Capital Markets
From The Report: Egypt 2019
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The year of 2018 was challenging across the board for many emerging markets, and changing trends in global capital movements have brought turbulence to the Egyptian Exchange as well. After rising significantly in the first four months of 2018, the exchange’s main index, the EGX30, showed a sustained retrenchment to end the year at a level not seen since early 2017. Throughout this period, however, the authorities implemented a series of reforms that are establishing the bourse as a safer and more transparent destina¬tion for domestic and international investors. With forecasts for the country’s economy broadly positive, Egypt’s capital markets are well positioned to serve their purpose as facilitators of growth and develop-ment over the coming year. This chapter contains interviews with Mohamed Farid Saleh, Executive Chairman, Egyptian Exchange; and Hussein Choucri, Chairman and Managing Director, HC Securities & Investment.

Articles from this Chapter

Overview

Positive exchange: Simplified rules, reduced trading times and an expanded range of products set the stage for an active sector
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The year of 2018 was challenging across the board for many emerging markets, and changing trends in global capital movements have brought turbulence to the Egyptian Exchange (EGX) as well. After rising significantly in the first four months of 2018, the exchange’s main index, the EGX30, showed a sustained retrenchment to end the year at a level not seen since early 2017. Throughout this period, however, the authorities implemented a series of reforms that are establishing the bourse as…

Interview

Mature development: Mohamed Farid Saleh, Executive Chairman, Egyptian Exchange (EGX), on diversifying and expanding the sector
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Interview:Mohamed Farid Saleh What measures are being taken to increase market activity and the level of liquidity? MOHAMED FARID SALEH: The EGX implemented several measures between August 2017 and December 2018 to improve trading activity and market efficiency, reducing circuit breaker time from 30 minutes to 15 in September 2017, and then to 10 minutes in October 2018. This increased the time available for trading on listed securities and had a positive impact on the daily value of trading,…

Analysis

Up for sale: Long-awaited plans for the sale of state-owned entities may be moving forward again
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In early 2017 Egyptian officials announced plans to offer stakes in 23 state-owned companies in a series of public offerings that would raise LE80bn ($4.5bn) over the following two and a half years. The move marked the return of the subject of privatisation on the national agenda after a decade of absence. New Agenda The new programme takes a more cautious approach than previous efforts at privatisation. Rather than sell-offs, only minority interests in selected state enterprises…

Interview

Attracting investment: Hussein Choucri, Chairman and Managing Director, HC Securities & Investment, on increasing foreign and domestic participation and the impact of technological innovations
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Interview: Hussein Choucri How is volatility in emerging markets impacting investment in Egypt’s capital markets? HUSSEIN CHOUCRI: Tighter US monetary policy is at the heart of this volatility. Rising US interest rates after so many years of a loose monetary policy, reversal of quantitative easing and divestment of the US Federal Reserve balance sheet, combined with increasing interest rates affects emerging markets, their fixed-income securities and the attractiveness of their markets in general,…

Analysis

Trending up: Despite some setbacks, markets are expected to be bullish in the short term as conditions improve
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The Egyptian Exchange (EGX) is one of the oldest stock markets in the Middle East and dates back to 1883. It includes the main market, an over-the-counter market, and the Nile Stock Exchange (Nilex) for small and medium-sized enterprises. As of November 2018 there were 220 companies listed on the main market with a total market capitalisation of LE751bn ($42.2bn) and 32 listed on the Nilex with a total market cap of LE1.2bn ($67.4m). The two most widely followed market indices are the EGX30,…

Analysis

Strong bonds: An economic reform strategy and IMF programme help shape debt-management policies
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In November 2016 the executive board of the IMF approved a three-year, $12bn loan under an extended fund facility (EFF) to assist with Egypt’s economic reform strategy. The liberalisation of the exchange rate, elimination of the parallel market and the stability of the Egyptian pound were crucial goals of the EFF programme. Moreover, several key features of the IMF strategy had domestic implications: monetary tightening aimed at containing inflation largely affected the country’s bond…

Analysis

Wider portfolio: Mutual fund market sees expansion in offerings and accessibility
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Although the country launched its first Egyptian Mutual Fund in 1994, the industry has evolved slowly since then. As of late 2018 there were nearly 100 funds operating under the supervision of the Financial Regulatory Authority (FRA), including specialised funds in a range of asset classes: 29 equity, 10 sharia-compliant, six fixed income, 27 money market, 11 balanced, three capital preservation, and US dollar- and euro-denominated money market funds. The FRA has always been on the forefront of evolving and modernising the industry, which has included the revamping of Law No. 95 of 1992, pertaining to the regulation of mutual funds, completely…

Overview

Indexed growth: Inclusion in global indices often results in a greater flow of funds to capital markets, but it is just one aspect of the economic picture – Egypt
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The period of easily raising funds from abroad seems to be coming to an end for emerging markets around the world. In the new environment of higher interest rates in the US and increased competition for capital flows, portfolio managers are becoming more selective with where they place their money. One way for developing nations to ensure that their financial markets can continue to attract foreign funds and remain sustainably liquid is by being included in visible and well-regarded benchmark indices. In addition to drawing in fund managers, inclusion on such indices requires specific standards that indicate to investors that the participating…