Interview: Mohamed Omran
What have been the primary drivers of the index’s strong growth over 2014 and into 2015?
MOHAMED OMRAN: It is indeed true that the exchange was one of the best-performing worldwide in 2014. EGX and the National Stock Exchange of India topped all emerging markets in 2014, realising more than 25% gains, according to the “MSCI Investable Market Index”. However, I am more interested in whether the EGX is functioning smoothly,and providing the necessary financing to companies. In this respect, we have seen a significant increase in activity. Over the course of 2014 and 2015, almost half the companies listed on the exchange raised their capital, with a total value of LE23bn ($3.14bn). Also, 28 new companies were listed, with a total capital of LE8bn ($1.1bn). Total paid-up capital for listings in 2015 is three times that of 2014, more than 30 times that of 2013 and close to the combined total of the last five years.
What specific measures can be taken to encourage new listings on the main board?
OMRAN: A number of measures have already been taken in this respect. In February 2014 we made major changes in listing and disclosure requirements, designed to make them friendlier without sacrificing minimum requirements for disclosure, investor protection and related-party transactions. In November 2015 we revisited the matter and made further improvements to the listing requirements, in order to make them more appealing. We agreed to accept companies on conditional bases, with the understanding that they would provide less essential documentation at a later time if they were to remain listed.
We embarked on an intensive promotional campaign to attract solid companies to the index. We also went about changing the perception that the business community has about the Egyptian market by conducting a number of workshops in collaboration with a number of business associations in Egypt. In addition, EGX conducted more than 80 meetings with promising companies in different governorates to promote the benefits of getting listed. We organized the EGX IPO Summit to give companies better insight into listing and its benefits for the growth of their businesses by highlighting the success stories of some of the listed companies.
How would you assess the progress of the EGX in improving the protection of minority investors?
OMRAN: In the past, investors were required to disclose their activities when buying a certain percentage of a company. For instance, if an investor held 33% of a listed entity, they would have had to pursue a tender offer to buy the entire company. We decided to apply some of these rules to exits, so that now major shareholders have to disclose every 5% decrease in shares, while board members have to announce every 3%. This will help to protect minority shareholders from sudden changes in ownership.
We gave special attention to the rules governing the market to ensure more shareholder protection, which in turn led to an improvement in Egypt’s investment climate as per the “Doing Business” report issued by the World Bank Group, which showed an improvement in Egypt’s ranking The number of annual disclosures sent to the market has jumped remarkably during the last three years (2012-14) to 9300 disclosures on average, compared to an average of 5400 disclosures annually during the years prior to that period. We have also been concentrating on the quality these disclosers. The EGX has raised the efficiency of investor relations in order to improve corporate disclosure levels.
Furthermore, we launched the Online Disclosure System so that listed companies can disseminate their required disclosures electronically, thereby allowing disclosure information to be easily integrated in real time into the various systems used by the market.
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