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EGX Developed EGX 30 Index Methodology

Date 21/01/2019

  • Farid: The development aims to increase the index efficiency and make it more reflective for the market performance to enhance trading and liquidity.

The Egyptian Exchange (EGX) finished the process of developing the methodology of entering the listing companies into EGX 30 index, as per its attempts to increase the efficiency of all market indices to be more reflective for the market performance, to diversify the investment options and therefore to enhance trading and liquidity.

This move comes within the framework of the development process adopted by EGX management from “the value-added chain” perspective, to raise the efficiency and competitiveness of the Egyptian stock market.

The key to develop EGX 30 methodology is to take into account the companies that achieve high trading values monthly rather than total turnover basis at the end of the review period every six months, which could include the inclusion of companies that make mutations in trading values.

From his part, Mohamed Farid, EGX Chairman, said that the development of EGX 30 index methodology came after consultation and dialogue with the market participants and studying the best international practices in this regard, in order to make the main index more reflective for the market performance and movement.

"We are currently working on implementing a comprehensive development plan that includes all indices, to diversify the investment options for all categories of investors, thereby to enhance trading and liquidity, which is the primary objective of any capital market looking to grow and compete." As per Farid.

The new methodology developed by EGX to include companies in EGX 30 components includes the following:

  1. The total trading value is calculated after excluding the “Deals” value of transactions per month for the traded companies.
  2. Companies are arranged monthly, and the top 30 companies are selected in terms of total monthly turnover.
  3. The frequency of repeating the company inclusion among the top 30 companies during the review period is calculated (January to June - July to December).
  4. The frequency of repeating the companies inclusion is analyzed and the monthly turnover is reviewed.

Then companies are selected according to the following criteria:

  1. The most frequent companies included within the top 30 companies during the review period of 6 months. In case of new listed companies, which start trading during the audit period, the frequency is calculated since the start of trading on them. (Example : Start trading on a company in October, the total number of review months is only 3 months not 6 months).

As per the previous criteria, EGX amended the number of trading days standard as a condition for companies to join EGX 30 components to be 65% of the total number of trading days during the review period instead of 50% in the past and thus the minimum is 78 trading days instead of 60 trading days.

While the minimum free-float trade ratio was maintained at 15% as is.

Finally, the final companies arrangement is arranged and presented to EGX indices Committee, which selects companies according to the previous criteria.