EGX Launches A New Index " EGX 30 Capped"

• The index sets a maximum limit of the weight of any security in the index byabout 15%
• EGX Chairman: The new index enhances growth opportunities of investment funds industry and contributes to investment options diversification

The Egyptian Exchange (EGX) Will launch next Sunday, a new index of determined weights " EGX 30 Capped ", Which includes the 30 most active companies in terms of liquidity and activity, while the market capitalization weighted by free float ratio determines the weight of each company in the index.

The " EGX 30 Capped " is featured by it’s weights’ determined, the maximum weight of each company within the index is 15% at the quarterly review of weights to limit the dominance of a limited number of companies on the index activity.

This step came to continue the comprehensive development plan implemented by EGX’ management on all indices, to develop the market tools and indicators, therefore to meet the expectations of many parties in the Egyptian stock market.

The methodology of the new index is consistent with the recent amendments to Chapter 3 of the Executive Regulations of the Capital Market Law promulgated by Law No. 95 of 1992 on investment policies of the investment funds, which helps investment managers and shareholders to measure their performance.

The new index methodology is consistent with Article 174 (Fund’ investment policy) of chapter 2 (Investment Funds), which states that "the proportion of investment in the purchase of securities of one company shall not exceed 15% of the net assets of the Fund and not more than 20% of the company’ securities ", which is an update to Article No. 149 of Chapter 2 (Investment Funds) of part Three of the Executive Regulations of the Capital Market Law promulgated by Law No. 95 of 1992, which stipulates that" Investing the investment funds’ proceeds in securities shall be in accordance with the terms and conditions that states the percentage of investment in purchasing one company’s securities should not exceed 10% of the fund’ proceeds and no more than 15% of the total securities of that company."

The new index launch means terminating  EGX 20 Capped index.

Commenting on the new index, Mohammad Farid, EGX Chairman, said that launching EGX 30 Capped index is designed to increase the market indices’ efficiency as effective tools to measure the market performance, moreover to help investment institutions in targeting the new index and increase their investments, thereby enhancing trading and liquidity which are the main determinants of any capital market’ progress and competitiveness.

"The new index will help to enhance growth and development of the investment fund industry by diversifying the investment options and enabling them to accurately measure the performance of their portfolios targeting the index, which requires the investment managers’ efforts" according to Farid.

The new index allows for the introduction of financial products such as ETFs, as the new index is a good tool that investment institutions could target to issue investment funds tracking the index  (INDEX TRACKING).

EGX management held a dialogue with all of the active market parties on the new index, which concluded the market need for a new capped index that includes the same components of the main market index EGX 30, and with the same methodology to list companies within the index. Several workshops were held specially with investment associations’ officials and senior investment managers.

EGX has completed the technical structure requirements and index tests on the electronic trading system, necessary for its final launch scheduled for next Sunday, February 3, 2019.

EGX 30 Capped index historical data starts from 1 February 2003 with 1000 points as initial value, Which reflects a positive return on the index’ performance during the period from inception to present, it was doubled by about 20 times.

Two reviews are conducted each year for the index components, 1 February (for the period from 1/7 to 31/12) and 1 August (for the period 1/1 to 30/6). The full review includes excluding non-qualifying companies, listing companies that meet the criteria, the index weights are also reviewed twice on 1 May and 1 November each year. The review is limited to the maximum weight factor of the listed companies in the index without change in companies.

EGX chairman stated that the methodology of setting maximum weights for each company in the index is one of the approaches adopted by many companies issuing indices that reflect the price performance of companies constituting that index, such as  FTSE ,  S & P Dow Jones , And MSCI .