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Mr. Mohamed Farid, Chairman of the Egyptian Exchange (EGX), held the opening meeting of the Euromoney Conference in Cairo. During the meeting, the EGX chairman praised the radical reforms that affected the Egyptian economy, which was the reason for the beginning of an investment cycle initiated by foreign institutions to invest in short and medium term debt instruments, when this category of investors is assured that the reform program adopted by the government will witness more interest in long term debt instruments and therefore in investing in stocks generally.
Farid explained that the improvement in the investment appetite of foreign institutions is evident in the gradual increase in trading volumes and values in the market, pointing that the net purchases value of non-Egyptians was amounted to about LE 7 billion since the beginning of the year.
He also mentioned that the decisions that have been activated by the decision makers during the recent period have led to more easiness in entering and exiting the market, and thus was able to attract all types of investments from short and medium‐term investment as well as long‐term direct investments, moreover the structural adjustments made in the monetary, financial and investment policies will also be the main motivator behind the return of foreign direct and long-term investments needed to sustain the desired economic growth.
With regard to the working strategy of the Egyptian capital market during the coming period and its role in the economic reform plan adopted by the State, EGX chairman said that the capital market value chain must be analyzed at the beginning to identify the challenges associated and the ways to solve them, and in this issue EGX is currently interested to improve liquidity levels Across 3 axes. The first is to attract new companies to list, the second is to improve the trading environment through the introduction and activation of new financial instruments and products. The third is to increase the area of communication with local and international financial institutions, which is the demand side.
In this context, Farid said “EGX is concerned with the IPOs quality, not their number, we are interested in attracting good companies both at the administrative and financial levels so as to be attractive for investors”. He pointed that activating the program to expand the ownership base of state companies increases the market’ attractiveness. At the same time it improves those companies’ ability to comply with the governance standards, and increases the governmental ability to follow up their performance.
On the level of improving the trading environment, EGX chairman stated that the availability of more financial instruments will improve the liquidity levels, noting that the studies conducted by EGX to activate the sale of borrowed shares mechanism expect to increase trading rates by 15-25% as per the international financial markets’ experiences when applying this mechanism.
Farid clarified that reducing the period of shares’ temporary suspension, which was implemented at the last mid-week also helps to improve the trading environment of the Egyptian market.
In a related context, EGX chairman said that the capital market Law amendments, which is expected to be discussed by the Egyptian Parliament in its next legislative session in a preparation for its approval, will allow for the establishment of an organized market for contracts and commodities in Egypt in addition to the activation of new financial instruments and products, which would improve the trading environment and enhance the Egyptian stock market competitiveness against the financial markets in the region.
