this month it will drop Telecom Egypt Co. from its emerging markets gauge, leaving Egypt with the minimum three stocks required to be classified as a developing market and raising the risk it will be downgraded to frontier status, according to EFG-Hermes Holding SAE, the nation's biggest investment bank.

Suspending implementation of the gains tax shows the government is "finally listening to investors and making a move that pushes the market in the right direction," Wael Ziada, EFG-Hermes' Cairo-based head of research, said by phone on Monday.

About 776 million Egyptian pounds ($102 million) of shares traded, the most in more than six weeks, and compared with a one-year full-daily average of 636 million pounds.

CIB climbed 4.9 percent to 58.19 pounds. Real estate developer Talaat Moustafa Group Holding soared 9.2 percent, the most since July 2013.

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