JUNE 2013 - FEAS

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013
EGYPTIAN EXCHANGE
Dr. Mohamed Omran
Chairman
We sturdily believe that the Revolution of
January 25th offers a unique and historic
opportunity to dramatically improve the
way Egypt is governed.
As we all know, in 2011, a series of events all
over the globe has rocked investors’ confidence
over the year starting with the Arab spring, then
the tsunami in Japan and culminating with the
seismic events surrounding the euro zone debt
crisis since the summer.
A year ago, Egypt the most populous country
in the Arab world has erupted in mass protests
in January 25th 2011 against the rule of Hosni
Mubarak. Following eighteen days of popular
protests, President Mubarak stepped down on
February 11, 2011. The Supreme Council of the
Armed Forces (SCAF) assumed the president’s
responsibilities and vowed to oversee a
peaceful transition process leading to free and
fair presidential elections. Accordingly, SCAF
quickly suspended unpopular provisions of
the constitution and Egypt held its first free
and fair voting on March 19 approving nine
constitutional amendments to pave the way for
the parliamentary and presidential elections.
Nevertheless, as Egyptians stood at Tahrir
Square and rejoiced at their new-found
freedom, the lack of security and concern over
the course of political events proved to be
economically costly. With Egypt’s stock market
closed for nearly eight weeks, investors were
worried that the full effect of the protests that
ousted the President will be even larger than
anticipated. However, the stock exchange
reopened and proved to be resilient to the
political turmoil with a noted demand from
investors especially Egyptians answering the
appeals to help save the exchange and, by
extension, the Egyptian economy.
After the downturn post the 25th Revolution, the
Egyptian Exchange commenced a promotional
campaign with the aim of rebuilding the
investors’ confidence in the Egyptian Economy
and its Capital Market. The EGX’s delegation
conducted comprehensive meetings with
various financial institutions such as NASDAQ
OMX and Goldman Sachs Inc. in New York
and with London Stock Exchange in London.
The campaign also addressed the institutional
investors in the Gulf countries where they
showed their extensive support and confidence
in the Egyptian Capital Market and pointed out
the prospects rising from the Egyptian Economy
as one of the promising emerging markets.
And following the democratic transition process
in Egypt, On October 18th the Egyptians have
casted their vote in the wake of their foremost
parliamentary elections resulting in the Muslim
Brotherhood’s Freedom and Justice party
(FJP) and the Nour Party (Egypt’s largest
Salafi political party) winning the majority in
the country’s first democratic parliamentary
election.
Following the elections, the Egyptian Exchange
hosted a press conference with representatives
of the Islamists parties and Liberal and
moderate parties to confirm their support of fair
and open exchange policies.
We sturdily believe that the Revolution of
January 25th offers a unique and historic
opportunity to dramatically improve the way
Egypt is governed. The resulting shift in the
political paradigm could pave the way for a
new development strategy that combines faster
economic growth and achieves better equality
in income distribution which in turn have a
positive impact on the performance of the
Egyptian Capital Market.
We do realize that the challenges ahead of
Egypt are not trivial, starting with a political
transformation that is still unfolding. However,
the will to make a peaceful transition to a
modern state where people enjoy dignity, liberty
and justice is not dying away. On the contrary,
progress is being made every day, thanks to
the spirit of patience, persistence and believes
of the Egyptian citizens that the country is
awaiting a brighter future.
EXCHANGE BACKGROUND
The Egyptian Exchange (EGX) dates back
to more than 125 years. Alexandria Stock
Exchange was officially established in 1883,
followed by Cairo in 1903. The two exchanges
were very active as one the oldest Futures
Market for Cotton in the world back in the 1940’s
and the Egyptian Exchange was ranked as the
fifth in the world. Nevertheless, the socialist
policies adopted in the mid 1950 have led
to a drastic reduction in activity on the stock
exchange, which remained dormant during
1961 till 1992.
In an attempt to re-activate the market, the
government opted for the public offering
of the state owned enterprises through the
privatization program, which provided the
impetus for its revival.
In 1997, The Egyptian Exchange (formerly
known as Cairo & Alexandria Stock Exchange)
started its modernization program in terms of
legislation and infrastructure to keep abreast
with globalization and internationalization.
Stocks, bonds and funds are traded on EGX.
In addition to a number of structured products,
issued by several international financial
institutions, on the Exchange in-house designed
index, EGX 30 Index, are listed and traded on
various European Exchanges such as EGX
30 Certificates Issuance by The Royal Bank of
Scotland (RBS), EGX 30 EUR X-Pert Certificates
Issuance by Deutsche Bank, and EGX 30 Open
End Certificates Issuance by Goldman Sachs
International.
The Exchange continued its journey of
expanding its services and products by
launching NILEX the first market for growing
SMEs in the MENA region. NILEX provides
medium and small fast growing businesses,
including family-owned businesses, from any
country and any industry sector, a clear access
to capital and the benefits of being traded.
EGX has developed a number of indices
which help the investors track the market’s
performance. EGX 20 Capped, EGX 30,
EGX70, EGX100, Dow Jones EGX Egypt
Titans 20 INDEX, and S&P/EGX ESG Index
which is the first corporate governance and
social responsibility index in the MENA region
in collaboration with the Egyptian Institute of
Directors and Standard &Poor’s. The Egyptian
Exchange is governed and regulated by the
Egyptian Financial Supervisory Authority (EFSA)
that is a single regulatory body governing all
non banking financial services.
EGX do not impose any restrictions on foreign
investment or profit repatriation in the Egyptian
securities market.
No taxes are levied on dividends, capital gain
and interest on bonds for individuals, mutual
funds and international funds.
FUTURE OUTLOOK
EGX will continue exerting efforts to enhance
the efficiency of the market, raise investors’
awareness, promote the financial literacy, and
improve the communication between EGX and
its stakeholders to further strengthening their
trust in the market. Moreover, EGX will continue
its aggressive marketing plan to attract the big
companies to be listed in the market.
On the other hand, EGX strives to build on
its success by accelerating the introduction
of a bundle of new investment products and
mechanisms into the Egyptian market such
ETFs, sukuks, the Market Maker system which
are expected to be launched in the market soon.
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