Capital Markets
From The Report: Egypt 2020
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Despite uncertainty for economies across the region, Egypt’s capital market reform continued apace. Short-term measures implemented in response to the economic effects of Covid-19 joined a series of reforms aimed at establishing the Egyptian Exchange (EGX) as a safer and more transparent destination for investors. While challenging market conditions have reduced the prospects of initial public offering (IPO) activity in 2020, the issuance of non-state IPOs is expected to pick up again as the economy recovers. More IPO momentum may also emerge from Egypt’s rapidly developing private equity and venture capital sphere, as well as the prospect of military companies being listed on the exchange. Although the performance of the EGX is inextricably linked to that of the economy, and the short-term outlook remains uncertain, longer-term prospects for the market are strong – a local investment firm expects Egypt’s market capitalisation to increase from 15% of GDP in 2019 to 20% in 2024. This chapter contains interviews with Mohamed Farid Saleh, Chairman, EGX; and Hussein Choucri, Chairman and Managing Director, HC Securities & Investment.

Articles from this Chapter

Overview

A true asset: Corporate governance reforms and reclassification of constituent industries underscore a commitment to global standards
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In a challenging year for economies across the region, Egypt’s capital market reform continued apace. Short-term measures in response to the economic effects of the Covid-19 pandemic joined a series of reforms aimed at establishing the bourse as a safer and more transparent destination for domestic and international investors. While market turbulence is expected to persist throughout much of 2020 and into 2021, longer-term growth in activity is underpinned by the country’s strong economic…

Analysis

Advanced trading: The authorities implement a sustainable short-selling framework
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Short selling, by which investors borrow and sell shares to seek a margin on declining prices, has been on the development agenda of the Egyptian Exchange (EGX) for some time. The ability to short a stock brings a number of advantages for investors, which exchanges seeking to increase trading volumes are usually eager to highlight. Investors and portfolio managers frequently use the tool as a hedge to balance the risk associated with their long positions, either by shorting the same security…

Interview

Taking steps: Mohamed Farid Saleh, Chairman, Egyptian Exchange (EGX), on the changes being made to encourage new listings
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Interview:Mohamed Farid Saleh In what ways have the recent economic reforms isolated Egypt from global market trends and volatility? MOHAMED FARID SALEH: Egypt has performed well in comparison to other markets included in the MSCI indices. This is largely due to the economic reforms that have been implemented over the past few years, which have enabled businesses to operate in a more robust environment, and has also been boosted by the strengthening of the Egyptian pound. One challenge for…

Interview

Enhanced trade: Hussein Choucri, Chairman and Managing Director, HC Securities & Investment, on boosting participation
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Interview:Hussein Choucri How do you expect markets to react in the medium term to the Covid-19 pandemic, particularly given its supply-side impact seen in early 2020? HUSSEIN CHOUCRI: The initial challenge for capital markets brought on by the pandemic was uncertainty regarding not only to how the situation would evolve, but also how investors would react. However, in the longer term the picture is clearer and more positive, particularly in Egypt. The initial slowdown in global demand due…

Analysis

On track for growth: Policies to increase medium- to long-term market capitalisation
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The Egyptian Exchange (EGX) is one of the oldest stock markets in the Middle East and can be traced back to 1883. It covers the main market, an over-the-counter market and the Nile Stock Exchange (Nilex), the last of which is a market for small and medium-sized enterprises. As of April 2020 there were 218 companies listed on the main market, which had a total market capitalisation of LE569.8bn ($35.1bn), and 28 listed on the Nilex, with a total market cap of LE1.6bn ($98.6m). Widely followed market indices include the EGX30 Index, a free-float, market-capitalisation-weighted index of the 30 most-actively traded companies on the EGX; the…

Analysis

Strong vitals: With foreign reserves rising, return rates are expected to strengthen on a variety of investments
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Egypt’s capital market has been noticeably attracting foreign inflows since the floatation of the Egyptian pound in November 2016, which was part of the country’s economic reform programme agreement signed with the IMF under the $12bn extended fund facility. The currency devaluation was followed by 700 basis-point interest rate hikes, taking overnight deposit and lending rates to historical highs of 18.8% and 19.8%, respectively, in July 2017. Performance Following the implementation of economic reforms and initiatives, improvements were evident. These included an increase in net international reserves from $19bn in October 2016…

Analysis

Access for all: Non-banking financial services segment poised to increase in value and reach in the medium term
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Egypt’s non-banking financial services (NBFS) segment is widely seen as underpenetrated, and it is thus expected to witness considerable growth throughout the coming five-year period to 2025, due to Egypt’s favourable demographics. Support efforts from the Egyptian government, the Financial Regulatory Authority (FRA) and the Central Bank of Egypt (CBE) will help drive this growth and manage risk. Performance These efforts include setting a minimum paid-in capital for companies financing small and medium-sized enterprises (SMEs) and those offering microfinance lending worth LE20m ($1.2m) and LE5m ($308,200), respectively; requiring…