Egypt’s stock exchange, the Egyptian Exchange (EGX), comprises two exchanges, Cairo and Alexandria.
How do you assess the EGX performance?
In 2017 the EGX had five initial public offerings (IPO) amounting to 4 billion with 46% being demanded by foreign investors. In 2018 we saw three IPO’s. In 2019 we will see several primary offerings from the public sector include: Banque du Caire. As a percentage of GDP we are not at our highest point, we reached market capitalization over 100% of GDP in 2008, however, at the moment, it is quite low.
Market capitalization as a percentage of GDP is important but in Egypt is affected by various external factors and it is not the primary target of the EGX. Our primary goal is to increase trading on the platform. Hence, we are trying to concentrate on the quality of the companies rather than on the number of listed companies. Slowly but surely is our saying when listing new companies on the exchange. Companies that will have sufficient free float. We are also working on facilitating the entry and exit of investors. Due to market conditions, the EGX was able to increase trading from EGP 300 million to EGP1.2 billion, and it has fallen back to EGP 500 million.
We are working on increasing financial literacy within the Egyptian population to boost future trading. We are working on four aspects. The first being an update to our website availing new information such as all brokerage houses in Egypt which are now searchable on google maps. This includes their branches and the licenses they hold: be it margin trading, etc. The second is targeted training sessions for middle-income workers of multinational companies working in Egypt. Our sessions highlight how to invest in capital markets through mechanisms; teaching personal trading, a process of hiring an asset manager, and thirdly incremental saving mechanisms on the EGX through ETFs. A third pillar is working with the Ministry of Youth to conduct simulations in youth centers across Egypt. We are promoting the use of the EGX amongst the next generation which should start using it once they enter the job market. In the future, we hope to roll out hefty IT infrastructure so we can upgrade our trading platform. We should see short selling take off soon as well.
What are some challenges faced by investors?
A challenge within EGX listed companies has been the lack of dual language disclosures. We are working closely to persuade listed companies to disclose information in both Arabic and English so foreign investors have more readily available information. Most companies with GDR’s already do this, but we still have large players in Egypt who do not care about this. For us improving communication is key. The EGX is expanding its role as a partner for investors, lobbying companies to improve the quality of disclosures, informing on current legislation and lobbying the government to improve the system. We have created a department within the EGX that now revises the financials of companies to ensure statements are properly disclosed thoroughly and properly. The capital markets are only one gear in a very complex gearbox. The first step is ensuring people are asking the right questions and financial analysts continue to assess company disclosures. We need to enforce these international standards on Egyptian listed companies which to date are very slowly improving their ability to disclose information to the general public.
Overall, Egypt has been around for over 7 000 years, and we are confident with the story we have. Egypt is a large market, with an educated workforce and strong market-oriented fundamentals. There are no taboos when it comes to improving Egypt’s macroeconomic situation. We have aggressively touched the monetary policy, fiscal policy, the energy sector, feed-in tariffs for the renewable market, promulgated laws to enhance and legalize uber/careem style companies.
